Salary Increase Statistics 2026: Pay Raise Budgets, Merit Increases & Real Wages

The 2026 salary increase story is not that budgets fell. It is that they stopped moving while everything around them kept moving. WTW, Mercer, the Conference Board, WorldatWork and Payscale — five organisations with different samples, different methodologies and different fielding dates — all landed within 0.2 percentage points of each other, projecting US salary increase budgets of roughly 3.5% for 2026. Last year they projected roughly 3.5%. The year before, employers delivered roughly 3.5%.

Underneath that flat line, three things are being quietly taken away: the merit component is smaller than the headline number, the promotion rate is being trimmed, and inflation is eating the remainder. This guide sets out every verified 2026 figure, states which survey each one comes from and when it was fielded, and flags the places where two reputable sources genuinely contradict each other rather than smoothing them into a single tidy number.

The Headline Numbers (2026 Snapshot)

Four figures frame the year: what employers budgeted, what the merit portion of that budget actually is, what employees received according to national statistics, and what happened to that after inflation.

Salary Increase Statistics Cheat Sheet

The most-cited 2026 compensation data points in one place. Each is unpacked, with its source and survey date, further down this article.

Five Surveys, One Answer: 3.4% to 3.6%

Compensation forecasting is usually a mess of incompatible numbers. Not this year. Five independent instruments — sampling different populations, fielded between May 2025 and November 2025 — converged on a band just 0.2 percentage points wide.

The spread that does exist is explained almost entirely by two things. First, what is being counted: a "total increase budget" folds in promotions, market adjustments and equity corrections, while a "merit budget" is only the performance-driven pot. Mercer publishes both, and the 0.3-point gap between them is the clearest illustration of why two people quoting different numbers can both be right. Second, who is being sampled: WorldatWork's respondent base skews toward larger, more formalised compensation functions, which is the most plausible reason its 3.6% sits at the top of the range.

The Five-Year Trajectory: Back to Normal, or Below It?

The flatness only means something against the run-up. Budgets spiked in 2022 and 2023 as employers chased inflation and a genuinely tight labour market, then fell back over two years.

One point of context matters more than the shape of the curve: the Conference Board notes that the pre-2020 norm was about 3%. On that reading 2026 is not austerity — it is a return to the long-run baseline, half a point above where budgets sat for most of the 2010s. Whether employees experience it that way is a different question, and the answer is in the inflation data further down.

Merit Versus Total: The Gap Most Reporting Misses

The single most useful thing to understand about 2026 compensation data is that the headline number is not the merit number. Mercer's October 2025 survey of 1,013 US organisations puts merit increases at 3.2% and total increases at 3.5%. The 0.3-point difference is not rounding — it is promotions, cost-of-living adjustments, market repricing and equity corrections, none of which are distributed on performance.

The practical consequence for a manager: if your merit matrix is built to hand a strong performer "above the 3.5% average," you are quietly working against a 3.2% pot. The extra 0.3 points is already committed elsewhere. This is the mechanism behind the most common recognition failure we see — a manager promises a differentiated raise in a performance conversation, then discovers in the compensation cycle that the differentiation was never funded.

What Employees Actually Received: The BLS Reality Check

Budget surveys measure intent. The Bureau of Labor Statistics measures outcomes, and its Employment Cost Index is the only instrument here that is not a self-reported employer plan.

For the 12 months ending June 2026, private-industry wages and salaries rose 3.1%, total compensation costs rose 3.3%, and benefit costs rose 3.8%. Two things jump out. Benefits are rising faster than wages, which is where a meaningful slice of the total reward budget is going whether or not anyone planned it that way. And the wage figure is below every budget projection in the table above — delivery is running behind intent, as it usually does.

That last row is the number to carry out of this article. In constant dollars, private-sector wages and salaries fell 0.4% over the year to June 2026, having been barely positive at +0.1% three months earlier. A 3.4% budget in a 3.5% inflation environment is not a raise. It is a hold, delivered with the ceremony of a raise.

The gap between a 3.5% budget and a 0.4% real-terms cut is where employee trust in the compensation process goes to die — not because employers are cheating, but because nobody explains the arithmetic. It shows up directly in the financial wellness data too: 49% of employees say their compensation is not keeping up with costs.

