A third of employers handed out ‘peanut butter raises’ this year—and underpaid staff are leaving

A third of employers gave out flat raises this year. These raises, known as “peanut butter raises,” spread a thin layer of pay increase across all employees. This year, employers are shifting away from this strategy. The shift is driven by a desire to differentiate pay increases based on merit. This trend is reflected in the planned 3.5% average pay increase for 2027, which is modest. The shift away from flat raises is driven by a desire to differentiate pay increases based on merit.

This trend is reflected in the planned 3.5% average pay increase for 2027, which is modest. Employers are looking to reward high-performing employees more generously. The reporting is consistent across multiple outlets, including The HR Digest, HRMorning, and CFO Dive. However, there is a lack of specific data on the extent of staff leaving due to underpayment. The HR Digest and HR Executive both note that fewer than a third of organizations plan to use flat raises in 2027. CBS News and Fortune both emphasize the trend of employers shifting to merit-based hikes.

The exact impact of this shift on employee retention and satisfaction is still unknown. It is also unclear how this change will affect overall compensation strategies in the long term. The MTL Blog provides specific data for Quebec, but broader regional differences are not specified. The extent to which this trend will continue into 2027 and beyond remains to be seen.