Looking forward to a raise in 2026? You may be getting “peanut butter”.
A new report from compensation software and data provider Payscale predicts that in 2026, many employers will be giving “peanut butter raises” to their employees – increases given “across the board” as opposed to being calculated individually based on performance or merit. They’re spread evenly, like peanut butter on a slice of bread.
“In total, more than 40% of organizations are either using or actively considering standardized across-the-board or peanut butter pay increases in 2026,” the report said. “This increases to 56% for top performers (organizations who reported that they would exceed their revenue goals in 2025).”
Most employers, the survey says, plan to give an average of 3.5% raises in 2026, which Payscale says is similar to last year (although based on the millions of employees in its system, payroll company ADP said that employers actually gave anywhere from 4.4% to 6.5% salary increases last year, depending on whether they left or stayed at their jobs). Regardless, inflation is about 3%, so raises are keeping up, if not staying ahead.
But please, if you’re a business owner or manager and you’re considering a peanut butter approach to your pay increases this year – and you’re blaming inflation – please, don’t. Your higher-performing employees deserve better than this. And your lower performers should be put on notice. I have nothing against peanut butter. Or jelly. But this practice is simply lazy. And – let’s face it – you’re probably doing the same with your performance reviews. We suck at performance reviews.
We don’t document. We don’t reward. We don’t mentor. We don’t coach. We’re too busy chasing profits. Instead, most of us are still going through the motions of the outdated annual review. Many of my clients are way behind in the process.
The workplace has changed dramatically over just the past decade. Millennials and gen Z workers now represent more than half of today’s workforce. Younger workers grew up receiving real-time comments on their social media posts and received Little League trophies just for participating. They want immediate gratification when they do something good. And they deserve honest feedback when they don’t. Yet most employers still behave as we did 20 years ago.
A 2015 study from the Society for Human Resource Management found that more than two-thirds of employees were dissatisfied with performance reviews, with 65% saying the exercise wasn’t even relevant to their jobs. Managers also overwhelmingly said that their company’s performance review process was not satisfactory.
A 2025 Deloitte Global Human Capital Trends survey of more than 10,000 employees found fewer than one in three workers thought their performance reviews were “very fair and equitable”, and a majority of employees and managers lacked trust in performance management. A June 2025 report described broad misalignment between employees and leaders on performance, with many employees feeling their reviews were unfair, stressful or just a checkbox exercise, and only about 29% of workers trusted their evaluation outcomes.
Which is why it doesn’t surprise me that so many businesses are opting for “peanut butter raises” this year. It’s the easy way out. Why spend the time to individually evaluate your people when you can just slap an across-the-board increase on everyone and just be on your way?
When a customer pays you, it means they’re satisfied with what you delivered. It’s the same with your employees. Raises are a true benchmark of performance. Employees should not only receive them, but know how their raise compares to the average in their group. If they care, they’ll seek to exceed the average. If they don’t care, and consistently rate below average, then that tells you something else. And if you do let that person go, they (and their attorneys) can’t say they weren’t forewarned.
The right way to do this is to set specific goals and give raises twice a year if those goals are met, along with incentive bonuses at the end of the year, depending on how well a worker performed. The bonus doesn’t need to be cash either. Today’s worker loves flexibility, so additional paid time off works well. If you can’t afford either, consider a smaller pay increase coupled with a new title. Titles are important too.
If you’re one of those organizations that are considering a peanut butter raise for your employees, rethink this practice. Ever seen the famous scene in Mad Men? Where Don Draper tells his employee Peggy Olson, who complained that he never said thank you, that “That’s what the money is for!”
He isn’t wrong. Raises matter. But so does regular feedback. Don’t be lazy about either.
