New report finds salary increase budgets for 2027 remain stable
Salary budgets are expected to remain stable in 2027, but employers are beginning to reshape their compensation programmes amid economic uncertainty and financial pressures, according to a new report.
Findings from the latest Salary Budget Planning Report by WTW found that the average salary increase budgets for US companies in 2027 are expected to reach 3.4%.
This is only slightly lower than the actual 3.5% increase recorded in 2026, indicating stability in the average salary increase budgets.
But Brittany Innes, senior director, rewards data intelligence, WTW, noted that there is an ongoing shift in how organisations are managing their pay strategies.
"Salary budgets may be holding steady, but the way organisations are using those dollars is changing significantly," Innes said.
"Employers are moving away from broad-based increases and toward more precise, performance-driven pay strategies that target the roles, skills, and talent segments that matter most."
According to the report, at least a third of employers are now adjusting their compensation programmes (33%), as well as starting to hire at higher salary ranges (36%).
Other employers are also increasing the use of retention bonuses or spot awards to help secure key talent (34%), as well as raising starting salary ranges (32%).
Drivers of cautious pay planning approach
These changes come as cost management pressure (32%) and inflationary concerns (27%) continue to influence employers' cautious approach to salary planning.
The tight labour market is also a driver of this approach (27%), but some employers seem to be forgetting this, according to Lori Wisper, senior managing director, Work & Rewards, WTW.
"While the focus is often on the low demand for labour, most leaders forget that we are still in the throes of low supply," Wisper said.
"Employers will continue to experience salary increases in the 'land of 3%' for the foreseeable future given these dynamics. Those who focus on using that money wisely will be the ones that win the inevitable war for talent once demand picks up."
Aside from strategic pay planning, employers are also taking steps to strengthen employee value proposition by improving employee experience (47%) and expanding training opportunities (40%).
More than a third (38%) are also enhancing health and wellness benefits to ensure that employees stay with them amid shifts in compensation strategies.
