Survey: Amid Economic Uncertainty, Companies Hold Salary Increase Budgets at 3.5% in 2027

AI, Leadership Skills, and Workforce Transformation Are Changing Who Commands Higher Pay

NEW YORK, Sept. 3, 2026 /PRNewswire/ -- US companies are planning to keep salary increase budgets steady in 2027.

The annual survey from The Conference Board found that employers are generally budgeting 3% to 4% for base-pay increases, with a median of 3.5%, unchanged from the 2026 median. That does not mean every worker will receive a 3.5% raise: How those dollars are distributed will vary by industry, employee level and role, performance, and the value particular skills bring to business priorities.

With limited room to increase spending broadly, employers are becoming more targeted in their pay decisions. The median "other" increase budget—a flexibility pool for promotions, pay equity, market adjustments, retention, and critical skills—is just 0.5%. Employers therefore face increasingly difficult choices about where to direct limited compensation dollars.

Nowhere is that shift more evident than with AI: 38% of organizations say AI and machine-learning skills are driving base-pay increases, more than any other specific skill category surveyed. Yet formal pay structures have not kept pace, with 63% still basing salary ranges entirely on an employee's job rather than skills, and just 3.4% specifically budgeting "other" increases for employees who acquire in-demand skills.

"Salary budgets may be holding steady, but the compensation landscape is anything but static," said Diana Scott, US Human Capital Center Leader, The Conference Board. "Employers have to make tougher choices about where limited compensation dollars will have the greatest impact. The opportunity is to move beyond across-the-board thinking and more deliberately reward performance, critical skills, and the capabilities that will drive future growth."

Stable budgets are driving more targeted pay decisions.

• The median salary increase budget is projected to remain at 3.5% in 2027, unchanged from 2026.
• Median merit budgets are projected at 3.1%, while "other" increase budgets are just 0.5%, leaving limited room for market adjustments, pay equity, retention, and critical skills.
• Industry differences remain: Projected median increases range from 3.7% in Technology, Telecommunications, and Information Services to about 3.0% in Wholesale and Retail Trade and Government, Nonprofit, and Education.

AI is changing what employers value faster than pay systems can adapt.

• 37.8% say AI and machine-learning skills are driving base-pay adjustments—the highest of any specific skill category measured.
• Human capabilities remain highly valued: 30.7% cite leadership and people-management skills, alongside 30.4% citing data science and advanced analytics.
• Yet 63% still base salary ranges entirely on jobs rather than skills.
• Only 6.0% use "other" increases to reward employees who upskill, and just 3.4% specifically reward hot-skill acquisition.

"AI skills are commanding a premium, but the data make clear that technical expertise alone isn't enough," said Rita Meyerson, EdD, Principal Researcher, Human Capital, The Conference Board. "As AI becomes more embedded in how work gets done, organizations also need leaders who can guide teams through change, make sound decisions, and translate technology into business results. The workforce of the future will require both AI fluency and strong human skills."

Stable headcount does not mean a static workforce.

• 31% expect headcount growth in 2027, while just 9% anticipate reductions.
• Yet employers report increasing automation, restructuring, upskilling, hot-skill hiring, and reductions in force.
• Companies are therefore removing or automating some work while investing more heavily in the roles and skills tied to growth, technology, and transformation.

Stable executive salaries put more weight on incentives.

• Executive base pay increases are also projected at 3.5%, broadly in line with other employee groups.
• Median Annual Incentive Plan targets equal 40% of base pay for executives and 100% for CEOs.
• 79% use financial performance in determining executive payouts, compared with 29% using operational measures and 23% using strategic or nonfinancial goals.

"With executive salary increases holding steady, incentive pay is becoming an even more important tool for aligning leadership with business priorities," said JoAnne Moeller, Senior Fellow & Program Director, The Conference Board. "The opportunity is to reward not only financial performance, but measurable progress on productivity, AI investment, and workforce transformation—the outcomes that will drive long-term value."

C-Suite and compensation leaders should align pay more closely with business priorities.

• Anchor base pay increases at 3.5%. Differentiate increases based on performance, critical roles, market pressure, and scarce skills.
• Keep merit focused on performance. Use separate funds for equity, retention, promotions, and market or skill adjustments.
• Connect pay to workforce redesign. Align compensation with automation, restructuring, upskilling, and changing role requirements.
• Create clear rules for skills-based pay. Define when AI and other high-value skills warrant premiums or awards.
• Use incentives to reward results. Tie executive variable pay to measurable financial, productivity, AI, and workforce outcomes.

About The Conference Board

The Conference Board is the global, Member-driven think tank that delivers Trusted Insights for What's Ahead®. Founded in 1916, we are a nonpartisan, not-for-profit organization holding 501 (c) (3) tax-exempt status in the United States. TCB.org  l  Learn about Membership

SOURCE The Conference Board