Employee expectations remain high amid economic uncertainties. And the best solution is “peanut butter raises”? Let’s get into it.
It’s not your imagination: The bonus squeeze is real
Year-end bonuses are getting smaller and less common as the U.S. labor market cools. Reporting from ADP which was covered by Forbes explains that bonuses have been smaller and more infrequent since 2021. At the end of 2024, the median payout had dropped to about $1,786.
Employers no longer face the intense competition for talent that drove larger incentives earlier in the decade, so compensation growth is settling into a more restrained pattern.
Salary increases are expected to stay modest in 2026. Research from compensation firm Mercer suggests companies are budgeting merit raises of roughly 3.2% and total pay increases around 3.5%, about the same as 2025. With hiring slowing and fewer workers switching jobs, businesses feel less pressure to push pay higher.
Still, the slowdown won’t hit everyone the same way. Employees in high-demand roles, including artificial intelligence and specialized finance jobs, are more likely to see stronger raises or incentives as companies continue competing for scarce technical skills.
Stellantis operating loss screws union workers
Union workers at Stellantis won’t receive a profit-sharing bonus for 2025, ending a run of annual payouts that often reached several thousand dollars. According to Carscoops, the reason is the automaker’s weak financial performance in North America, where it posted a $2.2 billion loss.
Because profit sharing is tied directly to operating margins under the company’s contract with the United Auto Workers, the loss means no bonus.
Workers typically receive roughly $900 for each percentage point of operating margin. With no margin to calculate this year, the payout dropped to zero, sparking frustration among employees who had grown used to sizable annual checks.
The contrast with competitors is stark. Workers at Ford Motor Company and General Motors are still receiving profit-sharing payouts because those companies remained profitable in North America. Stellantis leadership says restructuring and new vehicle launches could help restore profitability next year.
The rise of the “peanut butter raise”
Some employers are rethinking how pay increases are distributed. Instead of traditional merit-based raises tied to performance reviews, many are shifting toward flat or even raises for everyone, often referred to as “peanut butter” increases.
According to reporting from Fortune and data from Payscale, about 44% of organizations are considering or planning this approach in 2026.
Overall salary budgets remain modest, with average increases projected around 3.5%, pushing companies to simplify how those raises are distributed. Supporters say equal raises reduce bias in performance evaluations and help lower-paid employees keep up with rising costs. Critics argue the approach weakens incentives for high performers and could make it harder for companies to reward standout employees if the job market tightens again.
Bottom line: This may produce happy staffers in the short run, but high-performers may come to resent it.
The 2026 “war for talent” goes beyond higher salaries
According to a recent report from Clarify Capital which was broken down by Employee Benefit News, the 2026 job market will be defined by “intentional mobility.” While higher pay remains the primary motivator, salary alone is no longer enough to win the talent war.
For the one in five employees planning to switch jobs in 2026 and 42% passively looking for a new role, here’s what they’re looking for:
- Career development: 41% of employees leaving their roles cite a lack of career development as the main reason. It has officially shifted from a “nice-to-have” to a non-negotiable “must-have.”
- Flexibility and remote work options: Remote work options and flexible hours are now foundational parts of total rewards. In fact, 34% of HR leaders admit to losing top-tier candidates specifically due to a lack of remote options.
- Stability—or at least perceived stability: Despite 64% of seekers feeling confident they can find better roles, over 25% are searching specifically because they feel their current job security is “fleeting.”
To stay competitive, companies must bridge the gap between rising salary expectations and professional growth. Small and mid-sized firms, which may struggle to match the raw capital of giants, can level the playing field by offering clearly defined internal career paths and radical flexibility.
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