Nearly half of U.S. companies are abandoning merit-based pay increases in favor of uniform, across-the-board raises, according to new compensation data that signals a fundamental shift in how employers reward—or fail to reward—performance.
A Payscale report found that 44% of companies plan uniform wage increases in 2026. Of those, 16% are newly adopting the approach, 9% already use it, and 18% are actively considering it. The shift is most pronounced among high performers: 56% of companies expecting to exceed revenue goals are using or considering standardized raises.
The trend has a nickname in compensation circles: "peanut butter raises"—spreading the same thin layer across everyone.
Why Companies Are Giving Up on Differentiation
The official explanation centers on bias and simplicity. Payscale notes that "tying merit pay increases to performance ratings has come under criticism in recent years for being too subjective and prone to bias." That's true, but incomplete.
The real drivers are more pragmatic:
Budget pressure: Nearly a third of businesses are cutting compensation budgets compared to last year, citing recession concerns and cost control. When the raise pool shrinks, differentiation becomes politically impossible. Giving top performers 5% while average employees get 2% creates resentment that outweighs any motivational benefit.
Retention over performance: In a tight labor market, the priority shifted from rewarding excellence to preventing departures. Uniform raises ensure no one feels slighted enough to explore other options. It's risk management, not talent management.
Manager avoidance: Performance-based systems require managers to make and defend distinctions between employees. Many organizations learned that managers will avoid difficult conversations by rating everyone as meets expectations. Standardized raises eliminate the pretense.
