USA 
United Kingdom
Business leaders planning 2026 wage scales are deliberating a new but familiar dilemma - to spread pay increases evenly or reward employees entirely on performance.
The debate over these ‘peanut-butter’ pay rises, so-called because they are spread evenly among the workforce (so essentially any popular spread would do. In fact, is peanut butter even the best spreader?) centers around financial planning considerations, but also impacts on engagement, motivation, culture and even talent attraction. So it has to be the right fit for an organization.
The issue centers on whether equal pay increases help promote unity and engagement, or whether they risk dulling performance incentives for the most valuable contributors. A report at the center of the discussion warns that more companies are experimenting with the first approach, even as the second remains dominant.
New research from compensation expert Payscale found more than four in 10 companies are opting to give identical, across-the-board hikes rather than merit-based raises.
Data confirms that peanut-butter raises (cream cheese would fit better. Or even paté) are gaining traction, even if they have not overtaken performance-based pay. The report says some 44% of companies plan to rely on the peanut-butter approach this year.
Fairness, bias, and budgets
Employers are apparently moving away from performance-based pay increases because of concerns that the practice is too subjective and potentially biased. Such subjectivity carries legal and cultural risks in the workplace, especially when performance management systems are unevenly implemented. (It’s not even clear if we’re talking about crunchy or smooth peanut butter. They haven’t thought this through. Anyway…)
It’s also been reasoned that it simplifies the administration of pay rises, saving a bit of money in the process. For organizations with tight budgets or high workforce volumes, it must be appealing.
While base pay budgets show little sign of movement, expected to average around 3.5% this year according to Payscale, employees are already working with managed expectations around wage increases. Employers don’t tend to pay out more than they think they can get away with.
Even so, performance-based compensation remains the most common approach. The report states that 48% of organizations plan to rely on performance-based raises.
Risk to motivation and retention
Some performance managers have a distinct nut allergy it seems, and fear that uniform pay rewards encourage mediocre results among the workforce. Why put your back into it when you’re going to get paid just the same?
It may also create retention issues by giving pause to those top performers that are first in and last out of the office. They may feel their ‘extra mile’ outlook will be better rewarded elsewhere, where peanut butter is not on the menu.
Delivering Consistent HR Services for Deskless Workers
Can HR truly reach every employee — whether office-based, hybrid or deskless?
Deskless workers represent ~80% of the global workforce, yet most HR systems were designed for desk-based employees.
This ebook explores how to build a multichannel HR service delivery strategy — combining portals, mobile apps, email and conversational interfaces — to deliver consistent HR services, improve accessibility, and create a seamless employee experience across the entire workforce.
Based on research conducted by Neocase with clients and stakeholders in the industrial sector, it highlights practical insights on:
Why deskless environments reveal structural gaps in HR service delivery
Why multichannel HR requires governance, not just more channels
How mobile-first access can transform frontline HR interactions
What you will learn from this eBook:
How to reach employees without desk access
How to structure HR service delivery across sites
How to reduce HR workload from employee requests
Real examples from large organizations
One compensation leader put it more directly: “With no differentiation based on performance, it's easier to give everyone something. But there is a risk that top performers will feel disadvantaged in that environment,” Ruth Thomas, chief compensation strategist at Payscale, recently told CBS News.
She also made the rather useful observation that monthly pay is not the only way to reward performance, adding: “Base pay is not your only lever, and organizations may look more at bonuses and promotions when base pay budgets are restricted.”
A hybrid approach that gives a baseline increase across the board and individual performance related boosts, sounds like a win for everyone.
What might also be at play with companies that favor the PB approach is confidence. Uniform pay rewards gained traction after the recession, so they are symptomatic of a more cautious financial approach in what is a newly volatile economic situation. And of course, some sectors are performing better than others.
Company size also shapes the approach to compensation. Payscale says smaller companies with fewer than 100 employees are offering slightly higher pay increases - around 4% - compared to their larger counterparts, while larger businesses with between about 10,000 to 50,000 workers plan to hand out 3% raises in 2026.
Whether uniform raises build cohesion or push high performers toward the exits may depend on whether organizations supplement them with promotions, bonuses, and transparent performance paths.
It’s very much dependent on specific sets of circumstances and conditions. Sometimes you just have to take the crunchy with the smooth.
