A Closer Look at ‘Peanut Butter’ Raises

Last year, many organizations were pushing to make everyone more productive. This year, some are focusing their pool of raises only on the most productive.

Companies worldwide still intend to increase base salaries in the aggregate—by about 3.5% in the US and most other economically advanced countries. However, rather than so-called “peanut butter” raises—pay bumps spread across an entire organization—some firms may give large increases only to top performers. Which means giving nothing, or almost nothing, to everyone else. Experts chalk up the change to both a philosophy switch and a very uncertain business environment. “Companies are less likely to commit to consistent ‘peanut butter’ increases without clear business justification,” says Tom McMullen, the leader in Korn Ferry’s North America Total Rewards expertise group.

The switch would be a significant departure from the practices of past decades. In 2025, about three-quarters of companies gave raises to at least 80% of employees, according to Korn Ferry data; nearly half gave them to 95% of their workers. Historically, firms have rewarded perceived top performers with more pay, but many have also provided across-the-board pay bumps, either because of labor-contract obligations or cost-of-living increases.

Now, however, some executives would rather give a substantially higher percentage—if not the entirety—of their raise pool to top performers, or at least to those with the most in-demand skills. The lack of raises could lead to some employee departures, but many organizations believe automation or advancements in artificial intelligence will fill in any gaps. The weak-for-workers job market also gives some employers additional leverage.

The philosophy change could impact employees at the higher end of the corporate ladder as well. Base salaries represent only 20% to 40% of an executive’s annual total direct compensation, says Don Lowman, leader of Korn Ferry’s Global Total Rewards business. If a company is not doing well, executives know they’re expected to help manage costs by forgoing base-salary increases. “Executives would be wise to ‘read the room’ and not communicate that they want or expect to have an exception made for them,” Lowman says. 

Still, this might be cold comfort to the rank-and-file employees who feel that their contributions merit additional pay. In the US and other nations, the steadily declining number both of open roles and new hires isn’t giving many workers confidence to push back. “It is a tough time to ask for a raise,” says Val Olson Armstrong, a Korn Ferry Advance career and leadership coach.

The environment has altered not only the amounts of raises, but also the way leaders are talking about them. In the wake of the layoffs at the end of 2025, compensation conversations have become more sensitive and strategic, says McMullen. Increasingly, leaders are tying compensation decisions to business realities and performance metrics. “They are communicating more directly and transparently about financial constraints and priorities to avoid eroding employee trust,” McMullen says.

To be sure, many organizations are at least thinking about going in the opposite direction—spreading smaller raises widely rather than giving them exclusively to top performers. Indeed, 16% of firms say they’re planning to implement new across-the-board pay increases, while another 18% are considering doing so, according to a new survey from Payscale, a compensation-services provider. Many organizations are getting pushback for using performance ratings to determine salary increases. Some argue that these decisions are too subjective or administratively complex, so firms are contemplating a more equitable distribution of raises. Still, a peanut-butter approach would represent a disconnect from the stated goals—namely, to attract, then reward top talent—of many organizations.

Learn more about Korn Ferry’s Total Rewards capabilities. 

Read more This Week in Leadership articles