WTW Poll Reflects 2026 Salary Budget Stability; 3.4% Increases Planned

The 2026 salary budgets for U.S.-based organizations are expected to remain steady at 3.4%, the same as the actual average salary budget increase delivered in 2025, according to WTW’s latest Salary Budget Planning Survey, released on Wednesday, Jan. 21.

The global advisory firm based its new report on more than 35,000 survey responses received from 1,876 organizations from September through November 2025.

According to WTW, respondents based much of their expectations for salary budget stability on predictions of contained inflation across many economies. The report stated greater inflation predictability has reduced the need for reactive pay increases and instead allowed employers to proactively plan their compensation decisions.

Respondents also pinned budget stability to:

• Greater general clarity;
• More disciplined prioritization; and,
• Increased understanding where compensation can drive meaningful impact.

Heather Ryan, WTW’s rewards data and intelligence head of product, said particular attention should be paid to that third bullet point.

“The traditional approach of spreading around available budget to most employees is being replaced with strategic use of each dollar,” she said. “Those employees that are growing their skills, contributing to financial outcomes and demonstrating contributions that impact market impressions are poised to receive the larger share of the budget. Those that keep the business running with efficiency will also benefit. This approach will likely continue beyond 2026. Rewards must align to outcomes now more than ever.”

For Most, It’s Full Speed Ahead

Nearly two-thirds of employers (62%) that participated in the survey said they have made no change to their 2026 projected pay budgets, which were first set midway through 2025. While a small percentage of respondents (6%) reported they are planning to increase their budgets, 21% said they now plan to decrease theirs.

For those making changes to their initial budget projections, four primary factors emerged:

• Concerns related to cost management (36%);
• An anticipated recession or weak financial results (36%);
• A tight labor market (32%); and,
• Inflationary pressures (25%).

According to WTW research experts, recent budget consistency reflects underlying changes in how leaders approach workforce planning and compensation decision-making, with many organizations that participated in the survey reporting:

• Stronger governance around compensation decisions;
• More sophisticated use of market data and segmentation in their preparation and decision-making practices related to pay; and,
• Increased focus on affordability and maintaining internal equity.

Keeping an Eye on Hiring and Retention

While the new report reflected a measure of addressable predictability, it also pointed out a concern area: 24% of participating organizations said they are having trouble attracting and/or retaining employees. In addition, voluntary turnover rates are down 10.1% over the last year.

The survey found most employers are earmarking their limited budget capacity toward efforts to retain critical talent and address pay compression where it is most acute. Other most-cited retention strategies are geared toward:

• Improving the employee experience (50%);
• Increasing the use of training opportunities (43%);
• Making changes to health and wellness benefits (42%);
• Achieving greater workplace flexibility (35%); and,
• Making changes to compensation programs (32%).

Lori Wisper, the managing director of WTW’s work and rewards business, stated current hiring and retention issues still reflect general stability in the labor market and pose limited impacts on the salary budget process.

“The labor market has reached a sort of equilibrium in the sense that demand for labor is significantly lower than where it was the past few years, while labor supply shortages have also continued,” she said. “Since salary increase budgets are a direct reflection of this dynamic, we can expect a period of relative stability for salary increases for the foreseeable future.”

What Does the Future Hold?

A 3.4% average salary budget increase for 2026, while in tune with 2025 actuals, is under what employers generally delivered (and employees anticipated) in the post-pandemic years (e.g., by WTW’s numbers, 3.9% in 2024, 4.4% in 2023, 4.1% in 2022). Might we be seeing a drop on the horizon?

“It’s possible that salary increase budgets may go back down, closer to 3% by this time next year (or sooner if economic conditions worsen),” Wisper stated in a November 2025 article. “But ... going any lower than that has historically meant that some — potentially many — employers are resorting to zero salary budgets which, as history has shown, is a drastic and unsustainable move.”

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