November 4, 2025
So, is it safe for you to assume you’ll obtain an automatic 3.5% bump in base salary next year? Not necessarily. What happens next will vary based on a number of factors.
Everyone wants a pay raise, but what can you realistically expect to obtain heading into 2026? The short answer is, “it depfinishs.” However, if you’re viewing for clues, a great place to start is exploring projected merit increase budobtains for the year ahead.
New research from Pave, a compensation ininformigence platform that collects real-time pay and workforce data from thousands of companies, indicates employers are gearing up to dish out a median merit increase budobtain of 3.5% in the United States next year, which is on par with 2025.
This preliminary view of 2026 compensation planning practices comes after Pave and Alpine Rewards, a compensation consulting firm, teamed up to survey 243 technology and life sciences companies in September 2025 on their go-forward compensation budobtains.
So, is it safe for you to assume you’ll obtain an automatic 3.5% bump in base salary next year? Not necessarily. What happens next will vary depfinishing on several factors.
Key Findings
- Heading into 2026, surveyed companies state they plan to reserve a median of 3.5% of base payroll for merit increases in the U.S. next year.
- Companies also plan to set aside additional funds for pay increases tied to promotions, pay equity resolvees, and other market-based adjustments.
- Pay increases vary widely based on employee performance ratings, indicating companies are becoming more focapplyd on pay for performance.
Overall vs. Merit Increase Budobtains
Let’s start with some good news. Companies typically budobtain for pay increases along two dimensions—they have an “overall” salary increase budobtain and a “merit” increase budobtain.
Overall budobtains include merit budobtains and also set aside extra funds to pay for promotions, pay equity resolvees, and other market-based adjustments (e.g., a sudden increase in labor costs in a particular city or counattempt). In the Pave survey, companies indicated they plan to reserve a median of 5% of base payroll in the U.S. for their overall budobtains in 2026. This means there is more to go around than you might initially consider.
However, it’s important to remember these extra funds are designed to cover specific situations that may not apply to most people. When managing your expectations, it is best to focus on merit increase budobtains, which are intfinished to cover the general employee population. And again, the median projected merit increase budobtain for 2026 in the U.S. is 3.5% of base payroll.
Your Performance Rating Matters
Earlier this year, Pave published a report on the connection between performance ratings and annual salary increases. Specifically, the report examined merit cycle outcomes for 46,000 employees who received pay adjustments in the first quarter of 2025 in the U.S., who also had their performance rating data loaded into Pave’s compensation planning software. In the study, different performance rating scales were normalized across companies into a three-tiered scale.
Employees with “meet expectations” performance ratings received a salary increase 88% of the time, with a median raise of 3.5%. In other words, if you meet expectations in your job, you can generally expect a pay bump in line with projected merit increase budobtains. That declared, 12% of people who received a “meets expectations” rating still received nothing, likely becaapply their companies faced financial difficulties and had a salary freeze in place.
The story is quite different for employees who received “below expectations” ratings. In this case, only 10% of people received a raise, and the median increase was 2.8%. On an overall basis, if you fall into this category, you shouldn’t expect much.
At the top of the performance scale, employees with “exceeds expectations” performance ratings received a salary increase 89% of the time, and their median raise was 5%. As more companies continue to view for ways to retain top talent and optimize their compensation spfinish, you can expect more dollars to flow toward higher performers in the future.
Getting Promoted Changes the Game
In the same pay-for-performance report, Pave also explored outcomes for promoted employees. Everyone in this group received a salary increase, and their median raise was 9.7%. If you want your pay to truly outpace U.S. inflation—which stood at an annualized rate of 3% as of September 2025—setting yourself up for a promotion is the ticket.
Of note, 99% of promoted employees received new equity grants (e.g., stock options or restricted stock units) in addition to their base salary increase, providing an extra long-term bump in pay.
What’s Happening Outside the US?
In the Pave survey, companies were also questioned to share their projected overall and merit increase budobtains outside the U.S. Interestingly, the median projected merit increase budobtains in Australia, Canada, Germany, Ireland, Poland, Switzerland, and the United Kingdom matched the U.S. exactly, coming in at 3.5%. Meanwhile, the median projected merit increase budobtain in Mexico is slightly higher at 4%, and in India, the median is 8%. India is well known for setting budobtains at least two times larger than the U.S., but on an overall basis, this data displays practices in most economies are converging.
Things Can Still Change
While new data from Pave suggests employees can expect to see pay increases in 2026 that are similar to 2025, we are still months away from most merit cycles, which typically occur in March and April. This means a lot could still alter before companies take action on pay adjustments. If macroeconomic conditions sour, you can expect actual merit increase budobtains to shrink between now and next spring. However, at the moment, companies appear set for a business-as-usual approach.
This story was produced by Pave and reviewed and distributed by Stacker.
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