While salary budgets continue to stabilize, compensation and HR professionals have an opportunity this year to shift their focus from merit increases and bonuses to other factors that are reshaping employee pay. We’ve identified the top 5 trends to watch in 2026.
01
Data has always been at the heart of sound, defensible compensation programs. Today, though, artificial intelligence is paving a new path that delivers key analyses more quickly and efficiently. As examples, we see AI automating benchmarking, salary bands and market pricing workflows.
In turn, this will require compensation and HR professionals to have the skills to ask the right questions, understand outliers and know how to use the information they glean responsibly and thoughtfully. HR teams that are well versed on AI capabilities (and shortfalls) will be best positioned to have creative compensation offerings.
This is the time to start investing in AI-powered tools that will lift manual work off your teams’ shoulders and allow them the thinking space to take a more strategic approach to pay. Now is the time to also upskill your compensation and HR teams. The human-in-the-loop aspect of AI requires compensation and HR professionals to be well-versed in guiding AI agents toward strategic pay outcomes.
02
After several years of volatility, salary budgets are entering a new era: stability. Salary budgets in 2026 are expected to hover globally hovering between 2% and 3% globally, a modest increase compared to the peaks we saw in 2021 through 2023. This signals a move toward a measured, sustainable pace.
Salary-budget stability is your opportunity to refine your compensation strategy. Rather than across-the-board increases, target your pay adjustments for strategic-value roles — the ones that drive the greatest impact on business outcomes. With this approach, you’ll remain competitive while staying aligned with budget constraints.
03
So, quicker, AI-driven data analyses give compensation and HR professionals the opportunity to be more strategic. And salary budgets are stabilizing after a few high-water mark years. This combination makes it natural to expect that one-time bonuses, retention incentives and equity awards will be deployed more selectively — but in larger volumes — for critical roles.
As organizations become more selective with variable and performance-related pay, base pay adjustments may flatten for positions that are affected by AI. This signals the need for further reskilling within the organizations.
Compensation is important, but it isn’t everything. This is organizations’ opportunity to revisit and reframe your total rewards offering. Sharpen your frameworks for bonuses, equity and incentives and consider piloting modular benefits marketplaces that allow employees to choose rewards that fir their life stage and priorities.
04
Demand is surging for roles with digital, analytical and strategic skills — think AI/machine learning, data science, cloud computing and cybersecurity. Like the differentiation happening in variable and performance pay, these emerging digital roles command premium pay. Meanwhile, traditional HR roles may be moderating, but specialized HR roles (e.g., HRIS implementation experts, automated compensation planners) are seeing higher pay.
Build granular pay bands tied to capabilities and skills. Reward employees who gain and demonstrate specialized expertise, not just those who hold a title. And, before you look externally for those specialized roles, look internally for employees who may have skills that can be upskilled or reskilled and applied to those specialized positions.
05
With AI and easily accessible pay data, employees will increasingly compare their compensation to market benchmarks. This raises the risk of perceived pay inequity — not just among high performers, but also among operational employees who keep the business running.
Transparency is critical — and not only because of the June implementation of the EU Pay Transparency Directive. Communicate how pay decisions are made and where your company sits in the market. And if achieving parity is required, consider spot bonuses or other types of rewards to recognize critical contributions and reinforce fairness.
2026 isn’t about big salary hikes or AI takeovers. It’s about smart, differentiated pay strategies backed by data, equity and continuous review. Organizations that embrace this shift will stay competitive — and ready for the future.
