Economic uncertainty creates a difficult balancing act for employers. Organizations must remain competitive in attracting and retaining talent while managing costs amid fluctuating economic conditions, evolving workforce expectations, and ongoing pressure to improve productivity. As a result, compensation strategies continue to evolve, with employers taking a more deliberate and targeted approach to pay decisions.
After several years of elevated salary increases driven by labor shortages and inflationary pressures, many employers are beginning to settle into a more measured compensation environment. National compensation surveys indicate that salary increase budgets are stabilizing in the 3% to 4% range. While this represents a return to more traditional pay practices, it does not signal a reduced focus on compensation. Instead, organizations are becoming more strategic about how and where compensation dollars are invested.
One notable trend is the growing emphasis on targeted pay increases. Rather than distributing compensation increases evenly across the workforce, employers are concentrating resources on critical roles, high performers, and employees with in-demand skills. This approach allows organizations to address talent shortages in key areas while maintaining greater control over overall labor costs.
The rise of skills-based compensation is also influencing pay strategies. As technology continues to reshape job requirements, employers are increasingly rewarding employees for acquiring and applying specialized skills that drive business results. This shift reflects a broader movement away from compensation systems based solely on tenure or job title and toward models that recognize the value employees bring through their capabilities and contributions.
At the same time, pay transparency is becoming a more significant factor in compensation planning. Expanding state pay transparency laws and growing employee expectations for openness have prompted many organizations to examine their pay structures more closely. Employers are placing greater emphasis on documenting compensation philosophies, establishing clear salary ranges, and ensuring consistency in pay practices. Beyond compliance, transparency is increasingly viewed as a tool for building trust and supporting pay equity initiatives.
Another trend emerging during uncertain times is a renewed focus on total rewards. Many organizations recognize that base pay alone may not be sufficient to attract and retain employees. Flexible work arrangements, professional development opportunities, incentive programs, wellness initiatives, and enhanced benefits are playing a larger role in the employee value proposition. Employers are seeking ways to create a compelling overall employment experience, particularly when salary budgets are constrained.
Despite these strategic adjustments, employee expectations around compensation remain high. Workers continue to evaluate employers based on pay competitiveness, fairness, and opportunities for growth. Organizations that fail to communicate compensation decisions effectively may find themselves facing challenges with engagement and retention, even when compensation levels are market competitive.
What ASE's 2026 Compensation Survey Reveals
While national trends provide valuable context, compensation decisions are often shaped by local labor market conditions. ASE's 2026 Compensation Survey offers a closer look at how employers across Michigan are responding to today's compensation challenges, and many of the findings mirror what employers are experiencing across the country.
The survey suggests that wage growth is stabilizing after several years of above-average increases. Michigan employers reported an average salary increase of 3.3% for 2026, following increases in the 4.0% to 4.4% range from 2022 through 2024. The average increase dipped to 3.2% in 2025 before leveling off this year, reflecting a broader trend of organizations moving away from the larger increases that characterized the post-pandemic labor market.
At the same time, the data reinforces the growing emphasis on targeted compensation strategies. Rather than applying the same increases across all positions, employers are directing compensation dollars toward roles where talent demand remains strong. Facilities and Maintenance positions recorded the highest average increase at 4.3%, followed by Sales and Marketing roles at 4.1%. Human Resources positions aligned with the overall average at 3.3%, while Research and Scientific positions and Behavioral/Social Health roles saw average increases of just 1.7%. These differences highlight how organizations are responding to market pressures by investing more heavily in occupations that are critical to business operations and more difficult to fill.
ASE's 2026 Salary Budget Pulse Survey tells a similar story. Seventy percent of participating organizations planned the same salary increase for 2026 as they provided in the prior year, while the median planned increase remained at 3.0%. Although overall salary budgets have become more predictable, employers continue to differentiate rewards for top talent. In 2025, top performers received average increases of 4.3%, demonstrating that organizations are still using compensation strategically to recognize and retain their most valuable employees.
Together, these findings illustrate a key shift in compensation strategy. While broad-based salary growth is moderating, employers are continuing to make targeted investments in high-demand positions and high-performing employees. The result is a compensation environment that balances fiscal discipline with the need to attract, retain, and engage talent.
As employers navigate continued uncertainty, successful compensation strategies will likely combine market competitiveness, transparency, flexibility, and a strong understanding of workforce needs. Organizations that approach compensation as a strategic investment rather than simply an expense will be better positioned to adapt to changing conditions and maintain a competitive advantage in the labor market.
ASE Connect
ASE 2026 Compensation Survey: The 2026 ASE Compensation Survey results are now available. Participating ASE members can access the full survey report in the ASE Survey Library. All others can request to purchase the survey report here.
Sources: ASE 2026 Compensation Survey, ASE 2026 Salary Budget Pulse Survey, New York Post, Investopedia, The Economic Times, Mercer, World at Work