Pay raises will be stagnant in 2026 as companies 'reorient' to economic uncertainty

Salary Expectations - Employers plan to increase salaries by an average of 3.4% in 2026, consistent with the increases reported in 2025 [1][5] - Payscale's survey indicates a similar average pay increase of approximately 3.5% in 2026, down from 3.6% in 2025 [5][6] Economic Constraints - 60% of companies cite economic uncertainty as a key constraint affecting salary and hiring decisions [2] - 66% of employers now prioritize economic concerns over labor competition when making compensation decisions, an increase of 17 percentage points from the previous year [7] Hiring Trends - Companies are slowing down hiring and are more cautious in filling open positions, with some transitioning temporary layoffs to permanent reductions [3] - 16% of surveyed companies plan to allocate salary budgets towards skill-building initiatives for existing employees [3] Industry Variations - Pay increases vary by field, with employees in science, engineering, and government expected to see salary bumps exceeding 4% [9]