Good morning. Salary increases for employees are expected to remain similar next year amid a flatter, but potentially volatile, economic outlook.
For U.S. companies, the average salary increase budget is projected to hold steady at 3.5% in 2026, matching the actual increases seen in 2025, according to the Salary Budget Planning Report by Willis Towers Watson (WTW).
About 31% of respondents plan to lower their salary increase budgets compared to last year, mainly due to concerns about a possible recession, weaker financial performance, and the need for tighter cost control. In contrast, the few organizations planning to raise their budgets cite a competitive labor market and inflationary pressures as key reasons. The global survey, conducted from April to June, included responses from 1,569 U.S. organizations.
Employers are no longer simply reacting to economic signals regarding pay allocation, according to WTW. They’re accounting for other labor factors.
“Just as they do with any other investment, the most forward-thinking CFOs that we speak with are looking holistically at all aspects of pay and benefits to better understand which programs resonate most with employees and provide the highest return on investment,” John Bremen, managing director and chief innovation and acceleration officer at WTW, told me.
They treat “total rewards” as a portfolio, which makes sense given that the largest companies spend billions on them, Bremen explained. CFOs reduce spending on the programs that have less impact and further invest in the ones that have the highest impact, he said.
Another key finding of the report: Despite limited pay growth, employee turnover remains low. Fewer organizations now report challenges with employee stability compared to the past two years. Only 30% of surveyed organizations find it difficult to attract or retain employees, down 11 percentage points from 2023, WTW finds.
More employees want to stay with their current employers (62% in 2024 vs. 49% in 2022), and fewer are open to offers (11% vs. 22%)—yet nearly 30% are still actively job hunting, Bremen said.
Other reasons employees stay are structural, he said. U.S. Bureau of Labor Statistics (BLS) data shows that fewer job opportunities are available today compared with previous years, he explained. “Even though there are still millions of open jobs in the U.S., there are far fewer available to potential job changers,” Bremen said. “And the premium for changing jobs is lower today than it was in previous years.”
In June, the unemployment rate dipped to 4.1% from 4.2%. While 147,000 new jobs were added, private sector job growth was the slowest in eight months, according to BLS. Additionally, 130,000 people left the labor force, and the unemployed are staying out of work longer, Fortune reported.
In response to this stable yet challenging labor market, in which turnover is relatively low and burnout and disengagement remain concerns, WTW finds that companies are taking steps to support their workforce, including:
—Improving the employee experience (47%)
—Enhancing health and wellness benefits (43%)
—Expanding training opportunities (40%)
A commitment to employee well-being and engagement is essential.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Daniel S. Tucker, EVP and CFO of Southern Company (NYSE: SO), an energy provider, plans to retire. David P. Poroch, currently SVP, comptroller and chief accounting officer, was promoted to succeed Tucker, effective July 31. Tucker will transition to a senior advisory role reporting to the CEO until his retirement Oct. 1. Poroch began his career with Southern Company in 2012 as VP and chief audit executive of Southern Company Services. From there, he served as EVP, CFO and treasurer of Georgia Power and then EVP and CFO at Southern Company Gas in 2021. Before joining Southern Company, he was a partner with Deloitte & Touche LLP.
Sandy Mahatme was appointed CFO and chief business officer of Vor Bio (Nasdaq: VOR), a clinical-stage biotechnology company. Mahatme joins Vor Bio with more than 30 years of executive leadership experience. He most recently served as president, chief operating officer, and CFO of National Resilience, Inc., a biomanufacturing company he cofounded in 2020.
Big Deal
Since March 2023, the share of employed adults who say they use ChatGPT (released in November 2022) for work has risen by 20 percentage points, reaching 28% today, according to Pew Research Center. This includes an 8-point increase since last year.
Overall, the share of Americans surveyed who have used ChatGPT for tasks such as learning and entertainment has roughly doubled since the summer of 2023. Today, about one in three American adults have tried ChatGPT, including a 58% majority of adults under 30.
However, 66% of Americans have not used the chatbot, including 20% who say they’ve heard nothing about it, according to the report.
Going deeper
“Dow futures sink as Trump keeps pushing tariffs while White House suggests Powell’s job could be at risk” is a Fortune report by Jason Ma.
From the report: “After Wall Street previously downplayed risks from President Donald Trump’s trade war, investors are starting to take his tariff threats more seriously. U.S. stock futures fell on Sunday as Trump continued his letter-writing blitz, warning the EU and Mexico over the weekend that they face 30% tariffs unless they reach trade deals by Aug. 1.”
Overheard
“Life is really precious. I want to make sure I find something that I’m super passionate about. I wasn’t happy working for someone else in a job that I just wasn’t really passionate about.”
—Loren Castle, CEO of the refrigerated cookie dough empire Sweet Loren’s, recalled in a recent Fortune interview that in 2006, when she was a 22-year-old recent graduate of the University of Southern California, she was diagnosed with Hodgkin’s lymphoma just months after graduating. While undergoing six months of chemotherapy, Castle grappled with the challenge of eating healthier and figuring out what her career would look like.
