More companies are leaning toward “peanut butter” raises this year, according to PayScale’s Pay Scale Preview Report.
According to career coach Colleen Paulson, the term refers to an overall pay increase that is “spread evenly and thinly, like peanut butter on a sandwich.”
According to PayScale, nearly half (48%) of organizations surveyed said they would continue to give raises based on performance.
However, the report found that many companies are considering “peanut butter” pay increases. In addition to the 9% of organizations that have already implemented across-the-board pay increases, 16% said they plan to introduce this approach this year, and 18% said they were considering it.
“There’s always a tension within organizations of how to balance the need for top talent while taking care of the group as a whole, especially when a company has limited resources,” said Scott Hoffins, compensation expert and vice president of compensation and systems at SalesLoft.
Still, in Hoffins’ view, companies that implement “peanut butter” raises should realize that they are “essentially giving up top talent,” which can lead to morale and retention problems down the road.
Why do companies give “peanut butter” raises?
The concept of “peanut butter” raises is not new, Hoffins said. For example, Starbucks made headlines last year for giving all employees a 2% raise as part of cost-cutting efforts, according to the Wall Street Journal.
Paulson said tight compensation budgets may be the reason some companies are implementing across-the-board raises. “These companies are under a lot of pressure to cut costs, and this feels like an easy way out,” she says.
Fairness is also a concern. PayScale’s report points out that “linking merit pay increases to performance evaluations has been criticized in recent years for being too subjective and prone to bias.”
Sarah Eppink, a leadership coach and talent development expert, said some companies may view across-the-board raises as a more “equitable” approach. The company is making sure front-line employees, “who aren’t necessarily personally visible in the corporate offices,” are not overlooked for raises, said Eppink, who is also an adjunct lecturer at Bowling Green State University.
Eppink added that “peanut butter” raises are also easier to implement from an administrative standpoint. Managers generally don’t want to “have to deliver bad news,” she says. Implementing across-the-board raises eliminates the need for “difficult conversations” about why certain employees receive or don’t receive merit-based raises.
The impact of “peanut butter” increases
While across-the-board raises may seem “fair on the surface,” they can be demotivating for high-performing employees, Eppink said.
When raises are no longer tied to performance, workers who are “trying their hardest” will wonder, “Why should I make an outsized contribution when the lowest earner is getting paid exactly the same as me?” she says.
In the long run, Eppink said, these employees are likely to become “disengaged” and look for other jobs.
Companies may not currently realize the impact that “peanut butter” raises have on retention, Paulson said. Given the “challenging” job market and low recruitment rates, many workers are reluctant to leave their current roles, and employers are well aware of this, she says.
“In a competitive job market, companies don’t feel as much of a need to increase compensation as they would in other markets,” she says.
But Eppink says employees who feel less change now are likely to look for other roles when the job market becomes more favorable.
Pay cuts are a “very short-sighted strategy” for companies, Paulson said. High-performing employees will “quit as soon as possible” if they find an employer that pays them better for their skills, she says.
For example, during the Great Retirement period, people voluntarily quit their jobs at record rates. 47.8 million people quit in 2021, compared to 42.1 million in 2019, and 50.5 million quit in 2022. More than a third (37%) of employees said low pay was the main reason they moved in 2021, according to a Pew Research Center survey.
What employees can do
Ms. Paulson said she had previously advised employees who were disappointed with their raises to talk to their managers and advocate for more raises. But she knows that in today’s job market, employees are nervous about “rocking the boat,” she says.
“Everything feels a little diluted,” Paulson says. “It feels a little risky to have that conversation with your manager.” Still, it doesn’t hurt to ask your boss if you’re eligible for other benefits, like extra time off.
If you’re considering a career change, Paulson recommends updating your resume, optimizing your LinkedIn profile, and setting up job alerts to “dip your toe in the water and see what’s out there.”
“You never know, you just might find great opportunities with people who really appreciate what you bring to the table and will pay you what you’re worth,” she says.
Still, Eppink recommends taking a step back and evaluating the “long-term game” before deciding to quit your job over compensation concerns. “I would never use this example to encourage anyone to make a life-altering decision as big as leaving their employer, especially now,” she says.
Want to improve your communication, confidence, and success at work? Take CNBC’s new online course, Mastering Body Language for Influence. Sign up now and use coupon code EARLYBIRD to receive a 20% off introductory discount. Offer valid from February 9th to February 23rd, 2026. Terms and conditions apply.
