Mercer Forecasts 3.5% Total Salary Increase Budgets for 2026

American compensation experts have had a similar view of 2026 salary budget allocations, with five entities delivering their pay predictions within a range of 0.3 percentage points in reports released from July to early September. The combined average increase forecast in those five reports? 3.5%.

With that as a backdrop, Mercer published the results of its most recent QuickPulse U.S. Compensation Planning Survey on Sept. 3. The global consulting firm tabbed 2026 average pay increase budgets at … 3.5%, including 3.3% for merit increases.

The report also put 2025 average actual total pay increases at 3.5%, including 3.1% for merit bumps. The other five published survey reports, combined, put this year’s average actual total raises at 3.6%.

Mercer based its new report on a July survey of 1,157 U.S. compensation leaders across industries, sectors and employer sizes. While 88% of respondents categorized their 2026 budget projections as “preliminary,” the majority felt their final budgets will be similar to 2025 outlays.

* = job-classification dependent

For context, last year’s comparable Mercer report forecast 3.6% total pay increases, including 3.3% for merit increases, for 2025, which equaled the 3.6% average actual increases (3.3% for merit) respondents delivered for 2024.

Impacts, Priorities and Strategies

The new survey pointed to the extent that corporate pay decisions are hinging on U.S. and global economics. Sixty-six percent of respondents said factors such as tariffs, inflation and unemployment will impact their moves for next year, with 20% categorizing the potential impact as “significant” and 46% as “moderate.” Just 2% said the current environment would have no impact and 16% were unsure how things would shake out.

In examining the strategies that will drive the responses of total rewards professionals, Mercer said poll participants “are focusing on the basics.” Salary benchmarking was a priority, cited by 63% of compensation leaders. Others included:

• Job architecture effectiveness (49%)
• Communication of total rewards to employees (43%)
• Employee benefits (42%)
• Professional development and skill building (35%)
• Pay equity assessments (33%)

Hiring was mentioned by 17% of respondents, signifying a downshift in its prioritization.

As for pay transparency, half of participants said they comply with laws and have no plans to broaden transparency beyond what is required. However, the number of respondents that are including pay ranges in jobs postings nationally has increased from 29% in 2024 to 36% in the new report.

The View of Promotions

According to the Mercer data, employers predict they will promote 8.1% of their employee population, on average, in 2026 — less than the 10% that participating employers forecast for 2025.

In determining the size of monetary increase that accompanies a promotion, 91% of respondents said “the relationship of current salary level to new grade midpoint or market value” would have an influence. Other strategy factors included:

• Internal equity relative to other peers in the new jobs (cited by 87%)
• Individual performance and/or performance rating (62%)
• Number of grades/levels/bands in the promotion (35%)
• Size of other promotions across the organization (16%)
• Fixed promotion guideline (12%)

Industry Variations

Projected merit outlays deviate a bit when explored by industry sector. At 3.3%, energy and insurance/re-insurance are both slightly above the national mean for merit budgets. On the lower end, healthcare was among the lowest preliminary merit budgets (along with high-tech, other non-manufacturing, and retail and wholesale), at 3.0%.

The industry projections for mean total increase budgets follow a similar pattern except for banking/financial services, which is projecting a merit increase budget lower than the national average, at 3.1%, but a higher-than-average total increase budget, at 3.7%.

(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

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• Employee Compensation
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