If you’re hoping for a big pay raise this year, recent data suggests you might want to check those expectations. Pay raises in 2026 are holding steady rather than surging, according to research from Payscale.
The findings come from Payscale’s 2026 Compensation Best Practices Report, which surveys organizations about the salary increases they distributed in 2025 and what they plan for this year. The data provides a picture of where employer pay budgets stand amid ongoing economic uncertainty.
The numbers aren’t moving much
The median base pay increase for 2026 sits at 3.5%, identical to what employers gave in 2025. For workers who were expecting raises to outpace inflation more aggressively, that’s likely a bit of a letdown.
There are some differences between Canadian and American salary increases, according to the report. While U.S. employers are planning median increases of 3.5%, Canadian organizations are projecting slightly lower raises at 3.2%.
However, Canadian increases are actually higher relative to that country’s inflation rate, which held steady at 2.2% in November 2025. By comparison, U.S. inflation was running at approximately 2.7% annually as of late 2025.
As for what drives raises, merit and performance remain the dominant factors, with 76% of organizations citing them as the most influential drivers of pay increases.
Market adjustments to stay competitive with the cost of labor came in second at 46%. About 45% of organizations also factor cost of living into their decisions.
The rise of ‘peanut butter’ raises
One growing trend in pay is across-the-board salary increases. They’re sometimes called “peanut butter raises” because they spread pay increases evenly rather than tying them to individual performance ratings.
According to Payscale’s data, 48% of organizations plan to continue performance-based pay increases, but a significant portion are reconsidering that approach.
About 18% are considering peanut butter increases, 16% are planning to implement them and 9% already use this method. In total, more than 40% of organizations are either using or actively considering standardized raises.
This could reflect a shift away from performance-based systems, which have faced criticism for being subjective and potentially prone to bias. Organizations with large frontline or lower-wage workforces may find uniform increases simpler to administer and explain to employees.
Employers feel confident regarding flat budgets
Despite the lack of movement in salary budgets, most employers seem comfortable with their compensation strategies. About 60% believe their 2026 salary increases are competitive enough to retain and engage talent.
That confidence appears to stem from having better data to back up pay decisions. Organizations that can explain their compensation choices using market information seem more secure in their approach, even when budgets aren’t growing.
For workers, the message is that significant pay jumps probably aren’t coming through annual raises alone. Those looking to boost their income may need to consider other strategies, such as pursuing promotions, developing new skills or exploring opportunities elsewhere.
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