A third of employers handed out ‘peanut butter raises’ this year-and underpaid staff are leaving

Key Points:

• Approximately 36% of U.S. companies issued standard, across-the-board "peanut butter" raises in 2023, giving equal pay increases regardless of individual performance, particularly common in sectors with large workforces and hourly employees.
• These uniform raises risk demotivating high performers, with about 25% of companies reporting talent loss in 2026 due to insufficient wage increases that don’t reflect individual contributions.
• While peanut butter raises help mitigate bias and support lower-paid workers amid economic challenges, many employees view them as unfair since extra effort is not rewarded differently from average or low performers.
• For 2027, employers plan to allocate a larger portion of their payroll budget to merit-based increases, with merit raises expected to make up 3% of the total 3.5% salary budget, signaling a shift toward rewarding top performers more competitively.
• Economic uncertainty and budget constraints have driven companies to favor flat raises to ease administrative burdens and provide equitable boosts, though this approach may undermine motivation and retention of skilled talent.