Salary budgets have stabilized as employers focus on pay strategy for 2026

Rhea-AI Summary

WTW (NASDAQ:WTW) reports US salary budgets for 2026 are expected to remain stable at 3.4%, matching the 2025 increase. Employers show greater pay-plan discipline: 62% made no change to mid-year projections, 6% increased budgets and 21% will decrease them. Key influences on adjustments include cost management and recession concerns (36% each), tight labor markets (32%) and inflationary pressures (25%). Voluntary turnover eased to 10.1%, while 24% report attraction/retention issues and employers prioritize retention, training and benefits.

Positive

• Salary budgets stable at 3.4% for 2026
• 62% of employers kept original pay budgets
• Voluntary turnover declined to 10.1%, easing retention costs
• High focus on targeted pay and governance to improve affordability

Negative

• 21% of employers plan to decrease pay budgets
• 24% report issues attracting or retaining employees
• Cost management and recession concerns each influence 36% of budget changes

News Market Reaction

-0.86%

1 alert

-0.86% News Effect

On the day this news was published, WTW declined 0.86%, reflecting a mild negative market reaction.

Data tracked by StockTitan Argus on the day of publication.

NEW YORK, Jan. 21, 2026 (GLOBE NEWSWIRE) -- US salary budgets for 2026 are expected to remain stable at 3.4%, the same as the actual salary budget increase for 2025. Inflation expectations have regulated across many economies, reducing the need for reactive pay increases and instead allowing organizations to plan proactively. This is according to the latest Salary Budget Planning Survey from leading global advisory, broking and solutions company, WTW (NASDAQ:WTW).

Budgets expect to remain stable due to greater clarity, more disciplined prioritization and understanding where compensation can drive meaningful impact.

For the current cycle, nearly two-thirds of employers (62%) have made no change to their projected pay budgets, since they were first set mid-way through the year. While just a few (6%) are increasing budgets, over one-fifth (21%) of employers will decrease pay budgets. For those making changes to their initial budget projections, concerns related to cost management (36%), an anticipated recession or weak financial results (36%), a tight labor market (32%) and inflationary pressures (25%) are factors influencing pay budgets.

“The traditional approach of spreading around available budget to most employees is being replaced with strategic use of each dollar. Those employees that are growing their skills, contributing to financial outcomes and demonstrating contributions that impact market impressions are poised to receive the larger share of the budget. Those that keep the business running with efficiency will also benefit. This approach will likely continue beyond 2026. Rewards must align to outcomes now more than ever,” said Heather Ryan, Rewards Data Intelligence Head of Product, WTW.

The recent consistency in salary budgets reflects underlying changes in how leaders are approaching workforce planning and compensation decision-making, with many organizations reporting stronger governance around pay decisions, more sophisticated use of market data and segmentation, and increased focus on affordability and maintaining internal equity. As such, one- quarter (24%) of organizations have reported issues with attracting or retaining employees.

Staff voluntary turnover rates have also continued to drop to 10.1% over the last year, with companies directing limited budget capacity toward retaining critical talent and addressing pay compression where it is most acute. Other staff retention actions have included improving the employee experience (50%), increasing use of training opportunities (43%), making changes to health and wellness benefits (42%), greater workplace flexibility (35%), and changes to compensation programs (32%).

“The labor market has reached a sort of equilibrium in the sense that demand for labor is significantly lower than where it was the past few years, while labor supply shortages have also continued. Since salary increase budgets are a direct reflection of this dynamic, we can expect a period of relative stability for salary increases for the foreseeable future,” said Lori Wisper, managing director, Work & Rewards, WTW.

About the survey

The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted from September to November of 2025. Approximately 36,960 responses were received from companies across 156 countries worldwide. In the US, 1,876 organizations responded.

More information about preparing for 2026 salary budgets, can be found here.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you. Learn more at wtwco.com.

Media contacts:

Ileana Feoli: +1 212 309 5504
Ileana.feoli@wtwco.com        

Stacy Bronstein:
sbronstein@meritcomms.com

FAQ

What salary budget increase does WTW forecast for US companies in 2026 (WTW)?

WTW expects US salary budgets to remain at 3.4% for 2026, unchanged from 2025.

How many employers changed their 2026 pay budgets according to WTW (WTW) January 21, 2026?

62% made no change, 6% increased budgets and 21% will decrease budgets.

What are the main reasons employers adjusted pay budgets in 2026 per WTW (WTW)?

Top factors: cost management (36%), anticipated recession/weak results (36%), tight labor market (32%), and inflation (25%).

How does the 10.1% voluntary turnover rate reported by WTW affect pay strategy for 2026 (WTW)?

With voluntary turnover at 10.1%, employers are directing budget toward retaining critical talent and fixing pay compression.

What non-pay actions are employers using to retain staff according to WTW (WTW)?

Employers report improving employee experience (50%), training (43%), health/wellness benefits (42%), flexibility (35%), and compensation changes (32%).