How Salary.com Views Planning for 2026 Salary Budgets

U.S. employers anticipate having 3.6% higher salary increase budgets in 2026, the same year-over-year increase percentage they actually secured and provided in 2025, according to the results of the 15th annual Salary.com National Salary Budget Survey, released Friday, Oct. 24.

The survey report also showed Canadian employers project 3.4% mean salary increase budgets for next year — identical to their 2025 actual outlays.

Salary.com, a compensation software, data and services business, surveyed 738 organizations (representing 22 industries) in April and May for this year’s report. The 2026 projection and 2025 actual figures closely align with those of other recent salary survey reports (see table below), including WorldatWork’s.

* = job-classification dependent

The Salary.com report showed U.S. respondents, on average, factored 3.3% merit increases, 1.7% general increases and 0.7% equity/market adjustments toward their anticipated 2026 salary budgets. That breakdown is on par with 2025 actuals but a step behind those from 2022 through 2024 (see below).

Canadian respondents factored, on average, 2.8% merit increases and 2.7% general increases toward their 2026 plans.

“[The research] suggests companies are choosing a conservative and consistent approach over reactive cost-cutting,” said Heather Kruger, the vice president of marketing at Salary.com.

The Merits of Merit Pay

According to Kruger, the underlying story behind the data is that pay for performance remains organizations’ biggest challenge.

“Pay for performance still dominates as the most widely adopted cycle management practice,” she said. “So, here’s what keeps [HR and total rewards professionals] up at night: With merit budgets this constrained, how are organizations supposed to meaningfully differentiate performance? You simply cannot create effective pay-for-performance programs when you’re trying to spread 3.2% across employees who range from solid performers to superstars. The math doesn’t work.

“Between layoffs through summer and fall, and conservative increases projected, [employers] are pushing employees to sit tight now, but the recent lessons of post-pandemic resignations weigh heavy — particularly as cost-of-living increases and economic uncertainty remain top of mind.”

Pay Strategies for Employee Categories

U.S. respondents anticipated providing fairly equal percentage pay increases across the layers of their organizations in 2026, with 3.5% average raises slated for executives and 3.6% average raises for individuals classified as “other managers,” exempt employees or nonexempt employees. Those figures continued their trend toward more “normalcy” (increases in the range of 3% to 3.5%) after several exceptional years near or above 4% (see below).

For 2026, Canadian respondents are generally planning for 3.4% raises for executives, exempt employees and nonexempt employees, and 3.3% for “other managers.”

As usual, though, these organizations are placing considerable weight on variable pay for their higher-echelon employees. Toward 2025 compensation for executives, U.S. respondents said they have budgeted for variable pay (i.e., bonuses, commissions, profit sharing, recognition programs) that is, on average, 30.5% of these employees’ base pay. This year’s budgeted variable-to-base percentages dropped to:

• 13.4% for “other managers”;
• 8.2% for exempt employees; and,
• 5.1% for nonexempt employees.

Canadian respondents are planning for:

• 32.4% variable-to-base pay for executives;
• 16.1% for “other managers”;
• 9.8% for exempt employees; and,
• 7.9% for nonexempt employees.

Geographic Data

In examining pay at the U.S. geographic level, Kruger explained that variability in projections aligns with regional inflation. 

“For example, the Pacific Northwest projects the highest salary budget increases (a median of 3.8%), while the West Coast is experiencing higher-than-average [Consumer Price Index impacts], at 3.44% in August of this year, and many western states top the inflation rankings as of October,” she said. “A hidden risk area is going to be northern California. Contrary to historical patterns, the San Jose-San Francisco-Oakland metro area shows surprisingly modest planned increases for 2026, with most employee categories averaging 3.1% to 3.3% total increases. ... This represents a significant departure from the region’s traditional premium positioning and suggests market maturation in the tech sector. Yet, San Francisco-Oakland sits as the 14th-highest metro [area for] inflation.”

(Top-level results from the WorldatWork 2025-2026 Salary Budget Survey report are now available to the general public. The full report — covering base salary increases and merit budgets for 22 countries and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — is available for purchase. Report purchase also provides access to the U.S./Canada Online Reporting Tool to build customized reports based on industry, organization size and/or geographic area).

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Compensation
• Finance and Budgeting