Set-it-and-forget pay strategies may be costing you talent. In an uncertain market, your compensation strategy should evolve constantly, or risk working directly against your retention and ROI goals.
Peanut butter pay — or giving everyone the same raise regardless of performance — was once common practice. Now it’s losing its spread. As companies finalize their 2027 comp philosophy, it’s worth asking whether a flat, across-the-board merit increase still earns its keep in your compensation strategy stash — or if it’s time to toss and replace it with something better (ahem, intentional pay).
We’re digging into why and when peanut butter pay makes sense for some organizations, and when it downright doesn’t for others.
The story behind peanut butter pay
The term “peanut butter pay” has been around for a long time but gained widespread attention after Payscale’s 2026 Compensation Best Practices Report uncovered that 44% of organizations were already giving or planning to give across-the-board increases heading into 2026 (18% considering it, 16% newly planning it, and 9% already using it). That number surprised some folks, and it’s been closely watched ever since, popping up in Entrepreneur, Fortune, and HR Dive, among others.
Then Payscale’s 2026–2027 Salary Budget Survey shows where that trend actually landed: 36% of U.S. organizations say they did, in fact, give across-the-board increases in 2026, and 32% plan to do it again in 2027. Dare we say, it looks like peanut butter pay’s popularity is now spreading thin. Canada tells an even sharper version of the same story: only 17% of Canadian organizations gave peanut butter increases in 2026, and just 13% plan to in 2027.
“Peanut butter pay may be losing some of its spread, but it hasn’t disappeared,” said Ruth Thomas, chief compensation strategist at Payscale. “Organizations appear to be moving toward more thoughtful and differentiated compensation strategies — which is critical to attracting and retaining talent. When compensation budgets are limited, treating every employee the same feels simple and fair, but it can also fail to recognize the people, skills and contributions that are most critical to the business.”
So why did nearly half of employers lean toward it in the first place, and why do so many appear to be backing away now? It depends on who you’re paying and what you’re paying them for.
The case for peanut butter pay
Flat increases aren’t always a bad idea; they simply fit some workforces better than others.
Peanut butter pay can make sense for roles where the work is routine, standardized, or where performance differentiation was never the primary motivator to begin with. If the job isn’t based on individual output, a flat raise isn’t undermining much.
Additionally, if you manage a large hourly workforce and inflation is your main concern, an across-the-board merit increase can work well. It’s easy to explain, simple to manage, and shows everyone their pay is keeping up with the cost of living. Just be careful not to reduce the pay differences your top hourly workers have earned and expect. This problem happens more often with minimum wage increases than with true across-the-board raises, which tend to hold up better when planned carefully.
The case against peanut butter pay
It’s a different story for salaried, knowledge-based roles where recognizing performance is essential to engagement and tenure.
When someone goes above and beyond in their work but gets the same raise as someone who doesn’t, a flat increase doesn’t feel fair. At best, it seems aloof; at worst, it feels mishandled. This is the illusion of peanut butter pay. It treats 'the same for everyone' as if it means 'fair for everyone.' But peanut butter pay doesn’t suit everyone — and some people are allergic.
Retention data supports this. Payscale’s Salary Budget Survey found that 25% of organizations say perceptions of unfair pay are a top reason they lose talent. Even in today’s uncertain market, high performers have choices, so they are the most likely to notice when their effort and pay no longer match.
There’s also a less noticeable cost: employees who don’t quit will scale back (hello, quiet quitting). Less innovation, less initiative, less collaboration, less willingness to go above and beyond the job description. None of that shows up on a budget spreadsheet, but it will be hard to miss in the output and year-end results.
What does the rise and fall of peanut butter pay mean for you and your pay strategy?
The answer depends on your budget and what you want to achieve, both in the short and long term.
Flat increases can work for specific employee types or job families where equity, not differentiation, is the priority — think hourly roles with standardized work or positions where performance doesn't drive ROI in a straightforward way. But for salaried, knowledge-worker roles where output variance matters, peanut butter pay is a false economy. It saves you money today and costs your talent tomorrow.
Here's what that means in practice…
Ask the right questions
Does your workforce benefit from a flat increase? Is your finance team pushing for an across-the-board increase for the sake of simplicity and predictability?
Where does peanut butter pay quietly cost you your best people? The answer is rarely all or nothing, but knowing the difference is what separates a simple strategy from one that truly works. What might seem like a sound idea to some doesn’t resonate for others. When your employees hear “predictability,” they may see that meaning their performance doesn’t matter.
Know your data
Before deciding where to differentiate, you need to understand your current position. Seeing how employee pay compares to market rates by role means you’re not guessing which jobs deserve more than a flat increase; you’re using real (and current) information.
Make it defensible
High-performer pay decisions need guardrails. Tools like Paycycle, part of the Payscale Intelligence Cloud, help HR, leadership, and managers see position in the pay range and external equity as they make decisions, while keeping budget in line and pay increase practices consistent across the organization.
Before you finalize your 2027 merit cycle, make sure you know which roles need differentiation and which do not. Your top performers will notice the difference — and at the end of the day, they are your greatest investment.
Want the full, data-backed picture?
Payscale's 11th Annual Salary Budget Survey breaks down salary increase data from 1,266 organizations by industry, size, revenue, and location, plus insights on promotional increases, salary structure adjustments, and budget trends across North America and beyond.
