Only 4% of Employers Are Giving Flat 'Peanut Butter' Raises in 2026, Mercer Finds — Here's What That Means for Your Paycheck

Mercer's latest 2026 compensation survey makes one thing clear: the "peanut butter" raise — that flat, spread-it-evenly-across-the-team approach to annual pay bumps — is not the way most employers are actually paying people this year. Only 4 percent of the 756 employers Mercer surveyed gave across-the-board increases, according to HR Dive's coverage of the data. The rest are doubling down on differentiated raises tied to performance, market data, and what they can no longer afford to lose. For workers, that shift changes how you should think about your next review, your next negotiation, and your next job offer. At Metaintro, we've been tracking how this plays out across sectors — and the gap between "good performer" and "average performer" raises is widening fast.

What Is a 'Peanut Butter' Raise and Why Is It Fading?

A "peanut butter" raise is exactly what it sounds like — pay increases spread evenly across an entire team or company, regardless of individual performance. Everyone gets the same 3 percent, or the same 4 percent, or whatever the budget allows. It's clean, easy to administer, and feels fair on the surface.

The appeal was real during the post-pandemic talent crunch. When companies were scrambling to retain workers and trying to keep up with inflation, flat raises got money out the door fast without forcing managers to have hard conversations. Payscale's 2026 report even found that 16 percent of companies were ready to implement flat raises, with another 18 percent considering it.

But Mercer's actual-spend data tells a different story. Intentions did not become practice. Only 4 percent of the 756 employers in Mercer's survey followed through. The dominant approach in 2026 remains differentiated raises — sized by individual performance, market positioning, and in many cases geography. Most respondents used formal salary structures that assign jobs to pay grades based on market data, with over half factoring in geographic differences.

The reason flat raises are not catching on: employers cannot afford them at a time when budgets are tightening across the board. Spreading the budget evenly means underpaying your best people and overpaying the ones who are coasting. With merit pools shrinking, that math gets brutal fast.

How Much Are Raises Actually Worth in 2026?

Mercer's headline numbers are smaller than what employers told themselves they would pay. Merit increases averaged 3.1 percent in 2026, down from the 3.2 percent employers projected in October 2025. Total pay increases (which include merit, promotions, and other adjustments) averaged 3.4 percent, down from a projected 3.5 percent.

A tenth of a percentage point sounds tiny. On a $90000 salary, it is $90 a year. But the bigger story is the direction — projections kept getting trimmed as the year went on, which is the opposite of what happened in 2022 and 2023 when employers kept revising raises upward to retain talent. The signal is that employer leverage has shifted, and they no longer feel the same pressure to chase wages higher.

For context, inflation in 2026 has run roughly in line with these raises, which means the average worker is treading water on real wages. The people pulling actual buying-power gains are the ones getting more than the average — and Mercer's data shows those raises are concentrated, not distributed.

Which Sectors Are Paying the Best Raises?

Mercer's sector breakdown shows a clear hierarchy. High tech led with 3.6 percent total pay increases, the highest of any industry tracked. Transportation and retail-wholesale came in at 3.1 percent. Healthcare services landed at 3.3 percent, an improvement over prior years and a reflection of continued labor demand in healthcare. Chemicals and manufacturing were the lowest at 2.9 percent.

The high tech number is notable because tech also led layoffs in 2026 — the same companies cutting headcount are paying their remaining workers more. That pattern matches what we've seen across earnings reports: fewer people, paid better, expected to produce more with AI-assisted workflows. If you're in a sector that landed near the bottom of Mercer's range, that doesn't mean you're stuck — but it does mean the case for switching industries (or at least teams) gets stronger when the math is that lopsided.

The healthcare improvement is worth flagging too. After several years of nursing shortages, sticky vacancies, and burnout-driven turnover, healthcare employers are finally responding with raises that more closely track the broader market. Workers who held on through the worst stretches are starting to see those raises show up in offer letters.

Why Are Employers Going Differentiated Instead of Flat?

Three forces are pushing differentiated comp into 2026. First, retention. Top performers are the most expensive to replace, and they're also the most likely to take outside offers if they feel underpaid. A flat raise tells them they're worth the same as the underperformer next to them — that's a one-way ticket out the door.

