The average salary increase budget for U.S. companies is projected to be stable at 3.5% for 2026. A significant portion of organizations, about 31%, plans to decrease their salary increase budgets due to recession fears and the necessity for stricter cost control. Conversely, some companies aim to raise budgets because of a competitive labor market and inflation. Despite the stagnation in pay growth, employee turnover is low; only 30% of organizations struggle with retention, and 62% of employees wish to stay with their current employers.
Employers are no longer simply reacting to economic signals regarding pay allocation. They’re accounting for other labor factors, considering how pay and benefits resonate with employees.
CFOs that we speak with are looking holistically at pay and benefits to understand which programs provide the highest return on investment, treating 'total rewards' as a portfolio.
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