As companies are going through their annual budgeting exercises for 2027, one of the most impactful decisions they will make is how much additional budget to allocate to employee salaries. This number dictates how much most employees will see their pay increase for 2027.
While this increase in budget tends to be relatively stable from year to year, that doesn't mean all employees receive the same increase every year. To get a better understanding of how companies are approaching these pay increases, as well as a number of other decisions heading into 2027, Pave partnered with Alpine Rewards to survey major employers across industries.
Merit raises are steady, and so are promotion budgets
The median merit budget among U.S. companies is 3.5% of payroll for 2027, which is almost identical to what companies actually spent in 2026 and to last year's version of this survey, which also found a 3.5% median planned budget for 2026. Raises have settled into a pattern.
The budget set aside for promotions and market adjustments also looks similar, with a median of about 1%.
Outside the U.S., the story is much the same:
Pave
A 3.5% raise may not feel exciting to some employees, but there are other levers available to companies to reward employees.
Top performers are rewarded with equity
Here is the catch with an overall budget of 3.5%: It is not what everyone gets. Most companies will use performance to differentiate increases for high performance. In fact, the report found that 87% of companies use individual performance ratings to set merit increases, and only 9% hand out the same increase across the board.
Beyond salary, companies are leaning on stock to reward high performers. The research found that 61% of companies use equity to deliver additional compensation to their top-performing employees.
The key takeaway here is that while salary increases sit within tight boundaries, equity is where companies have room to pay a standout employee more.
The fastest route to a big raise is a promotion
If you want a double-digit pay increase, the data says to get promoted. The most common average promotional increase is 9% to 12%, roughly three times a typical merit raise.
Promotions are also not rare. Thirty-two percent of companies promoted between 10% and 15% of their workforce over the past 12 months, and another 29% promoted more than 15%. Overall, 61% promoted more than 1 in 10 employees. Timing is flexible too: 57% of companies promote employees off-cycle rather than making them wait for the annual review.
A promotion can bring equity along with it. Among companies that offer it, 51% typically make employees eligible for equity in an off-cycle promotion.
Two other interesting findings from the survey revolve around headcount growth and approaches to pay transparency.
Pave
2. Pay transparency is also a manager skill
Companies are still figuring out how transparent they want to be around pay. In recent years, providing salary ranges in job postings has become common, with many candidates seeing this as a minimum expectation for applying for a job. Based on the survey, 80% of companies include a salary range in every U.S. job posting, even where the law does not require it.
Beyond putting salary ranges in job postings, approaches to pay transparency are inconsistent. But what many companies are doing is training the people who have the conversations. About half of companies (51%) plan to increase manager training or guidance on pay in 2027, the most common planned approach to transparency identified for 2027. Many of these companies are building on an already established foundation: 42% already give formal pay training to all people managers and 54% provide written talking points.
The reason is simple. A pay decision is only as good as the explanation that comes with it. When managers can clearly describe how a raise, a range or a promotion was determined, employees understand what they are paid and why. If you are not sure how your own pay is set, ask your manager where you sit in your range—and what it would take to move up.
Methodology
Survey data: Pave and Alpine Rewards partnered to run a survey on "2027 Trends and Budgeting," in which 251 companies participated, mainly from the technology and life sciences industries. Full survey results of the 2027 Compensation Budgets & Planning Report with breakouts for company size, industry, and more can be found in Pave Data Lab.
Turnover data: Pave's real-time compensation dataset consists of 1M+ employees from 9,000+ companies. Turnover data is calculated as the rate of employees from 12 months ago that are no longer at the company.
This story was produced by Pave and reviewed and distributed by Stacker.
