Payscale: U.S. Employers Forecast 3.5% Pay Increases for 2026

U.S.-based employers are anticipating 3.5% average salary increase budgets for 2026, slightly less than the 3.6% average actual increases they provided to employees in 2025, according to the results of Payscale’s 10th annual Salary Budget Survey, which was released Thursday, Aug. 7.

Last year’s report from the compensation software and data company showed a 3.5% U.S. forecast for 2025, which was less than the 3.6% average actual pay increase for 2024.

Payscale surveyed 1,551 organizations in the U.S., Canada and 19 other international locations during May and June for its new report. The data for Canada showed 3.3% average salary increase budgets forecast for 2026 and 3.4% actual increases provided in 2025.

The new figures for the U.S. market resemble those found in other recently released salary budget survey reports.

WorldatWork: 3.6% mean salary increase budgets for 2026; 3.7% actual mean increase budgets in 2025.
WTW: 3.5% average salary increase budgets for 2026; 3.5% actual budgets in 2025.
Gallagher: 3.2% to 3.3% average salary increase budgets (job-classification dependent) for 2026; 3.8% to 4.0% actual budgets in 2026.

The Big Picture

In summarizing its report findings, Payscale stated: “Uncertainty over the economy is leading to planned salary increases declining slightly for the upcoming 2026 budgetary season compared to 2025. Concern about the competition for labor is declining in the United States. Only a small portion of organizations (16% in the U.S. and 10% in Canada) anticipate a salary increase budget that is higher than last year. Most organizations (68% in the U.S. and 74% in Canada) expect budgets to remain the same. For both the U.S. and Canada, 16% expect budgets to be lower.”

For U.S. employers anticipating lower budgets for 2026 compared to actuals for 2025, cited reasons include:

Concern about future economic conditions or business performance (selected by 66% of respondents)
Prior year increases were higher than usual (32%)
Reduced competition for labor or labor supply surplus (12%)
Change in compensation philosophy or competitive positioning (6%)
Other reasons (15%)

For U.S. employers anticipating higher budgets for 2026 compared to actuals for 2025, cited reasons include:

Change in compensation philosophy or competitive positioning (35%)
Improved economic conditions or improved business performance (34%)
Increased competition for labor or labor supply shortage (34%)
Prior year increases were lower than usual (32%)
Other reasons (12%)

“Pay increases have been tapering year over year as the surge in wage growth and inflation begins to level off, but inflation is starting to creep back up with economic uncertainty mounting and labor markets shifting in favor of employers, which may mean that pay increase plans will need to be revisited,” said Ruth Thomas, Payscale’s chief compensation strategist. “HR leaders should be prepared for heightened scrutiny around compensation, particularly as 1 in 3 employees (32%) feel their pay does not reflect their performance.”

Who Is Getting Raises, and What Are They Getting?

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

84% of all workers are scheduled to receive a base pay increase, compared to an 85% projection in last year’s report. Broken down by job classification, 2026 raises for anticipated for:
- 85% of exempt management employees
- 84% of exempt non-management employees
- 83% of non-exempt employees
- 79% of officers and executives
Merit increases and promotional increases are primary means in which to recognize employees, with:
- 87% of organizations using merit increases
- 73% using promotional increases
- 39% using salary structure increases
- 26% using inflation or cost-of-living adjustment increases
- 16% using other methods

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	2025 Actual Increases	2026 Forecast Increases
Agencies and consultancies	3.9%	3.7%
Arts, entertainment and recreation	3.7%	3.2%
Business services	4.0%	4.0%
Construction	4.1%	3.7%
Education	3.0%	3.1%
Energy and utilities	3.7%	3.7%
Engineering and science	4.4%	4.2%
Finance and insurance	3.9%	3.8%
Food, beverage and hospitality	3.0%	3.0%
Government	4.2%	4.0%
Healthcare and social assistance	3.3%	3.5%
Manufacturing	3.4%	3.3%
Non-profit	3.5%	3.7%
Pharmaceutical and biotechnology	3.2%	3.4%
Real estate, rental and leasing	3.6%	3.6%
Retail and customer service	3.0%	3.5%
Technology (including software)	4.0%	3.5%
Telecommunications	2.9%	3.4%
Transportation and warehousing	3.3%	3.4%
Other	3.6%	3.6%

Employer Size

Number of Full-Time Employees (FTEs)	2025 Actual Increases	2026 Forecast Increases
Less than 25 FTEs	4.3%	4.2%
25 to 49 FTEs	3.5%	3.7%
50 to 99 FTEs	3.9%	3.5%
100 to 199 FTEs	4.1%	3.9%
200 to 499 FTEs	3.5%	3.6%
500 to 749 FTEs	3.6%	3.6%
750 to 1,999 FTEs	3.7%	3.6%
2,000 to 4,999 FTEs	3.6%	3.6%
5,000 to 7,499 FTEs	3.1%	3.1%
7,500 to 9,999 FTEs	3.2%	3.3%
10,000 to 14,999 FTEs	3.3%	3.5%
15,000 to 49,999 FTEs	3.4%	3.4%
More than 50,000 FTEs	2.8%	3.9%

Employer Revenue

Employer Annual Revenue Range	2025 Actual Increases	2026 Forecast Increases
Less than $5 million	4.9%	4.3%
$5 million to less than $10 million	3.2%	3.5%
$10 million to less than $50 million	3.8%	3.8%
$50 million to less than $200 million	3.9%	3.8%
$200 million to less than $500 million	3.7%	3.7%
$500 million to less than $1 billion	3.8%	3.5%
$1 billion to less than $3 billion	3.5%	3.4%
$3 billion to less than $5 billion	3.4%	3.7%
$5 billion to less than $10 billion	3.6%	3.4%
$10 billion to less than $50 billion	3.4%	3.4%
$50 billion and higher	3.0%	3.3%

U.S. Region

Region of the Country	2025 Actual Increases	2026 Forecast Increases
Northeast	3.6%	3.6%
Middle Atlantic	3.6%	3.6%
Midwest	3.6%	3.6%
South	3.7%	3.7%
West	3.6%	3.5%

Outside the U.S. and Canada

Looking 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 2026 forecasts resembling the 2025 actuals.

Country	2025 Actual Increases	2026 Forecast Increases
Australia	3.6%	3.3%
Brazil	4.1%	4.5%
China	4.5%	4.7%
Finland	3.0%	2.8%
France	3.5%	3.3%
Germany	3.8%	3.4%
India	9.0%	8.5%
Ireland	3.9%	3.6%
Japan	3.0%	3.1%
Mexico	4.8%	4.6%
Netherlands	3.6%	3.5%
New Zealand	3.1%	3.3%
Poland	5.0%	4.9%
Singapore	3.6%	3.6%
South Africa	5.1%	4.9%
South Korea	3.9%	4.1%
Spain	3.7%	3.4%
Sweden	3.0%	3.2%
United Kingdom	3.6%	3.4%

(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).

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