Employers Favor Merit-Based Raises Over Uniform Pay Increases for 2027

A recent Payscale survey of about 1,300 human-resources and compensation executives reveals a growing preference for merit-based salary adjustments rather than uniform raises. Only 32% of respondents plan a standard across-the-board increase for 2027, a decline from 36% the year before. While the overall compensation budget is not expanding, firms are reallocating funds to reward high-performing staff, resulting in an average base-pay increase of roughly 3.5%, a modest 0.1-point rise from this year.

Ruth Thomas, the company's chief compensation strategist, explained that this shift aligns with broader business-transformation goals. Wage growth is projected to stay just above inflation, which recent government data shows remains elevated but is expected to ease later in the year. Sectoral differences are notable: aerospace and defense, as well as business services, anticipate 4.5% hikes, whereas telecommunications expects only 2.5%. The findings suggest employers are fine-tuning pay strategies to balance budget constraints with talent retention.