Shifting Compensation Strategies: The Rise of Uniform Pay Amid Economic Headwinds

Employers are increasingly adopting a strategy of uniform, across-the-board pay raises, dubbed "peanut butter raises," moving away from traditional merit-based compensation. This shift signifies a notable change in how organizations approach employee remuneration.

Approximately 44% of employers plan to implement these standardized wage increases by 2026. Current data indicates that 16% of organizations are newly adopting this approach, 9% already utilize it, and another 18% are actively considering it in the current year. Interestingly, among companies expecting to exceed revenue goals in 2025, a significant 56% are either using or actively considering uniform pay increases.

Understanding Pay Increases and the Critique of Merit

The average salary increase budget remains steady at 3.5%, consistent with the previous year. While 48% of businesses will continue to award performance-based pay bumps, the move towards uniform raises is partly attributed to long-standing criticisms of merit pay for being subjective and prone to bias.

Standardized increases are also noted for reducing administrative burdens and providing equal rewards, particularly for low-wage workers concerned about inflation.

Economic Context and Corporate Responses

The current labor market is characterized by slowed hiring, ongoing layoffs, and stagnant wage growth. This environment, often described as a "K-shaped economy," suggests rising earnings and wealth for higher-income individuals while lower-income populations face smaller gains and high living costs.

In response to these conditions, nearly one-third of businesses anticipate lowering their compensation-increase budgets compared to the previous year. Reasons for this projected reduction include potential recession, declining financial performance, and a desire for greater cost control. Economic concerns have notably become the primary factor driving compensation decisions for 66% of employers, a 17% increase from the prior year.

A prime example of this trend is Starbucks, which implemented a standard 2% raise for all salaried North American employees in 2025. This decision marks a divergence from manager-discretionary raises and is part of a broader cost-reduction effort by the company.

Strategic Investment in Top Talent

Despite the overarching trend toward uniform raises and general budget tightening, some companies are simultaneously reinvesting significantly in their highest-performing staff.

Walmart, for instance, notably increased the base pay for its top store managers from $130,000 to $160,000 in 2024. This change elevates their total compensation to a range of $420,000 to $620,000 annually, impacting over 4,000 store managers across the U.S. This strategy was explicitly described as a means to make managers "feel like owners" and to acknowledge their crucial role in the company's success.