Promotions: The Quiet Cut Nobody Announces

Salary budgets held. Promotions did not. This is where 2026 austerity actually shows up, and it is almost invisible in headline coverage because it does not appear in the budget percentage.

• Employers plan to promote about 9% of their population in 2026, down from roughly 10% in 2025 (Mercer).
• The average increase attached to a one-level promotion fell to 8.7%, from 9.3% the prior year (Mercer).
• Organisations with a separate promotion budget set aside 1.0–1.1% of the base salary budget for it.
• The Conference Board recorded promotions down 4% and external market adjustments down 3% as pay-increase mechanisms, while "other" base-pay increases rose to 59% from 56%.

Compounded, those are material. Fewer people promoted, each receiving a smaller step — the total promotion spend falls by roughly a sixth without a single line of the salary budget changing. For an employee, a deferred promotion is a far bigger financial event than a 0.2-point difference in the merit pool, and it is the one most likely to trigger a job search. Our employee turnover statistics guide covers what that costs to replace.

Who Is Raising, Who Is Cutting, and Why

WTW's survey, fielded September to November 2025, asked whether organisations had revised their initial 2026 projections. Most had not: 62% made no change. But among those that moved, cuts outnumbered increases more than three to one — 21% reduced their budget against 6% that raised it.

Note that the top two reasons pull budgets down and the next two push them up — these are the drivers cited across all adjusters, not a net direction. The broader economic anxiety is well documented elsewhere in the same data: the Conference Board found 61% citing economic uncertainty as a key workforce constraint, and Mercer found 61% anticipating moderate to significant economic impact on compensation decisions, with 66% specifically naming tariffs, inflation and unemployment.

Meanwhile the labour market gave employers cover. Only 24% of organisations reported difficulty with recruitment or retention, and the BLS quits rate has been stuck at 1.9% — a long-run low, with about 3.2 million quits a month. When people are not leaving, the market pressure that forced 4.4% budgets in 2023 simply is not there.

Salary Increases by Industry

Industry variation is narrower than most people expect — half a percentage point separates the top from the bottom on merit.

On total increases the ordering shifts again: financial services, energy and high tech all sit at 3.7%, health care services at 3.4% and retail at 3.3%. Banking is the clearest example of why merit alone misleads — its merit budget runs below the national average while its total budget runs above it, because so much of the money moves through promotions and market adjustments rather than the merit matrix.

The Global Picture: 2026 Increases by Country

WorldatWork's survey covers 22 countries. The pattern is uniform caution — projections for 2026 came in about 0.5 percentage points below the prior year's projections across all countries surveyed.

Nominal figures across borders are close to meaningless without inflation, which is why ECA International's approach is more useful for anyone budgeting a multi-country programme. Surveying 200 multinationals between August and October 2025 and applying IMF inflation projections, ECA put the median real salary increase across 25 European countries at 1.7% for 2026. Turkey led at 8.1% real. The UK managed 1.1% real on a 3.6% nominal increase. Greece came in at 0.9%, and Romania was projected negative at −0.7%. Eastern European economies — Poland, Czechia, Hungary, Bulgaria — generally outperformed their Western neighbours on faster growth and productivity.

The Employee Side of the Ledger

Employer surveys describe budgets. BambooHR surveyed 1,500 full-time salaried US employees between 29 August and 20 September 2025 and asked what actually landed. The answers do not line up neatly with the budget data, and the mismatch is instructive.

The 4.8% average sits far above every employer budget in this article, and there is no contradiction: it is an average among recipients only. A third of employees received nothing at all. Blend those together and you land back near the budget figure. This is exactly the arithmetic that makes employees feel misled when they read that "the average raise is 3.5%" — a third of them got zero, and the rest got something quite different from the average.

The two numbers with the most strategic weight are the last few. 83% of employees prefer a mix of salary and incentives over salary alone, and a quarter would trade base pay for bonus upside. In a year when base budgets are frozen at the rate of inflation, the variable and recognition layer is the only part of total reward with room to move — which is the argument we make in more detail in why cash bonuses are losing to digital rewards.

The Contradiction at the Centre of 2026 Pay Strategy

Every consultancy this year has said the same thing: with a flat budget, stop spreading it thinly and target it at critical skills. WTW's rewards data lead put it directly — the traditional approach of spreading available budget across most employees is being replaced by more strategic use of each dollar.

