Mercer, a business of Marsh McLennan and a global leader in helping clients realize their investment objectives, shape the future of work, and enhance health and retirement outcomes for their people, has released the results of its October 2025 Mercer QuickPulse US Compensation Planning Survey.
The survey of more than 1,000 American organizations revealed that on average, employers plan to hold base salary increases for merit at 3.2%, and total increases at 3.5%, which encompasses all salary increases, including for merit, promotions, cost-of-living, and other adjustments, in 2026—same as the actual increases employers reported in 2025.
Looking ahead, 61% of the employers surveyed anticipate that the economy will have a moderate to significant impact on compensation decisions in 2026. Nevertheless, employers remain committed to prioritizing skill and talent development (34%), market competitiveness (31%), and compensation adjustments (24%) next year.
However, the data suggests a disconnect between these priorities and how budgets are allocated. More than eight out of 10 (83%) employers indicated they would distribute their salary increase budgets equally across the organization, rather than directing more resources towards high-demand skills or critical market gaps. Further, employers plan to promote fewer employees in 2026 – around 9% of their workforce, down from 10% in 2025, with an average pay increase for promotions of 8.7%.
“Employers have a significant opportunity to strategically shape their spending to better align with critical talent goals,” says Lauren Mason, U.S. workforce solutions leader at Mercer. “By focusing compensation budgets on high-demand skills rather than spreading resources too thin, leaders can more effectively drive their workforce strategy and secure the talent essential for success.”
The survey also found that AI and automation have a limited impact on hiring and compensation decisions. Only 2% of respondents cited AI and automation as a reason for reduced hiring, and 57% reported stable hiring volumes despite AI adoption. Additionally, only 9% of organizations said they plan to make headcount changes related to AI.
“AI hasn’t yet reshaped hiring or compensation decisions – not because the technology isn’t ready, but because organizations are still evolving their operating models to apply AI responsibly and with the right governance and oversight. As they do, AI will become a critical tool for understanding workforce needs, optimizing spend, and enabling more transparent, equitable pay decisions,” says Stephanie Penner, U.S. and Canada career practice leader at Mercer.
Compensation trends vary across industries. Healthcare services and retail continue to report lower merit increases than other industries at 2.9% and total increases of 3.4% and 3.3%, respectively, reflecting the headwinds these industries face. On the contrary, the financial services, energy, and high-tech sectors anticipate delivering higher total increases at 3.7%.
