With most organizations having closed out their annual salary review cycle, the second quarter is the perfect time to begin thinking about the future. Uncertainties about the global economy are prompting organizations to carefully consider how they approach budgeting and workforce strategies.
WTW’s 2025 Salary Budget Planning Report — Global (July edition) offers a comprehensive look at how organizations worldwide have responded this year and how they’re preparing for what’s to come in 2026.
While top-line budgets are generally holding steady, the real shift is happening beneath the surface: Organizations are being more deliberate about how they allocate pay, where they focus investment and what outcomes they expect to drive. Employers are no longer simply reacting to economic signals; they’re reimagining how to best support broader business goals despite uncertainty and using this moment to position themselves for what’s next.
Global salary budgets hold steady — with key variations
Most countries are forecasting salary increases that are relatively flat compared to the prior year. In the United States, organizations plan to increase salaries by 3.5% in 2026 — nearly identical to 2025 budgets. Canada, France, Germany and the United Kingdom are showing similar trends, with these markets forecasting increases between 3.2% and 3.6% (Table 1).
Table 1. Median salary increase budgets over time
| Market | 2026 Planned | 2025 Actual | 2025 Planned | 2024 Actual |
|---|---|---|---|---|
| Brazil | 5.8% | 6.3% | 5.6% | 5.8% |
| Canada | 3.5% | 3.5% | 3.5% | 3.8% |
| China | 4.0% | 3.8% | 5.0% | 5.0% |
| France | 3.2% | 3.1% | 3.5% | 3.8% |
| Germany | 3.4% | 3.4% | 3.8% | 4.0% |
| United Kingdom | 3.6% | 3.6% | 3.8% | 4.0% |
| Saudi Arabia | 3.9% | 4.1% | 4.1% | 4.1% |
| United States | 3.5% | 3.5% | 3.9% | 4.0% |
A glimpse into the actual and projected salary budget increases for a region or industry is critical to help organizations understand where they fall compared to the benchmark — but context is key. To help organizations make this data actionable, the full Salary Budget Planning Report offers insights into the factors influencing budget decisions and how organizations are addressing their workforce strategy.
Why budgets are being adjusted
When organizations adjust their salary budgets, the reasons are increasingly grounded in macroeconomic caution and consistent in all regions. While concerns about inflation continue to influence spending for many organizations and remains a top factor in influencing budget change, the percentage of survey respondents citing inflation as a cause of budgetary adjustments has, again, dropped notably in the past year.
Even more pervasive are concerns related to cost management, including the rising cost of goods and services, combined with recession fears and weaker financial performance (Table 2). Clearly, even in a competitive labor market, economic pressure and uncertainty are again exerting influence over budget planning.
Table 2. Top budget adjustment catalysts, globally (based on respondents to the question)
| Rank | Factor | Percent of organizations (n=3,385) |
|---|---|---|
| 1 | Anticipated recession or weaker financial results (actual or forecast) | 38.9% |
| 2 | Concerns related to cost management (e.g., rising cost of supplies) | 34.4% |
| 3 | Inflationary pressures | 27.4% |
How organizations are responding to market conditions
In a complex labor market marked by global economic challenges, organizations are looking to their total rewards strategies as a tool to engage a productive workforce and align existing people resources to their most critical business objectives.
When asked which actions they’ve taken or plan to take in response to market conditions, companies pointed to a range of workforce investments. Notably, the most frequently cited actions already taken reflect a growing emphasis on internal culture, development and belonging — elements that play a key role in retention when compensation budgets are tight (Table 3).
Table 3. Top budget adjustment catalysts, globally (based on respondents to the question)
| Action Taken | Action Planned | |
|---|---|---|
| Improving the employee experience | 45.0% | 27.7% |
| Increase/target use of training opportunities | 41.4% | 20.2% |
| Broader emphasis on diversity, equity and inclusion | 43.4% | 16.7% |
| Changes to health and wellness benefits | 40.1% | 14.3% |
| More workplace flexibility | 38.3% | 4.9% |
| Changes to compensation programs (e.g., base, STI or LTI) | 26.6% | 18.5% |
| Other | 6.1% | 13.4% |
The fact that compensation changes rank third in future planning — despite being one of the less frequently reported actions taken to date — may signal a shift. Organizations could be recognizing that culture and upskilling can go only so far without reinforcing their value proposition through employee pay.
These actions suggest a deliberate rebalancing that is unsurprising given ongoing concerns over financial results and cost management. Many organizations have prioritized initiatives aimed at improving the employee experience, expanding DEI efforts and enhancing wellbeing. These are meaningful investments that will pay dividends in the long term. However, only one-quarter of responding organizations said they have taken deliberate action to adjust compensation programs.
