Merit budgets for 2027: what is everyone planning?

Manufacturing, mostly suburban plants. Salaried budget is 3.25 merit and 0.5 promotional. Hourly is separate and negotiated, 3.5 in year two of the contract.

Our CFO also opened at 3.0. What moved him was seeing voluntary turnover among high performers at 11 percent against 6 for everyone else.

We are at 3.5 again, but I would not use us as a comparator. We are a 300-person firm competing with much larger practices for the same associates, so we budget high and differentiate hard: top-rated people get about twice the average, and roughly 12 percent of staff get nothing.

On the carve-out: we stopped running a separate adjustment pot two years ago because managers treated it as a second merit budget. Now the compensation team holds 0.4 percent centrally and applies it after merit, only for people under 90 percent of range midpoint. Fewer arguments, and the money goes where the gaps are.