A new report from compensation software and data provider Payscale has forecast a concerning trend for 2026: many employers are set to implement "peanut butter raises" for their staff. This term refers to salary increases that are applied uniformly across all employees, much like spreading peanut butter evenly on bread, rather than being tailored to individual performance or merit.
The Rise of Standardised Pay Increases
According to the Payscale report, more than 40% of organisations are either using or actively considering these across-the-board pay increases in 2026. This figure rises to 56% among top-performing companies that expect to exceed their revenue goals in 2025. The survey indicates that most employers plan to offer an average raise of 3.5% in 2026, which is similar to last year's figures.
However, payroll company ADP reported that employers actually granted salary increases ranging from 4.4% to 6.5% in the previous year, depending on whether employees stayed or left their jobs. With inflation hovering around 3%, these raises are generally keeping pace, but they may not be advancing ahead of cost-of-living pressures.
Criticism of the Peanut Butter Approach
Gene Marks, a commentator on the issue, has labelled this practice as "simply lazy." He argues that higher-performing employees deserve better recognition, while lower performers should be given clear feedback and warnings. Marks emphasises that raises should serve as a true benchmark of performance, motivating staff to exceed averages and providing a basis for fair evaluations.
The trend towards peanut butter raises may be linked to broader issues in performance management. Many employers struggle with outdated annual review processes, failing to document, reward, mentor, or coach their teams effectively. This is particularly problematic in today's workplace, where millennials and Generation Z workers, who make up over half of the workforce, expect immediate gratification and honest feedback.
Employee Dissatisfaction with Performance Reviews
Research highlights widespread discontent with performance reviews. A 2015 study by the Society for Human Resource Management found that more than two-thirds of employees were dissatisfied, with 65% stating the reviews were irrelevant to their jobs. Managers also expressed dissatisfaction with their company's processes.
More recently, a 2025 Deloitte Global Human Capital Trends survey of over 10,000 employees revealed that fewer than one in three workers considered their performance reviews "very fair and equitable." A majority lacked trust in performance management systems. A June 2025 report noted a significant misalignment between employees and leaders, with many workers feeling their reviews were unfair, stressful, or merely checkbox exercises. Only about 29% of employees trusted the outcomes of their evaluations.
Alternatives to Peanut Butter Raises
To address these challenges, experts recommend a more nuanced approach to compensation. Setting specific goals and offering raises twice a year upon achievement, coupled with incentive bonuses at year-end, can better reward performance. Bonuses do not necessarily need to be cash; flexible options like additional paid time off are highly valued by today's workforce.
If financial constraints limit pay increases, consider combining smaller raises with new titles, as titles hold significant importance for many employees. This strategy can help maintain motivation and recognition without straining budgets.
In summary, while peanut butter raises might seem like an easy solution, they risk demotivating top performers and failing to address underlying performance issues. Employers are urged to rethink this practice and invest in regular, meaningful feedback and fair compensation structures to foster a productive and engaged workforce.
