2027 Pay Raises Expected to Hold Largely Flat Amid Cost Pressures

A pair of new surveys suggests that salary increases in 2027 will decline modestly from 2026 levels but remain largely stable overall.

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. The findings reflect a return to more typical compensation planning after several years of elevated pay increases during the pandemic-era labor market.

Overall, employers are taking a more cautious approach to salary planning, citing cost management pressures, a tight labor market, and inflationary concerns, according to the surveys.

Experts say employers are becoming increasingly strategic in how they allocate pay increases, shifting away from broad, across-the-board raises in favor of targeted, merit-based increases for top performers and employees in critical roles.

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“Salary budgets may be holding steady, but the way organizations are using those dollars is changing significantly,” said Brittany Innes, senior director, rewards data intelligence, at WTW. “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.”

Gallagher also found that merit continues to be the primary driver of pay increases, particularly for large employers.

Salary Concerns Persist

The new data on pay comes amid rising employee concerns over whether wages can keep pace with the cost of living. Nearly half of working Americans (49%) say they do not believe their wages will ever catch up with the rising cost of living, while another 32% say it will take many years, according to a 2026 financial outlook from San Francisco-based career platform Resume Now. Fewer than one in five workers (19%) believe their wages will catch up with inflation in 2026.

The findings underscore the growing disconnect between employer salary budgets and employee expectations as inflation continues to strain household finances.

About 7 in 10 workers (69%) feel underpaid, with just 2% believing they are overpaid, according to Resume Now. 

“Workers are telling us something critical: They’re not just stretched thin; they’re losing hope,” said Keith Spencer, career expert at Resume Now. 

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Navigating salary decisions has been difficult for many organizations. While employees continue to grapple with higher living costs and persistent inflation, employers are also facing rising operating expenses and ongoing economic uncertainty, making compensation decisions increasingly challenging.

Compensation experts say that even if meaningful pay raises are off the table, employers should be transparent about how compensation decisions are made.

“Employees want to know how pay decisions are made,” Carrie Cavanaugh, SHRM-SCP, senior HR consultant at HR consulting firm Find Great People, said June 18 at SHRM26, held in person in Orlando and virtually. 

وقالت: «الشفافية تبني الثقة، حتى عندما تكون الميزانيات محدودة. وعندما لا يتوفر المال لزيادة الرواتب، علينا أن نقول ذلك أيضًا». 

Employees want answers to several key questions about compensation, including: how pay decisions are made; why people in similar roles may earn differently; what growth looks like over time; and what they can do to increase their earnings over time. 

وقال كافانو إن على المؤسسات أن تكون مستعدة للإجابة على هذه الأسئلة بأمانة. وقد لا يعجب الموظفون دائمًا بالإجابة، لكنهم يميلون أكثر إلى الوثوق بالقرارات التي يتم شرحها بوضوح واتساق.