Peanut Butter Pay Strategy Gains Traction as 40% of Firms Shift Away from Merit-Based Raises
Event summary
- 44% of companies are adopting or considering 'peanut butter' pay increases in 2026, spreading raises evenly across employees.
- Overall base-pay increases remain steady at 3.5%, unchanged from 2025.
- Smaller employers (1–99 employees) are offering higher pay increases (4%) compared to larger firms (3% for 5,000–9,999 employees).
- Industries like Construction (5%), Agencies & Consultancies (4.5%), and Technology (4%) are offering above-median pay increases.
- 60% of organizations are confident their pay increases are competitive for retaining talent.
The big picture
The rise of 'peanut butter' pay increases reflects a broader trend toward simplifying compensation strategies amid administrative burdens and budget pressures. As labor markets remain uneven, companies are prioritizing fairness and simplicity over performance-based differentiation, potentially masking risks if top performers feel undervalued. This shift is particularly notable in smaller firms and industries facing talent shortages, where pay budgets are being used more aggressively to compete.
What we're watching
- Talent Retention
- How the shift to even pay increases will affect top performer retention and engagement.
- Industry Differentiation
- Whether industries with higher pay increases will see better talent attraction and retention.
- Compensation Strategy
- The pace at which companies will balance fairness, simplicity, and performance differentiation in pay strategies.
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