US salary budgets for 2026 are expected to remain stable at 3.4%, matching the actual salary budget increase seen in 2025. Inflation expectations have moderated across many economies, reducing the need for reactive pay increases and allowing organizations to plan compensation more proactively.

These findings come from the latest Salary Budget Planning Survey conducted by global advisory, broking and solutions company WTW.

Budgets are expected to hold steady due to greater clarity, more disciplined prioritization, and a clearer understanding of where compensation investments can drive meaningful business impact.

Pay Budgets Show Limited Movement

For the current planning cycle, nearly two-thirds of employers (62%) have made no changes to their projected pay budgets since they were initially set mid-year.

Only 6% of employers have increased their budgets, while 21% report plans to reduce pay increases. Among organizations adjusting their original projections, the most common influencing factors include cost management concerns (36%), expectations of recession or weak financial performance (36%), a tight labor market (32%), and inflationary pressures (25%).

“The traditional approach of spreading around available budget to most employees is being replaced with strategic use of each dollar. Those employees that are growing their skills, contributing to financial outcomes and demonstrating contributions that impact market impressions are poised to receive the larger share of the budget.”

— Heather Ryan, Rewards Data and Intelligence Head of Product, WTW

According to Ryan, employees who support efficiency and help keep operations running smoothly are also expected to benefit, reflecting a long-term shift toward outcome-based rewards that will likely continue beyond 2026.

Evolving Compensation Strategies and Workforce Trends

The consistency in salary budgets reflects broader changes in how leaders approach workforce planning and pay decisions. Organizations report stronger governance, more sophisticated use of market data, increased segmentation, and a greater focus on affordability and internal equity.

Despite these efforts, nearly one-quarter (24%) of organizations report ongoing challenges in attracting or retaining employees.

Retention Focus as Turnover Declines

Staff voluntary turnover has continued to decline, reaching 10.1% over the past year. Employers are directing limited budget capacity toward retaining critical talent and addressing pay compression where it is most pronounced.

Additional retention strategies include improving employee experience (50%), expanding training opportunities (43%), enhancing health and wellness benefits (42%), increasing workplace flexibility (35%), and making targeted changes to compensation programs (32%).

“The labor market has reached a sort of equilibrium. Demand for labor is significantly lower than in recent years, while supply shortages persist. Since salary increase budgets reflect this dynamic, we can expect relative stability in salary increases for the foreseeable future.”

— Lori Wisper, Managing Director, Work & Rewards, WTW