For years, merit-based pay increases have been positioned as a cornerstone of effective talent management. The logic was straightforward: reward top performers, motivate improvement, and reinforce a pay-for-performance culture. But in today’s economic environment, many organizations are rethinking that formula. Enter the rise of “peanut butter raises” – uniform, across-the-board pay increases applied evenly across employee populations.

Recent compensation data suggests this approach is moving rapidly into the mainstream. According to PayScale, roughly 44% of employers are planning general wage increases in 2026, with a growing share newly adopting the strategy. Even organizations projecting strong financial performance are considering uniform raises, signaling that this isn’t just a defensive move by struggling employers.

The shift is happening against a backdrop of economic uncertainty. Hiring has slowed, layoffs remain persistent, and inflation continues to erode purchasing power especially for lower-wage workers. While average salary increase budgets are holding steady at around 3.5%, many organizations are trimming discretionary spending and seeking predictability in labor costs. For HR leaders, uniform increases offer administrative simplicity and a clear, defensible way to support employee pay during volatile times.

There’s also growing scrutiny of traditional merit systems themselves. Performance ratings have long been criticized for subjectivity and bias, and in lean years, small merit differentials can feel arbitrary or demoralizing. Broad-based raises can help reinforce a sense of equity, particularly for frontline and lower-paid roles where even modest increases meaningfully affect retention and engagement.

That said, peanut butter raises are not without risk. When high performers receive the same increase as everyone else, organizations weaken the link between performance and reward. Some employers are addressing this tension through hybrid strategies pairing modest across-the-board increases with targeted investments in critical roles or top talent. Starbucks’ move to standardize raises contrasts sharply with Walmart’s decision to significantly increase compensation for top store managers, illustrating how different business models are balancing equity and differentiation.

For HR professionals, the real question isn’t whether peanut butter raises are “good” or “bad.” It’s whether compensation strategy aligns with organizational goals, workforce needs, and culture. As economic pressures reshape pay practices, success will depend on transparent communication, thoughtful design, and a clear articulation of how employees can still grow financially and professionally even when raises are spread evenly.

In this environment, compensation strategy is no longer just about rewarding performance. It’s about sustaining trust.