Companies are increasingly distributing small, uniform raises—dubbed “peanut butter raises”—across their workforces rather than rewarding individual performance. This trend, highlighted in a recent Payscale report, is a cost-cutting measure gaining traction as labor markets cool.
The Rise of Across-the-Board Increases
Approximately 44% of companies either plan to implement or already have implemented these across-the-board raises. This means that employees receive the same percentage increase regardless of their contributions, with 16% of organizations adopting the strategy for the first time in 2026. The average base pay increase is a meager 3.5%, barely keeping pace with the 2.4% average inflation rate.
This practice isn’t new, but it’s becoming more common amid higher unemployment and fewer job openings. Companies, particularly in sectors like government, non-profit, education, healthcare, and construction, are leveraging an employer-friendly market where employees are less likely to switch jobs (“job hugging”). Starbucks, for example, distributed only 2% raises to corporate workers last year as a cost-control measure.
Why Companies Choose This Approach
The primary driver is cost control. In a slower economy, employers can get away with minimal differentiation in pay, knowing that employees are less likely to leave when job opportunities are scarce. The last time such widespread “peanut butter pay” occurred was after the 2008 financial crisis, with 3% annual increases becoming the norm until the COVID-19 pandemic.
As Ruth Thomas, chief compensation strategist at Payscale, explains, “Recession or low wage inflation are the two reasons that you will see people defaulting to peanut butter pay.”
The Risks of Ignoring Performance
Experts warn that this strategy is unsustainable. Failing to reward top performers can lead to attrition, as high-achievers feel undervalued and seek opportunities elsewhere. Cynthia Pong, founder of Embrace Change, states, “Employers can keep raises flat and uniform without expecting much pushback…especially when some employers aren’t giving raises at all.”
What Employees Can Do
If faced with a “peanut butter raise,” employees should proactively inquire about performance-based adjustments. Documenting contributions and requesting a formal review process can help. If no such process exists, employees can initiate one by offering to summarize their impact for stakeholders.
Employees should also maintain an active network, interview even when not actively job-seeking, and cultivate outside options to increase their leverage. Transparency regarding pay allocation methodology is crucial. Asking, “Am I being recognized as a high performer, or is this some other message?” can uncover how employers are valuing contributions.
Ultimately, the most effective response is to prepare for potential career transitions that reward performance.
