The Rise of 'Peanut Butter' Raises: How Companies Are Spreading Thin Pay Increases
When you're running low on peanut butter, you spread it thinly across your toast. Similarly, many companies are now spreading raises thinly across their workforce, according to a recent compensation report. This strategy, known as the "peanut butter raise," involves giving uniform pay increases to all employees, regardless of individual performance.
A Growing Trend in Compensation
Payscale's 2026 compensation best practices report indicates that approximately 44% of companies are either planning to implement across-the-board raises or have already done so. Specifically, 16% of organizations are adopting peanut butter raises for the first time, while 9% already use this approach, and 18% are considering it for this year.
These raises are not substantial. The report shows an average base pay increase of just 3.5%, which barely exceeds the 2.4% average rise in consumer prices over the past year, as reported by the Bureau of Labor Statistics. This minimal increase struggles to keep pace with inflation, leaving employees with little real financial gain.
Why Companies Are Opting for Uniform Raises
Ruth Thomas, chief compensation strategist at Payscale, explains that this is a short-term strategy with long-term risks. "If you don't differentiate on performance, then your key high-performing talent that are probably driving the most business outcomes for you are going to feel disregarded," she warns.
Industries most likely to implement this strategy include:
- Government sectors
- Nonprofit organizations
- Education institutions
These sectors often have rigid pay bands that limit flexibility. Additionally, industries like health care and construction are reportedly considering peanut butter raises this year.
The Economic Context Driving This Trend
Companies are adopting this approach because they can get away with it in the current economic climate. For example, Starbucks gave only 2% across-the-board raises to corporate workers last year, citing cost control needs.
Thomas notes that peanut butter pay typically emerges during periods of recession or low wage inflation. "As long as the economy stays like it is, we will probably settle into this pattern," she predicts. The last significant wave of peanut butter raises occurred after the 2008 financial crisis, with 3% annual increases becoming common from 2009 until the COVID-19 pandemic.
Employee Response and Career Implications
Cynthia Pong, founder of Embrace Change, a career coaching firm, observes that we are currently in an employer-friendly market. "Companies know employees are 'job hugging,'" she says, referring to the practice of employees staying in their current positions due to economic uncertainty. "Employers can keep raises flat and uniform without expecting much pushback ― especially when some employers aren't giving raises at all."
This type of raise can be demoralizing for employees, particularly high performers who receive the same increase as those barely meeting expectations. "If peanut butter raises are the ceiling and top performers get the same increase as someone who's barely meeting expectations, it's not only unfair, it's also shortsighted from an organizational standpoint," Pong emphasizes. "High performers need to feel seen and valued. If they don't, you'll lose your best people to your competitors."
Strategies for Employees Facing Peanut Butter Raises
Employees who receive a low raise can potentially negotiate for merit-based increases. Pong suggests using language like: "I'm curious about the process for pursuing a performance-based salary adjustment. Could you share more about how to do that?"
If there is no formal process, employees can:
- Summarize their impact and contributions to relevant stakeholders
- Schedule a meeting to present their case formally
- Follow up in writing to create a record of the discussion
Thomas advises that employees have the right to understand how pay increases are allocated and what methodology their employer uses. This helps clarify whether they are being recognized as high performers or receiving a different message.
Building Leverage for Future Opportunities
Regardless of the outcome, the best defense against peanut butter raises is to keep career options open. Pong recommends:
- Maintaining a warm professional network
- Interviewing even when not actively seeking new positions
- Increasing visibility within and outside your organization and industry
- Cultivating multiple revenue streams that can be activated quickly
"The most important thing you can do to negotiate or advocate for yourself is to build your leverage," Pong concludes. By taking proactive steps, employees can better position themselves for career opportunities that truly reward their efforts in the future.
