As the year closes and organizations finalize 2027 plans, the compensation conversation has shifted again. Pressures from the last few years have largely stabilized, and salary budgets look much like they did a year ago. What has changed is how employers spend those dollars, how much they are expected to disclose, and how they use benefits to create value when cash is limited. The question is no longer only “how much should we budget?” It is “how do we invest every dollar, in cash and in benefits, to support our people and our business?”
Trend #1: 2027 Salary Budgets Are Holding Steady
What’s Happening Early 2027 projections point to continued stability. Several major salary budget surveys are landing in nearly the same place, with U.S. employers projecting average increases of roughly 3.0% to 3.5% for 2027, largely unchanged from 2026. Most employers plan no change. 63% expect budgets to stay the same, and 30% expect them to rise, up from 16% a year ago. Surveys point to cost management pressures, a tight labor market, and inflation concerns as reasons for the cautious approach.
What it Means Budgets are no longer the main differentiator, so execution is. With totals clustered around 3.4%, employees will see a similar headline number from most employers. The organizations that stand out will be those that explain their increases clearly and use the dollars with purpose.
Trend #2: The End of “Peanut Butter” Raises
What’s Happening Employers are moving away from spreading increases evenly. One national survey found that 36% of U.S. organizations gave across-the-board raises in 2026, but only 32% plan to in 2027. The cost of getting this wrong is real. The same research notes that these raises can be demotivating, and 25% of firms reported losing employees in 2026 due to insufficient pay increases. Budgets may be holding steady, but the way employers deploy those dollars is changing significantly.
What It Means Differentiation only works if the foundation supports it. Employers need performance assessments that separate strong contributors from average ones, merit matrices that translate those ratings into meaningfully different outcomes, and managers who can explain the result. Without those pieces, a pay-for-performance approach can feel arbitrary and do more harm than a flat increase.
Trend #3: Pay Transparency Becomes a Compliance Calendar
What’s Happening Pay transparency has moved from an emerging expectation to a growing set of legal obligations. A growing number of states and local jurisdictions now require employers to disclose pay information, and additional requirements are scheduled to take effect over the next year or more. The substance of these laws varies considerably. Some require a pay range in every job posting, while others require disclosure only after an interview, on request, or at hire. Many also address remote positions, so employers hiring across state lines may be covered even without a physical presence there.
Legal requirements are only part of the picture. Candidates and employees now expect openness about pay, and they have more information at their fingertips than ever before. Salary data is readily available through job postings, employer review sites, crowdsourced salary databases, and social media, and workers increasingly compare notes with peers inside and outside their organizations. Some of this information is credible and some is not. Self-reported figures can be outdated, incomplete, or taken out of context, but they still shape how employees perceive their own pay and how candidates view an employer. Organizations that stay silent leave that conversation to outside sources.
What It Means For multi-state employers, treating transparency as the default standard is increasingly the practical choice. Posted salary ranges must be credible, and that requires current ranges, a clear leveling framework, and managers who are prepared to explain where an individual falls within a range. Employers should also assume that employees and candidates are already comparing their pay against online data and external salary estimates.
Increasingly, transparency extends beyond publishing ranges to providing high-level insight into the organization’s compensation philosophy, how relevant labor markets are defined, the factors considered when establishing pay, and the process used to maintain and update compensation structures over time. Providing context about how ranges are built, how roles are leveled, how market data is selected, and how performance, experience, skills, and internal equity influence pay decisions helps employees interpret what they find, understand how compensation decisions are made, and build trust in the organization’s approach to pay.
Trend #4: Internal Equity Moves from Nice-to-Have to Necessary
What’s Happening Publishing ranges makes existing inconsistencies easier to see, including pay compression, uneven leveling, and legacy decisions that no longer fit the structure. Many employers are conducting proactive pay equity reviews rather than waiting for turnover or employee concerns to surface problems.
What It Means Market-based pay structures are not enough on their own. Leaders want confidence that pay decisions are consistent and defensible, supported by data and ongoing monitoring. Running an equity review before posting ranges and finalizing year-end increases is far less costly than correcting problems after they become public.
Trend #5: Total Rewards Carry More of the Load, Including Long-Term Care
What’s Happening With cash budgets flat, employers are looking to benefits to add value, and long-term care (LTC) planning is gaining attention as one of the largest financial risks employees face. Washington State offers an early look at where policy is heading. Its WA Cares program, funded by a 0.58% tax on workers’ paychecks, began providing insurance coverage on July 1, 2026. Benefits are capped at $36,500 per person, adjusted annually for inflation, which leaves a meaningful gap relative to the real cost of care. Lawmakers have also opened a path for private insurers to create supplemental policies for people with WA Cares benefits. Other states have explored similar programs, so employers with multi-state workforces should watch this space.