Employers are not doing it. Mercer found that 83% plan to distribute salary budgets equally across the organisation rather than directing funds toward in-demand skills or market gaps. Robert Half, surveying hiring managers rather than compensation teams, found 84% planning higher salaries for candidates with AI, machine learning and data science skills. So the money is being differentiated for people joining and spread flat for people already there — which is a fairly precise description of how you train your best internal people to interview elsewhere. The 15.3% average raise for job changers, against 4.8% for stayers, is the same finding viewed from the employee side.

Two related notes for anyone building the 2026 plan. AI is not yet showing up in headcount: only 2% of Mercer respondents said AI or automation had reduced hiring plans, and 57% reported stable hiring volumes. And pay differentiation is getting harder to hide — the EU Pay Transparency Directive requires employers to justify pay differences on objective, gender-neutral criteria, which is considerably easier when your differentiation is documented and considerably harder when it is not.

Statistics to Treat With Caution

Four figures circulate constantly in 2026 compensation coverage and should not be repeated without qualification.

• "The average raise in 2026 is 3.5%." This conflates a budget with an increase. 3.5% is a percentage of payroll set aside by employers; individual outcomes range from 0% for the 16% of workers scheduled for nothing, to 8.7% for those promoted.
• Any 2026 figure quoted without a fielding date. Mercer's preliminary July 2025 industry numbers differ materially from its October 2025 numbers, and WTW's mid-2025 poll (3.5%) differs from its September–November fielding (3.4%). These are revisions of the same survey, not disagreements between sources.
• Nominal increases compared across countries. India's 8.8% and the UK's 3.8% are not comparable in any meaningful sense. Use real, inflation-adjusted figures for cross-border comparison, and say which inflation forecast you applied.
• "Merit increase" used interchangeably with "salary increase." The merit pot is roughly 0.3 points smaller than the total budget. Managers who plan differentiation against the total figure will overcommit.

What to Do With This Data (2026 Checklist)

Methodology and Sources

Every statistic in this guide is drawn from a named research publication and was verified against that source before publication. Budget projections come from five compensation surveys, each with its sample size and fielding window stated in the comparison table above. Actual wage outcomes come from the US Bureau of Labor Statistics Employment Cost Index, which is a government statistical product rather than a survey of employer intent, and is the only figure here not subject to self-reporting bias. Employee-side figures come from BambooHR's survey of 1,500 full-time salaried US employees. European real-increase figures come from ECA International.

Four caveats worth carrying with you. First, budget surveys measure plans, and plans have consistently run above delivery — Mercer's 2025 actual merit increases of 3.2% came in below its own 3.3% projection from November 2024. Second, fielding dates span May to November 2025, so the later surveys incorporate economic information the earlier ones could not; where they disagree, prefer the later fielding. Third, the industry breakdowns are drawn from a single survey (Mercer) to keep them internally comparable, and cell sizes within individual industries are much smaller than the headline sample. Fourth, cross-country nominal figures are not comparable without an inflation adjustment, and the real-terms European figures rest on IMF inflation projections published in October 2025 which have since moved.

Key Takeaways

• Five independent surveys put 2026 US salary increase budgets at 3.4% to 3.6% — flat on 2025, down from the 4.4% peak in 2023, and about half a point above the pre-2020 norm of 3%.
• The merit-only budget is roughly 3.2%, not 3.5%. Managers planning differentiation against the headline number will overcommit by design.
• Actual delivery ran behind intent: BLS data shows private-industry wages and salaries up 3.1% over the year to June 2026, with benefit costs rising faster at 3.8%.
• After inflation, private-sector wages and salaries fell 0.4% over that year — a real-terms cut delivered as a raise.
• Promotions are the real 2026 cut: about 9% of the workforce promoted, down from 10%, with the promotion increase down from 9.3% to 8.7%.
• Cuts outnumbered increases more than three to one among employers that revised their budgets, with cost management and recession fears the leading reasons.
• 83% of employers plan to spread the budget equally even as 84% of hiring managers pay premiums for scarce external skills — and job changers averaged 15.3% against 4.8% for those who stayed.
• 45% of employees say they are underpaid and 33% received no increase at all, while 83% would prefer a mix of salary and incentives over salary alone.