Compensation budgeting is a dynamic process influenced by various market factors, internal equity considerations, and business objectives. The following analysis, based on data from leading industry sources, provides a detailed outlook for compensation increases in 2026 as compared to actual budgets in 2025.
The National Salary Budget Snapshot
Overall, salary increase budgets across the United States show a projected average softening, moving from a 3.7% actual mean in 2025 to a 3.6% projection for 2026. This indicates that while budgets remain robust, the post-pandemic surge may be leveling off.
| Source | 2025 Actual | 2026 Projected |
| WorldatWork | 3.7% | 3.6% |
| Willis Towers Watson | 3.5% | 3.5% |
| Gallagher | 3.8–4.0% | 3.2–3.3% |
| Mercer | 3.5% | 3.5% |
| Conference Board | 3.4% | 3.4% |
| Salary.com | 3.5% | 3.6% |
| Payscale | 3.6% | 3.5% |
| Korn Ferry | 3.5% | 3.5% |
Additional salary increase projection details described below are available in the WorldatWork’s Salary Budget Survey 2025 – 2026 Executive Report & Analysis and Payscale’s 2025-2026 Salary Budget Survey.
Key Components of the Budget
Merit Increases: The budget dedicated to Merit Increases is holding perfectly steady at a mean of 3.2% for both 2025 (Actual) and 2026 (Projected). This stability underscores the continued importance of rewarding individual performance to drive retention and productivity.
Cost of Living/General Increases: The budget for General Increase/COLA (Cost of Living Adjustment) is projected to rise slightly, moving from an actual mean of 1.3% in 2025 to 1.5% in 2026. This minor increase suggests some companies are accounting for persistent inflationary pressures or simply broadening baseline adjustments.
Other Increases: The budget allocated to Other Increases (which covers promotions, special adjustments, or equity adjustments) is expected to remain flat from 2025 at a mean of 0.8%.
Industry and Employee Category Trends
Industry: Business services, engineering, and the technology industries continue to budget the largest increases—all over 4%. Conversely, education, hospitality, and retail expect more modest rises, typically around 3%.
Employee Groups: For 2025, there was a near-uniformity in actual increases across the employee base: Non-Exempt Hourly Union, Non-Exempt Salaried, and Exempt Salaried all saw a consistent 3.7% budget. Looking ahead, this parity continues, with the projected 2026 increase set at 3.6% for all four job categories, including Officer/Executives. This suggests a consistent approach to base pay adjustments across the entire organizational structure.
The Difference in Salary Structure Adjustments
It is crucial to note that Salary Structure Adjustments operate on a different—and slower—track than salary increase budgets. Organizations are increasing their salary ranges at a slower percent than their merit budgets. For 2025, actual overall structure adjustments were 2.3%, and they are projected to be 2.2% in 2026.
Turning Budgets into Talent Investment
With tighter budgets in 2026, there is a need to think about how to strategically allocate and communicate increases. We can help you translate this information and guide you in developing high-impact approaches that can help drive retention and performance. We also create custom Excel-based annual increase budget tools.