What It Means Whether through voluntary LTC offerings, employee education, or caregiver support, LTC planning helps employees address a major financial risk and shows that their employer cares about their long-term security. Employers should evaluate options that fit their workforce and total rewards strategy, and consider how LTC fits alongside retirement and health benefits in their overall message to employees.
Action Items: What Employers Should Be Doing Right Now
1. Finalize 2027 Budgets with Allocation in Mind Decide how the budget will be split among merit, promotions, market adjustments, and incentives.
Ask Yourself:
- Does our plan effectively reward our highest-impact contributors?
- Where are we most at risk of losing key talent?
- Have we reserved funding for equity adjustments, retention concerns and market movement?
2. Validate Ranges and Increase Processes Differentiated pay depends on current ranges and credible performance ratings.
Ensure:
- Ranges and structure adjustments keep pace with the market
- Performance assessments truly distinguish levels of performance
- Merit matrices produce meaningful differences in outcomes
3. Audit Your Transparency Obligations Identify where you post jobs and hire, including remote roles.
Evaluate:
- Which state and local laws apply to our postings
- Whether our posted ranges are good-faith and consistent with internal pay
- What upcoming effective dates, such as Delaware’s in September 2027, require us to prepare
4. Review Internal Equity Before Ranges Go Public Fix issues on your own timeline, not after they are exposed.
Evaluate:
- Compression between new hires and tenured employees
- Inconsistencies across similar roles or levels
- Equity across departments, divisions, and locations
5. Prepare Managers and Revisit Total Rewards A strong program can fail if managers cannot explain it.
Managers should be ready to discuss:
- Performance ratings and merit decisions
- Pay ranges and where an employee falls within them
- Career progression and what it takes to advance
- The full value of benefits, including LTC and other voluntary offerings
Looking Ahead Compensation pressures have eased, but expectations of compensation programs have not. Employers that spend dollars with intention, communicate with transparency, correct internal inequities early, and use benefits like long-term care to strengthen total rewards will be best positioned to attract and retain talent in 2027.
Spotlight: Employer-Paid Guaranteed Issue Long-Term Care
For employers ready to act on the long-term care trend above, employer-paid guaranteed issue (GI) traditional LTC insurance is one of the simplest ways to get protection in front of employees. There are no health questions and no individual underwriting, and the employer controls and funds the benefit structure.
How it works
- Coverage is guaranteed issue, with no health questions for the group
- A minimum of 25 employee lives is required, and the plan must include all eligible members of the selected class
- Coverage includes home care, assisted living, nursing care, and adult day care facilities
- Premiums can be paid for life or on a 10-pay basis
- Partners and spouses may be added if the employer pays 100% of their premium
Tax advantages for the business
- Deductible for the business: Premiums the company pays for tax-qualified LTC coverage are generally deductible as an ordinary and necessary business expense
- Not taxable to employees: Employer-paid premiums for tax-qualified LTC coverage are generally not included in an employee’s taxable wages
- Tax-free benefits: Benefits received from a tax-qualified LTC policy are generally received income-tax-free, even though the employer paid the premium
This is general information, not tax advice. Tax treatment can vary by entity type (C corp, S corp, partnership) and ownership, so employers should consult their tax advisor.
A leadership retention tool Because LTC benefits are not subject to nondiscrimination testing, employer-paid GI coverage can be offered to a class of senior executives only, rather than the whole team. Funding that coverage on a 10-pay basis means the company’s premium obligation ends after 10 years while the executive keeps lifetime coverage. That creates a fixed, deductible premium window and a visible, differentiated reward that is hard for competitors to match.
With cash budgets flat, a benefit like this lets employers add real value for employees and key leaders without adding to base pay.
Salary budget projections and raise-practice data are drawn from 2026 and 2027 surveys published by WTW, Gallagher, and Payscale. Pay transparency information reflects state law developments as of August 2026 and should not be considered legal advice.
Sources:
2027 Pay Raises Expected to Hold Largely Flat Amid Cost Pressures
Payscale: Merit increases remain popular as ‘peanut butter’ raises trend downward | HR Dive
Navigating 2026: Pay Transparency Laws and Employer Obligations – Jackson Lewis
