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Performance-based pay raises rise in 2027 as “peanut butter” plans fall
Employers expect an average 3.5% pay increase in 2027, slightly up from 3.4% in 2026, while peanut butter raise adoption drops to 32% from 36%.
Employers are signaling a shift in pay practices for 2027, scaling back broad, across-the-board salary increases in favor of more individualized, merit-based raises, according to Payscale data cited by Yahoo Finance. Yahoo Finance reports that only 32% of organizations plan a peanut butter approach in 2027, down from 36% that did so in 2026. Pay equity strategist Ruth Thomas called the decline significant, pointing to a growing preference for differentiated increases tied to individual performance. The same data suggests employers also expect pay budgets to rise modestly. Average pay increases are projected at 3.5% for 2027, compared with 3.4% in 2026, which Yahoo Finance notes is broadly in line with inflation but below the 4.8% average workers received in 2023. The article adds that employers have found across-the-board raises can hurt retention. One in four organizations cited perceived pay unfairness as a leading reason they are losing talent, while Thomas said some sectors may still use across-the-board hikes, particularly workplaces with large workforces, step-pay structures, or hourly pay setups.