Payscale: Economic Gains Will Push 2027 Salary Budgets Higher

U.S.-based employers are anticipating 3.5% average salary increase budgets for 2027, which is slightly higher than the 3.4% average actual increases they provided to employees in 2026, according to the results released Tuesday, Aug. 4, in Payscale’s 11th annual Salary Budget Survey report.

Last year’s report from the compensation software and data company showed a 3.5% U.S. forecast for 2026, which was less than the 3.6% average actual pay increase for 2025.

Payscale surveyed 1,266 organizations in the U.S., Canada and 19 other countries during May and June for its new report. The data for Canada mirrored that for the U.S., with 3.5% average salary increase budgets forecast for 2027 and 3.4% actual increases provided in 2026.

The data points for 2027 U.S. projections and 2026 actuals resemble those found in other recently released salary budget survey reports (see table below). (Check back to the Workspan Daily site in the coming weeks for articles on additional salary budget survey reports.)

Source	2027 Projection	2026 Actual
WorldatWork	3.6% mean	3.6% mean
Gallagher	3.3% to 3.4% average	3.7% to 3.9% average
Payscale	3.5% average	3.4% average
WTW	3.4% average	3.5% average

The Big Picture

Key findings from the new Payscale report showed:

“Peanut butter pay” is losing ground. Just 32% of organizations plan a standard, across-the-board increase in 2027, down from 36% that actually gave one in 2026, after 44% had considered it.
Merit remains the biggest piece of the pie. Merit increases account for 3.0% of the 3.5% total payroll budget for 2027, by far the largest piece (unequal weight applied), ahead of promotional increases (1.0%), inflation/cost-of-living adjustments (0.9%), salary structure increases (0.6%) and other options (0.3%).
Raises are up, but signal pay paralysis. Employers plan a 3.5% average increase in 2027, up from 3.4% in 2026; while an improvement, it’s broadly in line with inflation rather than pulling ahead of it.
Unfair pay perceptions are a talent risk. Twenty-five percent of organizations cite perceived pay unfairness as a leading reason they’re losing talent.

In summarizing its report findings, Payscale stated: “Confidence in economic conditions is driving planned salary increases higher for the upcoming 2027 budgetary season compared to 2026. Optimism about improved business performance has replaced economic uncertainty as the driving factor.”

For U.S. employers anticipating higher budgets for 2027 compared to actuals for 2026, cited reasons include:

Improved economic conditions or improved business performance (selected by 30% of respondents)
Increased competition for labor or labor supply shortage (27%)
Change in compensation philosophy or competitive positioning (24%)
Prior year increases were lower than usual (13%)
Other reasons (5%)

For those anticipating lower budgets for 2027 compared to actuals for 2026, cited reasons include:

Concern about future economic conditions or business performance (42%)
Prior year increases were higher than usual (22%)
Change in compensation philosophy or competitive positioning (12%)
Reduced competition for labor or labor supply surplus (12%)
Other reasons (12%)

Who Is Getting Raises, and What Are They Getting?

In examining specific pay practices for U.S. organizations, the report’s research found:

79% of all workers are scheduled to receive a base pay increase, a notable drop from the 84% projection in last year’s report. Broken down by job classification, 2027 raises for anticipated for:
- 77% of exempt management employees
- 77% of exempt non-management employees
- 77% of non-exempt employees
- 74% of officers and executives
Total average increases are fairly consistent, with:
- 3.5% forecast for exempt non-management employees
- 3.4% for non-exempt employees
- 3.4% for exempt management employees
- 3.2% for officers and executives
Merit increases and promotional increases are primary means in which to recognize employees, with:
- 89% of organizations using merit increases (vs. an 87% projection in last year’s report)
- 69% using promotional increases (vs. 73%)
- 43% using salary structure increases (vs. 39%)
- 31% using inflation or cost-of-living adjustment increases (vs. 26%)
- 14% using other methods (vs. 16%)

Deep Dives by Employer Attribute

The report data provided an interesting peek at base pay increases across various attributes for U.S. employers. Among these attributes are industry, employer size, employer revenue and region of the country.

