Pay raises will be stagnant in 2026 as companies 'reorient' to economic uncertainty

Sat, Sep 13, 2025, 10:00 AM 5 min read

If you’re setting your sights on a big pay raise next year, you may want to temper your expectations.

Most employers plan to notch up salaries by an average of 3.4% in 2026 — on par with this year’s reported increases, according to a new survey from The Conference Board.

“Today’s labor market is one of reorientation, not retreat,” Mitchell Barnes, an economist at The Conference Board, told Yahoo Finance. “Employers anticipate steady compensation growth in 2026, but the underlying mix suggests some companies are scaling back, including signing and retention bonuses.”

Six in 10 companies surveyed cited economic uncertainty as a key constraint to their salary and hiring decisions.

Companies report reining in hiring and moving more slowly to fill jobs left open by employees who exited by choice in the last six months. Meanwhile, some firms report that temporary layoffs have transitioned to permanent reductions.

In a sense, it’s a reallocation of funds for cautious employers. Companies are tweaking salary budgets toward investing internally, with 16% of those surveyed planning to add skill-building initiatives for existing employees, Barnes said.

Payscale’s recent salary survey also found that US employers are planning for a similar pay increase, roughly 3.5% in 2026 on average, down from 3.6% in 2025.

Only 16% anticipate a salary-increase budget that is higher than last year. About 7 in 10 employers expect salary budgets to remain the same, while a small number expect them to dip lower.

“It’s not surprising that pay budgets are trending lower this year, based on a cooling labor market,” said Ruth Thomas, chief compensation officer at Payscale.

“What is maybe more surprising is just how much economic concerns have now overtaken labor competition as the primary driver of compensation decisions — 66% of employers cite this as the reason for pulling back, up 17 percentage points from last year,” she said.

Compare this to employers in the tight job market a few years ago who were eager to recruit and retain workers. Base pay increases in 2023 averaged 4.8%, the highest level in two decades, according to Payscale.

“What’s clear is that with global economic volatility, inflationary pressures, higher interest rates, and talk of potential recessions, organizations are prioritizing cost control,” Thomas said.

Pay varies depending on what field you work in, of course. For example, employees in science, engineering, and government will experience salary bumps over 4%, per the Payscale data.