In a competitive labor market, overlooking pay can have real consequences. Annual compensation survey data remains a critical resource to ensure decisions are grounded in reliable, representative benchmarks. Skipping a cycle or relying too heavily on highly reactive data sources can leave organizations out of step with the market at a time when alignment matters most.
Responding with intent: Employers invest in multi-pronged approaches
In the face of ongoing economic uncertainty and evolving workforce expectations, organizations that view compensation as a critical tool for improving business outcomes are putting in significant effort to ensure their pay strategies are responsive, equitable and effective. Rather than relying on a single tactic, most are taking a multi-pronged approach — balancing broad-based increases with targeted adjustments and comprehensive reviews.
Many organizations report having already taken action within the past year by conducting comprehensive compensation reviews and relying on data-driven approaches that are both sustainable and effective (Table 4). Notably, 27% of responding organizations reported a concentration on starting salaries. The July edition of the Salary Budget Planning Report now includes a special focus on starting salaries across multiple job families to help organizations understand what it will take to remain competitive.
Table 4. Actions taken to address competitive labor market and inflationary pressures
| Action | Percent of respondents |
|---|---|
| Full compensation review of all employees | 31.2% |
| Compensation review of specific employee groups | 30.1% |
| Raise starting salary ranges | 27.0% |
| Hire people higher in relevant salary range | 21.5% |
| Enhance use of retention bonuses or spot awards | 21.5% |
| Targeted base salary increases for specific employee groups | 20.3% |
| One-off equity/LTIs payment or grant | 16.7% |
| Adjust salary ranges (minimums, midpoints maximums) more aggressively | 16.2% |
| Discretionary funds for base salary increasing on as needed basis (in additional to original budget) | 10.0% |
| Higher base salary increases for all employee groups | 7.5% |
| More frequent base salary increases or off-cycle adjustments | 5.2% |
| One-off cost-of-living payments | 3.7% |
Survey participants shared that their compensation strategies and pay practices will continue to see investment over the next year with continued focus on both broad and targeted compensation reviews as well as more aggressive range adjustments (Table 5).
Table 5. Actions planned to address competitive labor market and inflationary pressures
| Action | Percent of respondents |
|---|---|
| Adjust salary ranges (minimums, midpoints maximums) more aggressively | 16.8% |
| Full compensation review of all employees | 16.3% |
| Compensation review of specific employee groups | 14.0% |
| Targeted base salary increases for specific employee groups | 11.7% |
| Hire people higher in relevant salary range | 11.5% |
| Enhance use of retention bonuses or spot awards | 10.6% |
| Raise starting salary ranges | 9.3% |
| Discretionary funds for base salary increasing on as needed basis (in additional to original budget) | 5.8% |
| More frequent base salary increases or off-cycle adjustments | 5.0% |
| Higher base salary increases for all employee groups | 3.3% |
| One-off equity/LTIs payment or grant | 1.9% |
| One-off cost-of-living payments | 0.7% |
Looking ahead to 2026
As organizations plan for 2026, their focus is shifting from simply responding to market signals to proactively shaping outcomes: driving performance, enabling transformation and retaining the talent that matters most. The path to a more effective workforce in 2026 starts with the decisions leaders make right now.
Here’s how your organization can take a more strategic approach to compensation planning:
- Evaluate and recalibrate your pay structures: If your organization made rapid compensation changes in recent years, now is the time to assess their effectiveness. Use data to identify where adjustments are needed and ensure your job architecture supports long-term goals.
- Align compensation with your evolving skills strategy: According to WTW’s 2025 Skills Survey, which collected information about the use of skills across more than 1,200 organizations, those that effectively use skills are more likely to report better outcomes related to employee productivity, retention and financial performance. As roles evolve and talent needs shift, compensation planning should be closely aligned with your organization’s upskilling, reskilling and workforce transformation priorities.
- Prioritize roles that drive business impact: A strategy isn’t a strategy without trade-offs, and the rules are no different when it comes to a compensation strategy. Identify the areas within your organization where rewards differentiation can make the most impact and where it could prevent regrettable turnover.
- Cut through the noise with reliable data: In a market full of conflicting signals, avoid being swayed by anecdotal trends. Ground your decisions in robust compensation survey data to maintain consistency, defensibility and alignment with business strategy.
The organizations that will lead in the years ahead are the ones using this moment to invest with intention. History has shown that bold, well-informed moves made during periods of uncertainty often define the next generation of industry leaders. This is a moment to lead with confidence — not because conditions are easy, but because the tools, data and insights to make the right calls are in place.
