In 2026, your performance might not be reflected in your pay raise

Core Insights - A shift is occurring in workplaces where performance reviews are being replaced by standardized annual pay raises, referred to as "peanut butter" increases [1] Group 1: Trends in Compensation - More employers are opting for across-the-board salary increases rather than performance-based raises, with less than half of organizations planning to continue merit-based pay increases [4] - Payscale estimates that base pay will increase by an average of 3.5% in 2026, which is lower than the 4.8% average increase seen in 2023 [2] - Pay increases vary by employer size, with larger firms (over 5,000 employees) averaging 3% increases, while smaller firms (under 100 employees) average 4%, and some industries like construction and technology seeing increases of up to 5% [3] Group 2: Reasons for Change - The trend away from performance-based pay is attributed to the historical bias and poor predictive power of performance reviews regarding actual performance outcomes [6] - Companies like Starbucks have already implemented flat pay increases, indicating a broader movement towards this compensation strategy [5]