As 2026 Salary Budgets Remain Flat How Employers Are Rethinking

With cost containment a looming influence, new research finds that when it comes to salary increase budgets for 2026, few organizations are planning any big changes. WTW’s most recent Salary Budget Planning Report uncovered that the average salary increase budgets for U.S. companies are expected to remain flat next year at 3.5%, the same as the actual budgets of 2025. WTW’s Rewards Data Intelligence practice conducted the survey this spring across 157 countries worldwide, with more than 29,128 responses, including nearly 1,600 from the U.S. While most organizations weren’t anticipating a change in budget, according to WTW’s Brittany Innes, director, Rewards Data Intelligence, 31% of those surveyed are projecting lower salary increase budgets than last year. Of those, the most common reasons cited include an anticipated recession or weaker financial results and concerns related to cost management.

Of the minority projecting higher salary increase budgets, most pointed to tight labor markets and inflationary pressures. Even without big salary increases, employees are staying put. According to WTW, fewer organizations this year found employee stability challenging compared to the past two years. Less than one-third of organizations (30%) reported difficulty attracting or retaining employees, representing a decrease of 11 percentage points since 2023. As a SHRM Member®, you’ll pave the path of your success with invaluable resources, world-class educational opportunities and premier events. Build capability, credibility, and confidence to influence strategy, shape culture, and drive measurable business impact.

Demonstrate your ability to apply HR principles to real-life situations. Stand out from among your HR peers with the skills obtained from a SHRM Seminar. Demonstrate targeted competence and enhance your HR credibility. NEW YORK, July 8, 2025 — Average salary increase budgets for US companies in 2026 are expected to remain stable at 3.5%, matching 2025’s actual increases. This is according to the latest Salary Budget Planning Report by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company. Three out of five organizations saw their salary budgets change in the last pay cycle.

More than half (53%) of these organizations reported no change between their anticipated and actual pay budgets in 2025. For the nearly one-third (31%) of these organizations that are projecting lower salary increase budgets than last year, the most common reasons cited are an anticipated recession or weaker financial results (51%) and concerns... Tight labor markets (59%) and inflationary pressures (30%) are the most commonly cited reasons for change among the relatively few organizations that are projecting higher salary increase budgets. While top-line budgets are generally holding steady, the real shift is happening beneath the surface ” “While top-line budgets are generally holding steady, the real shift is happening beneath the surface. Organizations are being more deliberate about how they allocate pay, where they focus investment and what outcomes they expect to drive.

Employers are no longer simply reacting to economic signals; they’re reimagining how to best support broader business goals despite uncertainty,” said Brittany Innes, director, Rewards Data Intelligence. Despite stable pay increases, employees are staying put. Fewer organizations this year have found employee stability challenging compared to the past two years. Less than one-third of organizations (30%) report difficulty attracting or retaining employees, representing a decrease of 11 percentage points since 2023. Good morning. Salary increases for employees are expected to remain similar next year amid a flatter, but potentially volatile, economic outlook.

For U.S. companies, the average salary increase budget is projected to hold steady at 3.5% in 2026, matching the actual increases seen in 2025, according to the Salary Budget Planning Report by Willis Towers Watson (WTW). About 31% of respondents plan to lower their salary increase budgets compared to last year, mainly due to concerns about a possible recession, weaker financial performance, and the need for tighter cost control. In contrast, the few organizations planning to raise their budgets cite a competitive labor market and inflationary pressures as key reasons. The global survey, conducted from April to June, included responses from 1,569 U.S. organizations.

Employers are no longer simply reacting to economic signals regarding pay allocation, according to WTW. They’re accounting for other labor factors. “Just as they do with any other investment, the most forward-thinking CFOs that we speak with are looking holistically at all aspects of pay and benefits to better understand which programs resonate most with... “Organizations are being more deliberate about how they allocate pay, where they focus investment and what outcomes they expect to drive,” a WTW director said. Most U.S. employers are expected to maintain their salary budgets for 2026, with increases remaining flat at 3.5%, matching actual increases for 2025, according to a July 8 report from WTW, a global advisory firm.

