In Corporate America, 2026 Pay Raise Budgets Projected to Hold Steady

Amid widespread economic uncertainty, employees at US corporations have reason tobreathe a small sigh of relief. A new study projects next year’s pay raise budgets to be on par with 2025.  

The Conference Board survey showscompanies are planning to increase their salary budgets by an average of 3.4% in 2026—in line with 2025 reported increases.  

The report also reveals that economic uncertainty is tempering the pace of hiring and salary growth. Yet, companies may be rebalancingtheir investments with a focus on critical skills and roles, whether related to AI technical skills or sectors with hiring difficulties like healthcare and construction.  

“With turnover slowing, companies are getting more strategic about where their salary dollars go.Rather than spreading increases across the board, they’re channeling budgets into roles and skills that really move the needle—like critical capabilities and internal upskilling,” said Diana Scott, US Human Capital Center Leader, The Conference Board. 

The survey, now in its 40th year, was conducted from May 19–June 20. It reflects the responses of more than 460 US compensation leaders across industries, company sizes, and sectors. Key reportfindings include:  

2026 salary budgets remain stable. 

• Employers reported average salary budget increases of 3.4% in 2025, and a 3.5% median, with the same expected for 2026.  

• Budget increases for 2025 came in lower than expected in last year’s survey—forecasted at nearly 4%—but remain above the 3% pre-2020 average. 

Performance and incentive pay remain priorities. 

• Organizations are leaning into performance-based compensation strategies.  

• One-time discretionary pay, like sign-on and retention bonuses, is being scaled back, particularly in technology and trade-sensitive sectors. 

• Merit-based pay growth is also moderating—from 3.5% in 2024 to 3.0% in 2025. 

• Nonexempt salaried employees saw the steepest drop in overall total increases (−0.8 percentage points vs. 2024), potentially indicating tighter limits on lower- to mid-level pay growth and a prioritization of critical roles and high-value skills. 

Economic uncertainty has cooled hiring momentum.  

• 61% of companies surveyed cited economic uncertainty as a key constraint on workforce strategies.  

• Companies report slowing both expansion hiring and attrition backfill in the last 6 months, while some report temporary layoffs have transitioned to reductions in force. 

Use of “other” base pay grows. 

• In 2026, companies’ use of “other” budgeted base-pay increases are projected to rise to 59% from 56% in 2025, continuing a multi-year trend of organizations diversifying their compensation strategies.  

• But fewer companies plan to include promotions (down 4%), external market adjustments (down 3%), and both retention and internal pay equity adjustments (each down 2%). 

Demand for critical skills persists. 

• Despite slower hiring overall, demand for “hot skills” remains strong with 14% expanding hiring for key skills.  

• Net increases in hiring for key capabilities were reported in technology (+17% net), healthcare (+16%), professional & business services (+13%), and finance, insurance & real estate (+13%). 

Automation and upskilling gain ground. 

• 30% of organizations increased automation investments over the past six months, with large employers leading the way, especially in leisure & entertainment and finance, insurance & real estate (both 40% more), and technology (33% more).  

• Simultaneously, 16% have expanded upskilling initiatives. 

Sector and size dynamics vary. 

• Manufacturing stands out as the only sector expanding pay equity and minimum adjustments in 2026.  

• Conversely, leisure & hospitality; government, nonprofit & education; and wholesale & retail trade sectors report retrenchments in specialized compensation strategies. 

“Today’s labor market is one of recalibration, not retreat,” added Mitchell Barnes, Economist at The Conference Board. “Companies are rebalancing their workforce and labor strategies—slowing overall headcount growth, targeting high-value skills, and investing in technology and training—to sustain productivity in a slower but still-competitive labor market.” 

About The Conference Board 

The Conference Board is the member-driven think tank that delivers trusted insights forwhat’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org