Companies in the United States are expected to maintain modest salary increases for 2027, continuing a trend of restrained pay raises amid ongoing economic uncertainty, according to a recent survey by Mercer. The survey, which included responses from 1,001 U.S. organizations, found that employers plan an average merit-based salary increase of 3.2%, with total compensation growth—including merit, promotions, cost-of-living adjustments, and other factors—projected at 3.5%. These figures align closely with actual increases seen over the past three years.

With inflation rates continuing to outpace wage growth, many American workers may face challenges in maintaining their purchasing power. In July, annual inflation stood at 3.4%, effectively offsetting average pay raises and making it difficult for employees to improve their financial standing. Michael Ashton, managing principal at Enduring Investments LLC, noted that while wage hikes followed by inflation could be tolerable, the reality is that inflation drives prices up first, often leaving cost-of-living adjustments as a reactive rather than proactive measure.

Economic uncertainty appears to be a central factor influencing corporate compensation strategies this year. More than half of the surveyed companies (57%) indicated that the economic outlook would have a moderate or greater impact on their pay decisions. Tauseef Rahman, workplace reward solutions leader at consulting firm Marsh, emphasized that employers are cautious with compensation expenditures amid an unpredictable economic environment.

Despite these challenges, there remains some flexibility in budget planning. As of July, 87% of organizations reported that their 2027 salary budgets were still in preliminary stages, with only a small percentage having proposed or finalized budgets. Rahman suggested that if current projections hold, 2027 will mark the fourth consecutive year of moderate salary growth.

Beyond annual merit increases, many companies continue to offer promotions and pay adjustments throughout the year. The survey revealed that 64% of organizations had provided or planned to provide promotions or additional raises during 2027. However, the rate of workforce promotions is expected to decline slightly, with employers anticipating promoting 8.4% of employees next year, down from 8.6% in 2026 and 9.9% in 2025.

Overall, the survey highlights ongoing challenges for wage growth against a backdrop of inflation and economic uncertainty, signaling that workers may see limited improvement in compensation in the near term.