Why pay confidence is now a business imperative

Ruth Thomas is joined by Amy Stewart, Lauren Hein, and Brittni Beers-Branco to unpack insights from the 2026 Compensation Best Practices Report and explore what confident pay looks like in practice.

Episode Highlights  

Why 2026 is the year of strategic alignment

RUTH THOMAS: When we step back and look at the data from over 3,500 respondents, the key takeaway is clear. Compensation is being elevated to an executive-level priority while budgets tighten, employee skepticism rises, and leaders are being asked to prove the impact of pay decisions more often and more visibly.

AMY STEWART: This year we focused on pay confidence from three angles: confidence in pay increases, market pricing, and total rewards. What is exciting is that confidence correlates with measurable outcomes. As confidence increases, voluntary turnover decreases and time to fill open roles drops.

What the data says about pay increases in 2026

AMY STEWART: Seventy-five percent of organizations plan to give pay increases in 2026, which is lower than previous years. Median increases remain flat at 3.5 percent. We are also seeing 44 percent of organizations either implementing or considering “peanut butter” pay increases, where everyone receives the same percentage regardless of performance.

We last saw this approach rise during the Great Recession. While we are not officially in a recession, there is clear conservatism in how pay budgets are being managed.

LAUREN HEIN: Tight budgets force hard tradeoffs. If you only have 3 percent to allocate, do you reward top performers or distribute increases evenly? Anchoring to your compensation philosophy and total rewards strategy is critical. Without that alignment, even well-intentioned decisions can derail trust.

BRITTNI BEERS-BRANCO: Communication matters just as much as strategy. Managers need clear talk tracks and transparency so employees understand why decisions were made. Confidence in pay decisions depends on both data and communication.

Compensation as an investment, not a cost  

RUTH THOMAS: One of the biggest shifts we observed this year is executives viewing compensation as a strategic investment rather than simply an expense line.

AMY STEWART: Seventy-five percent of executive leadership teams are asking for compensation data occasionally or frequently. Leaders want to know whether pay investments are driving retention, reducing time to fill, and improving engagement.

The key question is no longer “Are we paying enough?” It is “Are we paying correctly for the outcomes we need?”

LAUREN HEIN: Retention and regrettable attrition resonate strongly with executives. Payroll is often the largest expense. When high performers leave, the cost extends beyond salary to lost productivity, recruiting spend, and ramp time. Measuring the full employee lifecycle strengthens the case for strategic compensation investment.

AI in compensation: opportunity and guardrails  

AMY STEWART: AI was a spotlight topic in this year’s report. Organizations want transparency and accuracy. They want to understand how AI arrives at recommendations and whether those recommendations are grounded in reliable data.

AI in compensation is not just generative tools. It includes automation, machine learning, and recommendation engines that process more data than humans can manually analyze.

LAUREN HEIN: AI can spot trends and streamline workflows, but guardrails are essential. Personal data must be protected, and human judgment must remain in the loop. AI can inform decisions, but it should not replace contextual understanding.

BRITTNI BEERS-BRANCO: Trust depends on understanding how AI works. Leaders must be able to articulate how decisions were made, even when technology is involved. Used correctly, AI frees time for more strategic thinking. Used blindly, it risks eroding confidence.

Key Takeaways

  • Compensation is being elevated to a strategic executive priority in 2026.
  • Higher pay confidence correlates with lower turnover and faster hiring.
  • Median pay increases remain flat at 3.5 percent, with increased use of peanut butter raises.
  • Executives are demanding measurable ROI from compensation investments.
  • AI adoption is growing, but transparency, trust, and human oversight are critical.
  • Alignment between compensation philosophy, communication, and business strategy is essential.

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