In a survey of more than 1,500 U.S. organizations, 3 in 5 said their salary budgets changed in the last pay cycle. While 53% reported no change in their anticipated and actual pay budgets for 2025, 31% projected lower salary increase budgets than last year. “While top-line budgets are generally holding steady, the real shift is happening beneath the surface,” Brittany Innes, director of rewards data intelligence for WTW, said in a news release. “Organizations are being more deliberate about how they allocate pay, where they focus investment and what outcomes they expect to drive. Employers are no longer simply reacting to economic signals; they’re reimagining how to best support broader business goals despite uncertainty.”

Companies with lower salary increase budgets cited an anticipated recession, weaker financial results and cost management concerns. Those projecting higher salary increase budgets pointed to tight labor markets and inflationary pressures. Referring to the current political and business environment as a “time of change,” an April report by consulting firm WTW on widescale U.S. policy shifts pointed to American workers’ concern about the state of their anticipated salary increases. In that survey, 56% of surveyed employers indicated their workforces are worried about base pay increases. Respondents tried to temper those fears, even slightly, with 48% stating they anticipated no impact to this year’s projected salary increases but some impact on their 2026 budget, and 28% anticipating no impact this...

With that as a backdrop, WTW released its Salary Budget Planning Report on Tuesday, July 8, which, on its face, could perhaps be summed up as: the more things change, the more things stay... Some complex activities are supporting — and even countering — that smoothness. According to the report, the composite look from 1,569 surveyed U.S. organizations shows average salary increase budgets for 2026 will remain stable at 3.5%, matching American employers’ actual increases for 2025. (WTW had initially predicted 3.7% increase budgets for 2025.) The firm’s expanded outlook report for 2026 reflected similar stability for select countries outside of the U.S. “While top-line budgets are generally holding steady, the real shift is happening beneath the surface,” said Brittany Innes, the director of rewards data intelligence at WTW.

“Organizations are being more deliberate about how they allocate pay, where they focus investment and what outcomes they expect to drive. Employers are no longer simply reacting to economic signals; they’re reimagining how to best support broader business goals despite uncertainty.” WTW’s data points for 2026 projections and 2025 actuals resemble those found in other recently released salary budget survey reports for the U.S. market. Our research and analysis have helped the world's leading companies navigate challenges and seize opportunities for over 100 years. Our in-person and virtual events offer unmatched opportunities for professional development, featuring top experts and practitioners.

View all Upcoming Events, Programs, and Webcasts 26th Annual Employee Health Care Conference - New York 26th Annual Employee Health Care Conference – San Diego In a Willis Towers Watson survey of U.S. companies, participants said they’re planning to increase salary budgets by 3.5% in 2026, the same as actual increases this year. Planned salary budgets for 2026 are looking a lot like actual salary budgets this year.

That’s according to recent research by British insurance brokerage Willis Towers Watson. Across a survey of 1,557 organizations that are either headquartered or have operations in the U.S., the median salary budget for 2026 is expected to increase by 3.5%. Notably, that’s the same level of actual salary budget increases in 2025. As finance chiefs know, budgets can and do often change for any number of reasons, so it’s an open question whether that 3.5% increase will even come through in 2026. Consider the fact that, in WTW’s same survey at the end of 2024, U.S. participants projected a salary budget increase of 3.9%.

And that came after an actual budget increase of 4% in 2024. This all comes against the backdrop of continued economic uncertainty, at home and abroad. “While concerns about inflation continue to influence spending for many organizations and remains a top factor in influencing budget change, the percentage of survey respondents citing inflation as a cause of budgetary adjustments has,... With cost containment a looming influence, new research finds that when it comes to salary increase budgets for 2026, few organizations are planning any big changes. WTW’s most recent Salary Budget Planning Report uncovered that the average salary increase budgets for U.S. companies are expected to remain flat next year at 3.5%, the same as the actual budgets of 2025.

WTW’s Rewards Data Intelligence practice conducted the survey this spring across 157 countries worldwide, with more than 29,128 responses, including nearly 1,600 from the U.S. While most organizations weren’t anticipating a change in budget, according to WTW’s Brittany Innes, director, Rewards Data Intelligence, 31% of those surveyed are projecting lower salary increase budgets than last year. Of those, the most common reasons cited include an anticipated recession or weaker financial results and concerns related to cost management. Of the minority projecting higher salary increase budgets, most pointed to tight labor markets and inflationary pressures. Even without big salary increases, employees are staying put. According to WTW, fewer organizations this year found employee stability challenging compared to the past two years.

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