Industry

Industry Group	2027 Forecast Increases	2026 Actual Increases
Aerospace and defense	4.5%	5.1%
Architecture, engineering and design	3.6%	3.5%
Business services	4.5%	3.9%
Construction	3.9%	3.8%
Consumer goods	3.3%	3.3%
Distribution, logistics and transportation	3.8%	3.9%
Education	3.5%	3.3%
Energy and utilities	3.5%	3.4%
Financial services	3.4%	3.4%
Food, beverage and hospitality	3.4%	3.4%
Government	3.0%	3.0%
Healthcare and social assistance	3.2%	3.0%
Insurance	3.4%	3.3%
Legal services	4.2%	4.4%
Manufacturing	3.6%	3.4%
Media, sports and entertainment	3.3%	4.0%
Nonprofit	3.3%	2.8%
Pharmaceutical and biotechnology	4.0%	3.9%
Real estate, rental and leasing	3.4%	3.1%
Retail	3.3%	3.2%
Technology (including software)	3.4%	3.6%
Telecommunications	2.5%	2.5%
Other	3.4%	3.3%

Employer Size

Number of Full-Time Employees (FTEs)	2027 Forecast Increases	2026 Actual Increases
Less than 25 FTEs	4.1%	3.7%
25 to 49 FTEs	4.4%	4.1%
50 to 99 FTEs	4.7%	3.6%
100 to 199 FTEs	3.9%	3.3%
200 to 499 FTEs	3.2%	3.3%
500 to 749 FTEs	3.6%	3.4%
750 to 1,999 FTEs	3.5%	3.6%
2,000 to 4,999 FTEs	3.5%	3.4%
5,000 to 7,499 FTEs	3.2%	3.2%
7,500 to 9,999 FTEs	3.6%	3.6%
10,000 to 14,999 FTEs	3.2%	3.1%
15,000 to 49,999 FTEs	3.2%	3.1%
More than 50,000 FTEs	3.9%	3.5%

Employer Revenue

Employer Annual Revenue Range	2027 Forecast Increases	2026 Actual Increases
Less than $5 million	3.6%	3.1%
$5 million to less than $10 million	4.2%	4.6%
$10 million to less than $50 million	4.5%	3.7%
$50 million to less than $200 million	3.5%	3.4%
$200 million to less than $500 million	3.5%	3.5%
$500 million to less than $1 billion	3.6%	3.5%
$1 billion to less than $3 billion	3.3%	3.3%
$3 billion to less than $5 billion	3.6%	3.5%
$5 billion to less than $10 billion	3.2%	3.2%
$10 billion to less than $50 billion	3.4%	3.6%
$50 billion and higher	3.4%	3.4%

U.S. Region

Region of the Country	2027 Forecast Increases	2026 Actual Increases
Northeast	3.3%	3.2%
Middle Atlantic	3.6%	3.5%
Midwest	3.5%	3.4%
South	3.5%	3.4%
West	3.6%	3.4%

Outside the U.S. and Canada

Going beyond the U.S. and Canada, the data picture showed a wide range of raise percentages (but most in the 3% to 4% range, outside of a couple of outliers), with 2027 forecasts resembling the 2026 actuals.

Country	2027 Forecast Increases	2026 Actual Increases
Australia	3.2%	3.4%
Brazil	4.2%	4.2%
China	4.5%	4.2%
Finland	2.9%	2.6%
France	3.2%	3.1%
Germany	3.3%	3.2%
India	8.8%	9.5%
Ireland	3.4%	3.5%
Japan	3.1%	3.1%
Mexico	4.9%	4.8%
Netherlands	3.4%	3.3%
New Zealand	3.2%	3.2%
Poland	5.0%	4.8%
Singapore	3.8%	3.6%
South Africa	5.0%	4.1%
South Korea	4.1%	4.0%
Spain	3.2%	3.2%
Sweden	3.0%	3.3%
United Kingdom	3.5%	3.4%

Get the new WorldatWork Report
Top-level results from the WorldatWork 2026-2027 Salary Budget Survey report are now available to the general public. The full report — covering base salary increases and merit budgets for 24 countries/geographic regions and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — also is now 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.

Get the new WorldatWork Report

Top-level results from the WorldatWork 2026-2027 Salary Budget Survey report are now available to the general public. The full report — covering base salary increases and merit budgets for 24 countries/geographic regions and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — also is now 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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