Results of the October 2025 QuickPulse® Compensation Planning Survey
It’s that time of year again — the big push for annual budget planning, just as we’re all ramping up our holiday planning and end-of-year activities. It’s a busy time of year, for sure!
In October, just over a thousand organizations took the time to answer questions about annual increase budgets, promotions, salary structure adjustments, and a variety of hot topics, including how companies are adjusting to AI. Of those, 8% were from the Banking/Financial Services industry and 8% represented Insurance/Reinsurance.
How do these industries compare to the national average? Let’s take a look!
Increase budgets firming up
Just over 60% of organizations have either presented their 2026 budget recommendations to leadership for approval or have already secured approval. That is likely an indicator that the 3.2% average merit increase budget (including zero increases) and 3.5% average total increase budget is pretty close to final for 2026. This represents a continued downward trend from prior years, as well as a return to pre-pandemic budget levels.
Total increase budgets include merit increases, promotional increases, cost-of-living increases, across-the-board increases, minimum wage adjustments, off-cycle increases, etc.
High Tech is leading the pack in merit increases, with the average merit budget projected at 3.4%. Insurance/Reinsurance, Other Non-Manufacturing, and Energy are all planning higher merit budgets. with projected average increases of 3.3%. Health Care Services and Retail/Wholesale continue to project lower-than-average merit budgets, with projected increases at 2.9%, as well as lower-than-average budgets for total increases, at 3.4% and 3.3%, respectively. Banking/Financial Services is also projecting lower than the national average for merit at 3.0% but exceeds the national average with their projected total increase budget at 3.5%.
Planned promotions
Organizations plan to promote around 9% of their population in 2026, which is similar to prior years. It used to be pretty standard compensation practice that a typical pay increase for one-level promotion was around 10%. However, the average pay increase that organizations purportedly plan to provide for a one-level promotion is now 8.7%, down from 9.3% reported this time last year. For the organizations that do budget for promotions separately, the amount has remained consistent at around 1% to 1.1% of the base salary budget for promotions. Banking/Financial Services and Insurance/Reinsurance are budgeting similarly for promotions.
Handling hot topics
In Mercer QuickPulse® Compensation Planning Surveys, in addition to salary increase, promotion, and salary structure questions, we always include questions about several topics that we suspect are presenting challenges or opportunities for employers now.
In the October edition we asked about the hourly workforce, AI’s influence on work, as well as the perceived economic impact.
Hourly, front-line, and skilled trades
In the US Mercer Benchmark Database, released earlier this year, we saw that hands-on, skilled trades jobs dominated the list of roles that were receiving greater-than-average year-over-year base salary increases. Jobs such as Aircraft Mechanic, Pilot, and Electrical Installation Assembly all had average increases of more than 5% in base pay from 2024 to 2025.
One in three employers indicated that they are having challenges when it comes to hiring hourly workers and skilled trades. The challenges they cited include:
- Limited candidate availability (75%)
- Increased competition from other employers (75%)
- Wage expectations exceeding budgets (61%)
- Other (5%)
While the hourly employee population seems to be presenting challenges for employers, most report that while there is not a distinct rewards strategy for hourly employees, organizations are employing retention strategies such as competitive pay and wage increases, flexible scheduling and shift options, and career development and advancement opportunities.
AI’s influence on work
While the headlines seem to be telling us that AI is having a dramatic impact on how we do work, who does the work, and even how jobs are defined, it seems that the impact might not be uniform. More than half of the participants indicated that AI is not having any impact on their hiring volume, workforce planning, or entry-level hiring practices.
As for the expected impact on overall workforce size, more than half of companies are unsure.
Economic impact
The turbulent economy is causing concern, with 45% of participants stating it will have moderate impact on compensation decisions and another 16% reporting the impact will be significant.
Market competitiveness, skill and talent development, and compensation changes are among the most reported processes that will increase in prioritization next year due to the economic impact.
Looking ahead to 2026
Are you among the 38% of organizations that are still in the preliminary phase of setting your 2026 compensation plan? Let us give you a hand! Mercer can help with all of your compensation needs including salary surveys and policies and practices guidance. We can even help you identify your priorities for 2026 and develop a customized plan that will set you up for success in the new year.
Connect with a Mercer specialist via email at surveys@Mercer.com or give us a call at 855-286-5302.
About the author
Rebecca Hall, Principal
Rebecca spent much of her career working in compensation in various corporate roles then transitioning to consulting with Mercer. Her current role, as the Content Leader for imercer.com, allows her to leverage her knowledge of human resources and talent strategy to create materials supporting Mercer’s Products & Services in North America.