Payscale’s 2025 Salary Budget Survey reveals a cautious pay environment as employers prepare for 2026. Drawing on insights from 1,551 organizations across the U.S., Canada, and beyond, the findings show that salary increase budgets are flattening, even as inflation and wage expectations remain elevated.
Payscale’s findings illustrate a shift in the employment landscape. Wage growth between 2021 and 2023 became more cautious, and employers are focusing on controlling costs amid consistently uncertain economic signs. Simultaneously, workers remain highly aware of inflationary pressures and expect wage increases to preserve their purchasing power. The ongoing friction between these forces will shape retention and engagement in 2026.
For 2026, U.S. employers project average salary budget increases of 3.5%, slightly lower than the 3.6% they actually granted in 2025. In comparison, Canadian employers anticipate 3.3% increases, also a modest decline. While still above the pre-pandemic norm of 3%, these figures indicate a pullback after several years of increased pay growth driven by inflation, labor shortages, and competitive hiring markets. Fewer organizations now view labor supply shortages as the primary reason for higher salary budgets; only 34% cite it as a factor in 2025, a 19% decrease from last year.
Employers cite different reasons for slowing pay growth this year. In the U.S., 66% cited concerns about economic conditions, a 17% increase from last year. Fewer mentioned labor shortages or talent competition, both of which have eased.
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