Second, AI productivity gains. Companies investing heavily in AI tools want to reward the people who actually use them to ship more work. When AI raises productivity inside a team, the people getting the most leverage out of it are not the people getting flat 3 percent raises. They're getting 5, 7, sometimes 10 percent — and the rest of the team is funding it.

Third, cost pressure. Merit pools shrank slightly in 2026, and shrinking pools force harder choices. If you're a comp leader with a 3.4 percent budget, you cannot give everyone 3.4 percent and also reward your top quartile competitively. Differentiation becomes the only way to make the math work without bleeding talent.

That math also explains why employers are willing to cut "underperformers" more aggressively than they would in a tighter labor market. When you can't pay everyone, you'd rather pay your best people well and replace the bottom slice. Mercer's data is consistent with that approach across sectors.

How Does This Affect the Average Worker?

If you got a 3.1 percent merit raise in 2026, congratulations — you got the average. That probably feels disappointing if you're used to thinking of raises as recognition. But average is the wrong benchmark in a differentiated world. The right question is: where do you sit in the distribution, and how do you move up?

The honest answer is that most workers don't know where they sit. Performance review systems are notoriously fuzzy, and many companies tell their best performers they're great without backing it up at the comp level. Mercer's data suggests the dollars are flowing — but they're flowing to people who have made their contributions visible and quantifiable. If your manager cannot name three specific things you shipped this year that moved a number, you are probably going to get the average raise.

This also affects how you should think about job-switching. Historically, switching jobs got you a 10-15 percent bump. In 2026, outside offers are running closer to 5 percent on average, and some sectors are flat or negative. If your current employer is differentiating well and putting you in the top bucket, staying might actually pay more than leaving — a reversal from the last five years that very few workers have absorbed yet.

What Should Workers Do About It?

First, document outcomes. Not activities — outcomes. "Launched the Q3 onboarding revamp" is an activity. "Cut new-hire ramp time from 8 weeks to 5 weeks, saving an estimated $40000 in productivity loss across 12 hires" is an outcome. Mercer's data makes clear that raises are flowing to the people who can articulate impact in dollars or measurable units. If you're not keeping a running log of what you shipped and what it moved, start one this week.

Second, negotiate on contribution, not tenure. Pay grades and market data are real, but the lever you control is your case for being at the top of your band. Walk into your next review with three specific outcomes and a market benchmark for your role in your geography. If your employer is using formal salary structures (which most are), they have a band for your job — your job is to argue for the top of it. Our hiring rebound analysis shows that workers who come in with numbers do measurably better than those who come in with feelings.

Third, ask comp questions in interviews. Before you take a new role, ask how the company differentiates raises, what percent of the merit pool goes to the top quartile, and whether they use formal pay bands. Companies that can answer cleanly tend to pay better than those that hedge. Companies that say "we pay fairly" without specifics are usually the flat-raise holdouts — which Mercer just confirmed is a shrinking 4 percent of the market.

Finally, watch the projections. Mercer's October 2025 projection was 3.5 percent total pay; actual delivery was 3.4 percent. That gap is the signal worth tracking. If 2027 projections start at 3.2 percent and your employer is already saying budgets are tight, plan accordingly. The era of automatic annual bumps that beat inflation is, by Mercer's numbers, behind us.

People Also Asked

Q: What is a peanut butter raise?

A: A peanut butter raise is a flat, across-the-board pay increase where every employee gets the same percentage regardless of individual performance, role, or market data. Mercer's 2026 survey found only 4 percent of employers actually use this approach.

Q: What is the average raise in 2026?

A: According to Mercer's survey of 756 employers, the average merit increase in 2026 is 3.1 percent and the average total pay increase (including promotions and adjustments) is 3.4 percent. Both came in slightly below October 2025 projections.

Q: Which industries are giving the biggest raises in 2026?

A: Mercer's sector data puts high tech at the top with 3.6 percent total pay increases, followed by healthcare services at 3.3 percent. Transportation and retail-wholesale landed at 3.1 percent, while chemicals and manufacturing came in lowest at 2.9 percent.

Wondering What You Should Earn?

Metaintro tracks compensation trends across sectors and shows you where your role sits in the market — so you can walk into your next review or offer conversation with the data, not the guesses.