Budget planning for 2027 is shaping up to be one of the most nuanced compensation challenges in recent memory. The labor market is no longer in freefall, but it isn’t recovered either — and the forces reshaping it go well beyond the business cycle. AI transformation, expanding pay transparency laws, shifting employee priorities, and a cautious hiring rebound are all converging at once.
Payscale’s 11th annual Salary Budget Survey (SBS) is now open for participation. Share what you’re planning for pay increases in 2027 and receive the aggregated results to benchmark your decisions against your peers.
The “seduction era” of talent acquisition is here — and compensation is only part of the story
For the past two years, employers have had the upper hand. Candidates accepted less. Attrition slowed. Competing on pay alone was enough to hold the line.
That dynamic is beginning to shift. As early signs of hiring recovery emerge, organizations that have relied purely on compensation as a differentiator are finding it increasingly insufficient. We’re entering what some talent strategists are calling the “seduction era” of talent acquisition — a period where winning over candidates requires organizations to actively court top talent rather than simply post a competitive salary.
What’s driving this? Candidates are increasingly prioritizing job security and stability over the highest bidder. After years of layoffs, restructurings, and economic uncertainty, many workers are choosing roles where they feel the organization is invested in them for the long term. They want to know: Is this company growing? Will I have opportunities here? Do they treat people fairly?
This has real implications for compensation strategy. Pay transparency — specifically, publishing salary ranges in job postings — has become table stakes in this environment. It signals fairness and builds trust before a candidate ever speaks to a recruiter. But it must be backed by a coherent internal compensation architecture. Publishing ranges that don’t hold up under scrutiny, or that reveal pay inequities to existing employees, can backfire quickly.
According to Payscale’s 2026 Compensation Best Practices Report, organizations that combine transparent pay practices with clear career development pathways report meaningfully stronger employee trust scores. For 2027 workforce planning, Payscale’s Salary Budget Survey is an invaluable tool for striking the delicate balance between smart, transparent, and competitive pay — including promotional and structural pay increases as well as base pay increases.
A recovering but cautious labor market demands smarter pay decisions
The labor market of mid-2026 is not the same as 2022 or even 2025. Job growth has shown resilience in recent reports — the April 2026 report added 177,000 jobs with unemployment holding at 4.2 percent — but the recovery is uneven. Federal workforce reductions from early 2025 continue to ripple through industries reliant on government contracts and funding. Hiring in many white-collar sectors remains subdued.
At the same time, voluntary turnover, which has been suppressed by employee caution over the past two years, is expected to rise as confidence returns. Employees who stayed put during the downturn have been accumulating frustration around pay compression, stalled promotions, and rising workloads. When the market opens up, they’ll move.
This creates a strategic imperative for compensation leaders: don’t wait for turnover to signal a problem. The salary budget survey data from 2025 showed average base pay increases of approximately 3.5%, continuing a downward trend from the 3.8%average in 2024. For 2027, the question is whether budgets will stabilize or tick upward to address retention risk — and how organizations should allocate limited budget for maximum impact.
Rather than applying blanket merit increases, organizations are increasingly using compensation data to identify where market movement is greatest, where critical talent is most at risk, and where targeted off-cycle adjustments can prevent costly attrition. Payscale’s SBS data, segmented by industry, location, and company size, is designed to give compensation teams exactly that kind of precision.
AI-driven workforce shifts are reshaping compensation benchmarks — and employee expectations
Perhaps no force is creating more complexity in 2027 compensation planning than artificial intelligence. The impact is no longer speculative — AI-related workforce restructuring is actively reshaping labor supply in key industries, and the effects are showing up in compensation data.
High-profile employers including Deloitte and Meta have scaled back benefits and headcount while simultaneously increasing investment in AI infrastructure and capabilities. For employees watching these decisions, the message is mixed at best: the company is investing in the future, but that future may require fewer of them. Trust — already strained by years of economic volatility — is under additional pressure.
For compensation strategy, this creates two distinct challenges. First, in roles and industries directly disrupted by AI (certain coding functions, content production, data entry, paralegal work) market rates are softening or becoming highly volatile. Compensation benchmarks from 12 or 18 months ago may no longer reflect current market conditions. Organizations must increase the cadence of their market data review for these job families and be prepared to have honest conversations about how role scope and value are evolving.
Second, in roles that require uniquely human capabilities — strategic judgment, complex relationship management, creative leadership, skilled trades — demand is intensifying and compensation pressure is building. These are the areas where competitive pay matters most heading into 2027, and where organizations that fall behind market risk losing talent that cannot easily be replaced or augmented.
The critical question for compensation teams is not “How does AI affect our headcount?” but rather: “Are our compensation benchmarks keeping pace with how AI is changing the value of specific skills and roles in our industry?” Payscale’s SBS captures real-time planning data across industries, giving you a current read on where peers are investing — and where they’re holding back.
What the Salary Budget Survey measures — and why it matters for 2027 planning
Payscale’s Salary Budget Survey asks compensation professionals what they budgeted for base pay increases in 2026 and what they are planning for 2027. The survey captures merit increases, COLA increases, and total increases overall, broken down by employee type, state, province, and country. It also covers promotional increases and budgets for salary structure adjustments.
Results are segmented by industry, location, revenue, and company size, providing a meaningful benchmark for compensation and HR professionals across organizations of all types.
Participants receive a free copy of the report. The survey is open for participation now through June 12, 2026, with the full report launching in time for salary budget planning season.
