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Your 2026 pay raise could be a “peanut-butter”-style increase, with new research from compensation expert Payscale finding more than four in 10 companies are opting to give identical, across-the-board hikes rather than merit-based raises.
This year, 44% of companies plan to rely on the peanut-butter approach — a method of evenly spreading pay hikes across the workforce — according to a new report from Payscale.
Some employers are moving away from performance-based pay increases because of concerns that the practice is too subjective and potentially biased, Payscale noted. Spreading pay hikes out evenly across a workforce is also easier from an administrative perspective, which can save companies money.
Pay hikes will hold steady at 3.5% in 2026, unchanged from 2025, the group found. Still, merit-based pay hikes remain the predominant method used by companies, with 48% of organizations saying they plan to rely on performance-based raises, Payscale said.
There are downsides to peanut-butter raises, as they can discourage some employees from putting in extra effort if they don’t expect they’ll be rewarded for going the extra mile, Payscale said.
“With no differentiation based on performance, it’s easier to give everyone something. But there is a risk that top performers will feel disadvantaged in that environment,” Ruth Thomas, chief compensation strategist at Payscale, told CBS News.
She noted that companies that eschew merit-based pay increases can still reward top performers with bonuses or promotions, for example.
“Base pay is not your only lever, and organizations may look more at bonuses and promotions when base pay budgets are restricted,” she added.
Peanut-butter raises started gaining traction after the Great Recession as budget-constrained companies turned to the strategy, Thomas said. She added that more companies are once again tightening their budgets.
“We’re now seeing a slow decline in pay increase budgets again, so it’s easier to give everyone a relatively flat increase,” Thomas said.
Small company, big raise
Smaller establishments with fewer than 100 employees are offering higher pay increases — 4% — compared to their larger counterparts. Businesses with between about 10,000 to 50,000 workers said they plan to hand out 3% raises in 2026, the report found.
“Smaller employers appear to be using pay more aggressively to compete for talent, while larger organizations face structural and budgetary challenges that limit flexibility,” the researchers said in the report.
Average raises also vary by industry, with companies in sectors struggling to find workers offering above-average pay hikes. For example, these sectors are offering above-average pay increases:
- Construction — 5%
- Agencies and consultancies — 4.5%
- Technology — 4%
Some blue-collar fields, such as construction, are newly popular among younger job-seekers as AI appears poised to change the hiring landscape and supplant coders and other white-collar jobs, while blue-collar roles are viewed as more immune to AI’s impact.
Some 77% of Generation Z say they want a job that’s hard to automate, with many identifying professions like carpenter, plumber and electrician as occupations they believe fit the criterion, according to a 2025 survey from Jobber.
