Despite ongoing economic uncertainty, US companies are maintaining steady salary budget growth for 2026, aligning with 2025 levels. According to The Conference Board’s recent survey, businesses are strategically allocating resources to prioritize critical skills and performance-based compensation, reflecting a cautious yet focused approach to workforce investment.
US companies plan a 3.4% average salary budget increase for 2026, matching 2025.
Economic uncertainty slows hiring but boosts focus on critical skills like AI and healthcare.
Performance-based pay and upskilling initiatives gain traction in 2026.
Automation investments rise, especially in technology and finance sectors.
Nonexempt salaried employees see reduced pay growth compared to 2024.
Companies diversify compensation with “other” base pay, up to 59% in 2026.
The Conference Board’s survey, conducted from May 19 to June 20, 2025, reveals that US companies are planning an average salary budget increase of 3.4% for 2026, consistent with the 3.4% reported for 2025. While this is lower than the nearly 4% forecasted in the prior year’s survey, it exceeds the pre-2020 average of 3%. This stability reflects a cautious approach amid economic challenges, with companies prioritizing strategic investments over broad pay hikes.
Organizations are increasingly leaning into performance-based compensation to optimize salary budgets. “With turnover slowing, companies are getting more strategic about where their salary dollars go. Rather than spreading increases across the board, they’re channeling budgets into roles and skills that really move the needle—like critical capabilities and internal upskilling,” said Diana Scott, US Human Capital Center Leader at The Conference Board. Merit-based pay growth is moderating, dropping from 3.5% in 2024 to 3.0% in 2025, while discretionary bonuses, such as sign-on and retention incentives, are being scaled back, particularly in technology and trade-sensitive sectors.
Economic uncertainty, cited by 61% of surveyed companies, is tempering hiring momentum. Over the past six months, businesses have slowed expansion hiring and attrition backfill, with some transitioning temporary layoffs to permanent reductions. Despite this, demand for critical skills remains strong, with 14% of companies expanding hiring for roles in technology (+17% net), healthcare (+16%), and finance, insurance, and real estate (+13%). This focus underscores the prioritization of high-value skills in a competitive labor market.
To enhance productivity, 30% of organizations increased automation investments in the last six months, with large employers in technology (33%), finance, insurance, and real estate (40%), and leisure and entertainment (40%) leading the charge. Concurrently, 16% of companies have expanded upskilling programs to develop internal talent, particularly for critical roles. These initiatives reflect a strategic shift toward long-term workforce resilience.
In 2026, 59% of companies plan to incorporate “other” base pay increases, up from 56% in 2025, continuing a trend of diversifying compensation strategies. However, fewer organizations will include promotions (down 4%), external market adjustments (down 3%), and retention or pay equity adjustments (each down 2%). Manufacturing is an exception, expanding pay equity and minimum adjustments, while sectors like leisure and hospitality and retail trade are retrenching specialized compensation approaches.
The survey highlights a labor market in recalibration. “Today’s labor market is one of recalibration, not retreat,” said Mitchell Barnes, Economist at The Conference Board. “Companies are rebalancing their workforce and labor strategies—slowing overall headcount growth, targeting high-value skills, and investing in technology and training—to sustain productivity in a slower but still-competitive labor market.” This strategic approach positions businesses to navigate economic challenges while fostering growth in key areas.
The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org
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