Preliminary 2026 Salary Budget Increase Projections
August 7, 2025
Written and curated by Lauren E. B. Belcher, with some content and sources generated by Grok
As the fourth quarter of the year grows near, and 2026 compensation planning begins, we are beginning to see early projections for salary budget increase percentages, particularly with WorldatWork publishing their 2025-2026 Salary Budget Survey earlier than expected.
Amid preliminary reports from several sources, including WorldatWork, Willis Towers Watson (WTW), and Gallagher, among others, the consensus for 2026 salary budget increase projections appears to be around 3.2 – 3.6 percent overall, with most projections closer to 3.5 – 3.6 percent. Additionally, most report the actual average increase given in 2025 to be around 3.7 percent, slightly lower than the predicted 3.9 percent.
Payscale, who conducts their own annual salary budget survey, reports an average of around 3.5 percent as the average actual budget increase for 2025 and a 2026 projection hovering around 3.4-3.5 percent. Factors cited by Payscale as influencing the 2026 projections include steadying inflation and a relaxed labor market.
Just as these economic indicators seemed to drive the 2024 and 2025 projections, they continue to impact the 2026 projections. After a record 40-year high in mid-2022, inflation has been on a steady decline over the past three years. As of June 2025, the inflation rate was 2.7 percent, down by over six percent since 2022. Per the U.S. Bureau of Labor Statistics, the most current data (July 2025) will be available as of August 12th.
Moreover, the minimum exempt salary threshold, that was expected as of January 1, 2025, having been overturned and returned to a National rate of $684/week, or $35,568 annually, relieves some pressure regarding FLSA practices, making it less of a factor for many employers nationwide when considering salary budgets for 2026. Six states, including Alaska, California, Colorado, Maine, New York, and Washington, have state laws that include higher minimum exempt salary thresholds, above the National minimum. Salary budget decision making for employers in these states could be more heavily impacted by the increased premium on exempt salary mandates.
Other key factors that could affect salary budget increase decisions in 2026, include reduced workforce turnover, cost management strategies, growing competitiveness in the labor market, and AI integration in the workplace.
As in years prior, it will be important to consider these economic factors and trends and their effect on employee retention and cost of labor when budgeting for salary increases in 2026.
