According to a recent estimate, employers are expected to provide only modest salary increases for their employees in 2027.
The anticipated average pay raise for the coming year is projected to be around 3.5%, which encompasses merit-based increases, adjustments for cost of living, promotions, and other forms of salary enhancements, as reported by Marsh, a professional services firm that surveyed 1,000 organizations in the United States.
Mark Bowling, a compensation expert at Marsh, shared with CBS News that “2023 represented the peak for salary increases, and since then, we have observed a trend towards moderation.” He indicated that organizations may have established a new standard regarding their budgets for salary adjustments.
Marsh also pointed out that many employers have not yet completed their budgeting processes. If these forecasts remain accurate, the limited salary increments could result in many employees struggling to keep up with inflation. Consumer prices increased at an annual rate of 3.4% in July, although economists generally predict a decline in inflation rates both this year and by 2027.
Bowling highlighted the difficulties companies face in strategically allocating their restricted compensation budgets, particularly in a climate of ongoing economic uncertainty. “They prioritize increases that will have the most significant effect on retention and align with their business objectives.”
This shift in strategy has led many employers to abandon the practice of evenly distributing salary increases, often referred to as “peanut-butter” raises, in favor of rewarding high-performing individuals, as noted by Payscale.
Indeed, the survey conducted by Marsh indicates that top performers in lucrative sectors may experience larger salary increases next year. For instance, employees in the technology industry are expected to see an average raise of 3.8%, while those in the banking sector might receive an average increase of 3.7%.
Conversely, workers in industries with diminishing job prospects, such as retail, may receive smaller raises that do not keep pace with inflation.
