Dive Brief:
- While nearly half of companies (48%) expect to award performance-based pay increases, a growing share are considering a different approach: the “peanut butter” pay raise, according to a preview of Payscale’s 2026 Compensation Best Practices Report.
- The peanut butter raise approach provides workers with across-the-board salary increases, Payscale explains, and is gaining consideration from employers with large front-line or lower-wage populations.
- Already, 9% of companies take this approach and 16% are ready to implement it, Payscale said. Another 18% said they are considering doing so.
Dive Insight:
Peanut butter raises, although less traditional, may have sticking power, as companies reassess their compensation strategies in the face of inflation, Payscale said.
“While merit pay is still a best practice, performance ratings-based salary increases have faced criticism in recent years for being subjective, bias-prone, and administratively complex, especially in a volatile labor economy that faces economic uncertainty,” the report found.
Similarly, a December 2025 Mercer report found that most of the companies it surveyed planned to spread salary increases equally across all workers rather than spending more on employees with high-demand skills or to address market gaps.
Mercer noted that this approach might represent a “disconnect” with companies’ priorities of talent development and market competitiveness.
“By focusing compensation budgets on high-demand skills rather than spreading resources too thin, leaders can more effectively drive their workforce strategy and secure the talent essential for success,” Mercer’s U.S. workforce solutions leader said at the time.
One in 10 companies said they are not confident about how competitive their pay increases are in attracting and retaining talent, and 5% said they are not at all confident, the Payscale report found. A quarter of companies said they felt neutral about their competitiveness.
Overall, median base-pay increases are expected to hold steady in 2026. Companies awarded 3.5% raises last year and plan to do the same this year, Payscale said.