Dive Brief:
- U.S. organizations expect to maintain steady pay strategies in 2026 despite economic concerns, according to the results of an October survey published by Mercer on Tuesday.
- The firm’s data showed expected average merit base salary increases of 3.2% for the new year and an average overall increase of 3.5%. Most respondents planned to spread those increases equally rather than directing more funds to employees with high-demand skills or to solve market gaps.
- Mercer said its findings suggest a “disconnect” with employers’ broader priorities such as talent development and market competitiveness. Organizations have an opportunity to shift their budgets to focus on in-demand skills to more effectively achieve such goals, Lauren Mason, U.S. workforce solutions leader at Mercer, said in a press release.
Dive Insight:
A consistent picture has emerged on employers’ pay increase plans for the new year — at least according to surveys by major consultancies and vendors. An estimate published over the summer by Payscale, for instance, put 2026 salary budget increases at 3.5%, down 0.1% from 2025. In September, data from The Conference Board put the average increase at 3.4%.
But other trends have emerged in the background, such as a growing divide between high-wage and low-wage roles, according to a recent report by workforce intelligence firm Revelio Labs. Revelio found that since January 2023, high-wage salaries increased by more than 30%, whereas low-wage salaries rose by just 10%. The report also showed that gains had fallen for low-wage workers since the onset of the COVID-19 pandemic.
Artificial intelligence and automation loom over pay strategy discussions for the year ahead. Robert Half’s 2026 Salary Guide found that 84% of hiring managers reported plans to give higher salaries to candidates with in-demand skills including AI, machine learning and data science. That comes amid fears that employers may be hiring for AI talent too quickly without taking the time to build enduring talent pipelines, according to a separate General Assembly report.
Conversely, Mercer’s survey found that AI had little effect on hiring and compensation decisions, with only 2% of respondents stating that AI or automation reduced hiring plans and 9% stating plans to make head count changes related to AI. The technology could become more integral to such plans as organizations evolve and apply AI over time, Stephanie Penner, U.S. and Canada career practice leader at Mercer, said in the press release.
Mercer previously found that actual merit increases for 2025 fell below expectations, with an average actual increase of 3.2% compared to the 3.3% projected in November 2024. The firm attributed the difference to factors such as ongoing compensation budget declines driven by a softer labor market.
