What You’re Spending on Your Merit Budget
We asked what your 2026 merit budget looked like. A third of you (33%) landed at 3–4%, 26% came in under 3%, 25% cleared 4%, and 16% froze merit increases entirely.
Mercer’s survey of more than 1,000 U.S. employers put the planned 2026 merit budget at 3.2%, which falls inside our largest bucket. Add the readers under 3% to the ones who froze, though, and 42% of you came in below the national figure or funded no merit increase at all.
Our survey doesn’t tell us why budgets split this way, but a few factors are likely in play.
Small Companies Feel Revenue Swings Directly
When the headcount is small, a lost client or a slow quarter shows up in the raise pool quickly, without the cushion a larger company’s budget provides.
Merit Competes with Benefits for the Same Dollars
Health renewals for January plan years are landing this fall, and money that goes to a premium increase isn’t available for raises.
“Over 4%” May Not Be All Merit
Some smaller companies run one pool for merit, market adjustments and retention, so a higher number can include a catch-up for someone who was underpaid or a counteroffer for someone who was about to leave.
A Freeze Usually Says More about Cash Flow Than about Priorities
If you’re in the 16%, how you explain it to employees will probably matter as much as the decision itself.
Editor’s Note: These are HRinsidr readers who chose to answer, so treat the results as a read of the room and not a national benchmark.
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Compensation and BenefitsWe asked what your 2026 merit budget looked like. A third of you (33%) landed at 3–4%, 26% came in under 3%, 25% cleared 4%, and 16% froze merit increases entirely. Here's what we think is going on ...
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