U.S. employers plan to keep base salary increases flat at 3.2% in 2026, matching the actual increases reported in 2025, according to new survey data from Mercer.
The October 2025 Mercer QuickPulse US Compensation Planning Survey of more than 1,000 organizations found that total salary increases, which include merit raises, promotions, cost-of-living adjustments and other changes, will average 3.5% next year.
Budget allocation creates strategic gap
Despite economic concerns heading into 2026, with 61% of employers anticipating the economy will have a moderate to significant impact on compensation decisions, most organizations plan to distribute salary increase budgets evenly rather than strategically.
More than eight in 10 employers (83%) indicated they would spread their salary increase budgets equally across the organization, rather than directing more resources toward high-demand skills or critical market gaps.
“Employers have a significant opportunity to strategically shape their spending to better align with critical talent goals,” said Lauren Mason, Mercer’s US Workforce Solutions Leader. “By focusing compensation budgets on high-demand skills rather than spreading resources too thin, leaders can more effectively drive their workforce strategy and secure the talent essential for success.”
Fewer promotions planned
Employers plan to promote around 9% of their workforce in 2026, down from 10% in 2025. The average pay increase for promotions will be 8.7%.
Looking ahead, employers said they remain committed to prioritizing skill and talent development (34%), market competitiveness (31%) and compensation adjustments (24%) in 2026.
AI impact remains limited
Artificial intelligence and automation have had minimal effect on hiring and compensation decisions, according to the survey. Only 2% of respondents cited AI and automation as a reason for reduced hiring, and 57% reported stable hiring volumes despite AI adoption.
Additionally, only 9% of organizations said they plan to make headcount changes related to AI.
“AI hasn’t yet reshaped hiring or compensation decisions — not because the technology isn’t ready, but because organizations are still evolving their operating models to apply AI responsibly and with the right governance and oversight,” said Stephanie Penner, Mercer’s US and Canada Career Practice Leader.
Industry variations persist
Compensation trends vary across industries. Healthcare services and retail continue to report lower merit increases than other sectors, at 2.9%, with total increases of 3.4% and 3.3% respectively.
Financial services, energy and high-tech sectors anticipate delivering higher total increases at 3.7%.
The survey includes data from 1,013 US organizations ranging from fewer than 500 employees to more than 20,000 employees across 15 industries. The study was conducted between Oct. 20 and Oct. 31, 2025.
