Peanut Butter Raise Trend ‘Losing Some of Its Spread’

After experts said peanut butter raises — the practice of spreading the same pay increase broadly across employees regardless of performance — were one of the biggest pay trends of the year, employers are turning away from the tactic.

More than a third of U.S. companies (36%) said they gave out standard, across-the-board pay increases this year, after 44% said in early 2026 that they were considering it, according to data from Seattle-based compensation firm Payscale. Now, fewer employers are sticking to the strategy, with 32% expecting to dole out such wage increases in 2027.

“Peanut butter pay may be losing some of its spread, but it hasn’t disappeared,” said Ruth Thomas, chief compensation strategist at Payscale.

According to Payscale’s recent report, peanut butter raises may not be the best talent lever, with a quarter of firms saying they lost employees in 2026 “due to insufficient pay increases.” Instead, more employers are turning to merit-based pay increases in the year ahead. 

“Organizations appear to be moving toward more thoughtful and differentiated compensation strategies, which is critical to attracting and retaining talent,” Thomas said. “When compensation budgets are limited, treating every employee the same feels simple and fair, but it can also fail to recognize the people, skills, and contributions that are most critical to the business.”

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Peanut butter pay is a more common strategy in times of economic uncertainty, Payscale CHRO Lexi Clarke noted earlier this year. For example, the practice became prevalent during the 2008 recession. “In uncertain economic conditions, flatter raises feel safer and easier to manage,” she said. Another reason for the rise of the peanut butter approach is scrutiny of pay-for-performance practices, as those can be prone to bias.

But experts caution that peanut butter raises may not be a sustainable approach for keeping and attracting talent. 

Myrna Hellerman, senior vice president at HR and benefits consulting firm Segal in Chicago, told SHRM earlier this year that peanut butter raises can sometimes backfire. “Across-the-board increases as a standalone pay management strategy can, over time, cause significant misalignment of individual employee pay with the market,” she said. “This misalignment can lead to employee discontent and turnover.”

Merit Takes Focus

Merit-based hikes will be employers’ main form of pay raises in the coming year, Payscale researchers noted. For 2027, employers plan to raise their base pay by an average of 3.5%, up just slightly from 3.4% in 2026. The largest portion of those increases is allotted to merit increases.

While the increase marks a slight improvement, it remains broadly in line with inflation, meaning many employees may experience little meaningful growth.   

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That’s in line with other recent figures.

Data from consulting firm WTW shows that average salary increase budgets for U.S. companies in 2027 are expected to average 3.4%, down slightly from the actual 3.5% increase budget reported for 2026, according to its survey of more than 34,000 companies across 156 countries, including 1,650 in the U.S.

Similarly, Gallagher’s 2026/2027 Salary Survey, which included approximately 1,180 employers, found that salary budget increases are stabilizing at between 3% and 3.5% annually.