To say that the last few years of compensation have been a rollercoaster is an understatement, but as we look toward 2026, the landscape of how we pay our people is shifting yet again.
Have you heard of the “peanut-butter” approach to pay raises? If not, you’re certainly going to see it in action soon.
New research from compensation expert Payscale has found that more than four in 10 companies—about 44%, to be exact—are opting to give identical, across-the-board hikes rather than merit-based raises this year. It’s a method of evenly spreading pay increases across the entire workforce, much like spreading peanut butter on a slice of bread.
The good news is that pay hikes are expected to hold steady at 3.5% for 2026. But why the sudden move away from performance-based pay?
The Logic Behind the Spread
For many employers, the move is born out of a desire for fairness and simplicity. Payscale noted that some organizations are worried that merit-based practices can be too subjective or potentially biased. Beyond that, let’s be honest—spreading pay hikes out evenly is much easier from an administrative perspective, which can save a company significant time and money.
However, there is a catch. What does this mean for your culture of motivation?
The Risk to Top Performers
While it’s easier to give everyone something, there is a real risk that your top performers will feel disadvantaged in that environment. If you aren’t differentiating based on performance, you might inadvertently discourage your best people from putting in that extra effort or going the extra mile.
As Ruth Thomas at Payscale points out, base pay is not your only lever. If your budget is restricted, you absolutely should look at other ways to reward those who are truly moving the needle. It’s about ensuring that your stars still feel seen and appreciated. Sometimes, a simple a well-timed employee gift can bridge the gap when the general budget is tight.
Size, Industry, and the Future of Work
Interestingly, the “peanut-butter” trend varies wildly depending on where you look. If you’re at a smaller establishment with fewer than 100 employees, you might actually see a higher increase—around 4%—as they use pay more aggressively to compete for talent.
We’re also seeing a fascinating trend in specific industries where the demand for workers remains high:
- Construction: 5%
- Agencies and Consultancies: 4.5%
- Technology: 4%
It is worth noting that blue-collar fields like construction are becoming newly popular among Gen Z job-seekers. Why? Because they want a job that’s hard to automate. In a 2025 survey, 77% of Gen Z said they wanted a profession that fits that criterion, identifying roles like plumbers and electricians as careers they believe are immune to the impact of AI.
The Bottom Line
Is your company ready to handle the “peanut-butter” trend without losing its top talent? It’s a fine line to walk. By acknowledging the hard work your people do—perhaps through recognition awards or by creating a culture of daily recognition—you can maintain the kind of engaging, productive culture that makes a business truly successful.