More Employers Are Now Offering ‘Peanut Butter’ – What It Means for Your Pay in 2026

If you’re hoping for a big pay raise this year, the latest data suggests you might want to check your expectations. Salary increases through 2026 are stagnant rather than rising, according to research from Payscale.

The findings come from Payscale’s Best Compensation 2026 report, which surveys organizations about the salary increases they’ve delivered in 2025 and what they’re planning for this year. The data provides a picture of where the employer budget stands amid continued economic uncertainty.

The numbers don’t go very far

The average wage increase for 2026 is set at 3.5%, similar to what employers are offering in 2025. For workers who have been waiting for a raise to outpace inflation, that may be a bit of a letdown.

There are some differences between Canadian and American wage increases, according to the report. While US employers are planning an average increase of 3.5%, Canadian organizations are showing a slightly lower increase of 3.2%.

However, the Canadian increase is actually higher compared to the rate of inflation in that country, which remained stable at 2.2% in November 2025. In comparison, inflation in the US was running at about 2.7% per year in late 2025.

In terms of what drives quality, fitness and performance are still the top factors, with 76% of organizations citing them as a strong driver of salary increases.

Market adjustments to remain competitive with labor costs came in second at 46%. About 45% of organizations also factor cost of living into their decisions.

The rise of ‘peanut butter’ is on the rise

Another growing trend in finance is the increase in total wages. They are sometimes referred to as “peanut butters” because they spread out pay that increases evenly rather than being tied to individual performance ratings.

According to Payscale data, 48% of organizations plan to continue with performance-based pay increases, but the majority are reconsidering that option.

About 18% are considering increasing peanut butter, 16% plan to and 9% are already using this method. Overall, more than 40% of organizations are actively using or considering regular promotions.

This may reflect a shift to performance-based systems, which have faced criticism for being rational and potentially biased. Organizations with large high-wage or low-wage employees may find similar increases are easier to manage and explain to employees.

Employers feel confident about the low budget

Despite the lack of movement in the salary budget, many employers appear to be comfortable with their compensation strategies. Nearly 60% believe the 2026 salary increase is competitive enough to retain and engage talent.

That confidence seems to stem from having better data to back up payment decisions. Organizations that can define their compensation choices using market knowledge seem more secure in their approach, even if budgets don’t grow.

For workers, the message is that a significant jump in pay is unlikely to come solely from annual raises. Those looking to improve their salary may need to consider other strategies, such as pursuing a promotion, developing new skills or exploring opportunities elsewhere.