US employers plan to set base salary merit increases at 3.2% for 2027, according to Marsh’s Mercer QuickPulse® US Compensation Planning Survey. The total salary increase budget stands at 3.5%, including promotions and cost-of-living adjustments.

The survey of 1,001 US organizations indicates that compensation budgets remain stable compared to actual increases reported in 2024, 2025, and 2026. Economic uncertainty continues to influence decisions, with 57% of employers expecting at least a moderate impact on their compensation strategies.

Sector-Wise Budget Variations

Merit budgets vary significantly across industries. High Tech leads with the highest planned merit increase at 3.8%, followed by Banking at 3.7%. Energy, Insurance/Reinsurance, and Non-Financial Services all plan for 3.6% increases. In contrast, Consumer Goods lag behind with the lowest budget at 2.9%, while Healthcare and Retail plan for 3.0%.

Promotion and Off-Cycle Trends

Promotion rates are expected to decline slightly in 2027. Employers plan to promote approximately 8.4% of their workforce, down from 8.6% in 2026 and 9.9% in 2025. This reduction suggests a tightening in career progression opportunities despite stable base pay budgets.

Off-cycle salary adjustments remain prevalent, with 64% of organizations providing or planning to provide them in 2027. This indicates that compensation management extends beyond the annual merit cycle, allowing firms to address talent retention needs dynamically.

AI Adoption in Compensation

AI and automation are increasingly integrated into compensation planning, though most organizations are in early stages. Nationally, 70% of organizations report at least some automation in compensation processes. However, only 1% have reached advanced levels of transformation.

AI is primarily used for:

• Market pricing recommendations and benchmarking (53%)
• Salary increase recommendations (50%)
• Job matching and leveling (49%)

Tauseef Rahman, Marsh’s US Workforce Reward Solutions Leader, noted that barriers to deeper AI adoption include governance, data quality, and system integration rather than lack of interest.

What the Numbers Show

The divergence between stable merit budgets and declining promotion rates highlights a shift in compensation strategy. While base pay increases remain consistent with previous years, the drop in promotion percentages from 9.9% in 2025 to 8.4% in 2027 suggests employers are becoming more cautious about expanding headcount or advancing roles, possibly due to economic uncertainty cited by 57% of respondents.

As of July 2026, 87% of organizations stated their 2027 salary budgets were still preliminary, with only 5% having secured final approval. This indicates that final compensation figures may still adjust before implementation.

Wells Fargo analyst Elyse Greenspan has maintained an Equal-Weight rating on Marsh (NYSE: MRSH) while raising the price target from $186 to $188. The adjustment reflects an updated valuation outlook despite the unchanged investment stance.

The decision to increase the price target suggests a revised fair value estimate for the stock. However, the retention of the Equal-Weight rating indicates that the analyst does not see significant upside potential at current levels.

Rating and Target Details

The following table summarizes the changes:

Marsh is listed on the NYSE under the ticker symbol MRSH. The revision by Wells Fargo provides updated guidance for investors tracking the stock's performance.