2027 Salary Planning: Balancing Workforce Pressure with Targeted Investment

2027 Salary Planning: Balancing Workforce Pressure with Targeted Investment
November 2, 2026 9 mins

2027 Salary Planning: Balancing Workforce Pressure with Targeted Investment

2027 Salary Planning: Balancing Workforce Pressure with Targeted Investment

Effective salary planning in 2027 will require employers to balance affordability, fairness and transparency while targeting reward investment where it matters most.

Key Takeaways
  1. Organizations are identifying priority talent more deliberately, using different lenses to assess current performance, business-critical roles and future potential.
  2. Targeted pay adjustments remain more common than separate merit budgets. Employers should direct reward investment toward roles and skills where a clear, measurable premium is justified.
  3. Differentiated rewards can create internal equity and retention risks. Employers should review pay equity, clearly explain decisions and test whether their approach is sustainable as pay transparency expectations increase.

Employees are continuing to feel pressure from cost-of-living concerns, changing workforce expectations and uncertainty about how technology will affect roles and skills. At the same time, employers are planning for 2027 with constrained reward budgets, continued competition for critical skills and growing expectations around fair and transparent pay decisions. 

For employers, the question is therefore not simply how much to spend, but where salary increases, adjustments and broader rewards can best support business priorities, employee expectations and future workforce needs. Data from the second edition of Aon’s 2026 Salary Increase and Turnover Study (SITS) reflects responses collected from 1,850 organizations between June and July 2026, alongside previous survey submissions, creating a total reported database of 4,522 organizations. The results show that organizations are increasingly focused on where limited reward investment can have the greatest impact. 

Here are key findings from the survey, as well as considerations to help employers plan salary increase budgets and align reward decisions with market trends, critical skills and broader workforce strategy. 

Organizations are Becoming More Deliberate About Where They Invest 

Formal talent identification remains widespread, but the more important story is how employers are using different lenses to determine where reward investment may have the greatest impact.  

The latest SITS data shows organizations are identifying priority talent across three groups: 

 Question   Measure 
 Who is delivering exceptional results today?   Top performers (79%)
 Which roles are most important to business performance?   Critical talent/key roles (68%)
 Who may create future value?   High potentials (61%)

These groups answer different workforce questions and should not be treated as interchangeable.  

Clear segmentation can help employers distinguish between current performance, business-critical roles and future potential, informing decisions around pay, development, succession planning and retention as workforce requirements change. 

According to Aon’s 2026 Human Capital Trends Study, 76% of organizations report that hiring and talent development increasingly prioritize skills and competencies over formal degrees. In the same study, 73% of organizations have deployed or are piloting AI, but only 18% report that most of their workforce has participated in AI reskilling or upskilling programs in the past 12 months.  

These findings suggest that skills development is not keeping pace with workforce change. As AI reshapes roles, employers will need to think more carefully about which skills are genuinely business critical, which can be developed internally and which may justify a market premium. Certifications may be relevant in some sectors, particularly professional services, but employers should also assess how employees apply AI to improve productivity, output or business performance. Formal definitions and consistent criteria can help prevent rewarding broad skills-based premiums for credentials that are not genuinely required for a role. 

“As skills become more transferable, organizations are competing for talent beyond their traditional industry boundaries. Employers may therefore need to define the relevant talent market by the capabilities they require, rather than by sector alone.” — Martín López, Head of Talent Data & Advisory, Latin America 

A skills-based approach can also strengthen the case for wider access to development. Giving employees opportunities to build relevant capabilities can expand internal talent pipelines, support mobility and reduce reliance on scarce external hires, benefiting both the organization and its workforce. 

Connecting Pay Decisions to the Broader Employee Experience 

As organizations place greater emphasis on targeted investment, many are revisiting how performance is assessed, rewarded and communicated. Differentiated reward strategies are often most effective when supported by robust performance management practices. Clear objectives, consistent performance evaluations, manager accountability and evidence-based pay decisions can help organizations balance differentiation with fairness and transparency. 

Reward investment should also sit within a wider talent strategy that includes development, culture, values and career growth, rather than focusing only on salary increases. Employees often evaluate the whole experience an organization offers, from learning opportunities and career progression to purpose, culture and broader employee value. Employers should therefore consider whether differentiated pay decisions are supported by the wider employee value proposition. 

Quote icon

Competitive pay remains important, but employees are now evaluating the whole experience an organization offers. Employers that can align these elements with workforce expectations will be better positioned to attract and retain critical talent.

Bruno Rocquemont
Partner, Head of Talent Data Solutions, Europe, the Middle East and Africa

How Organizations are Supporting Critical Talent 

The way organizations differentiate investment varies by sector and pay model. In professional services, salary and promotional increases often carry greater weight because employees tend to progress quickly through early career levels. In technology, long-term incentives and equity can be a greater differentiator than base salary, while incentive pay may play a larger role for senior employees in financial services. 

Employers should therefore consider not only which talent requires additional investment, but which element of the reward package is most appropriate for attracting, motivating and retaining that talent.  

Organizations continue to use several mechanisms to differentiate rewards for critical talent and key roles. Across the confirmed 2025 and 2026 SITS data, practices remain broadly stable, with pay adjustments outside the merit process or budget the most common approach. 

Approaches Used to Support Critical Talent and Key Roles 
Critical Talent Practice 2025 2026
Pay adjustments outside merit process/budget  53% 50%
Use of published/specific merit matrix  44% 43%
Separate salary increase guidelines  40% 38%
Mid-year/frequent reviews 27% 27%
No actions taken to ensure differentiated increases are awarded  11% 11%
Separate merit budget for critical talent/key roles  6% 6%

Employers must decide whether to support critical talent through distinct programs or build differentiation into the wider compensation framework. The data indicates that most use targeted adjustments and structured decision tools rather than separate merit budgets. 

Why Reward Planning Remains Complex 

While many organizations are taking a more targeted approach to reward investment, determining where to invest is only part of the challenge. Salary planning decisions must also account for the wider market and economic environment, including persistent cost pressures, evolving pay transparency requirements and competition for critical skills. 

  • Continued Economic and Affordability Pressures

    Although inflation has eased from recent peaks in many markets, employees still face higher living costs, while employers must balance salary increases with cost management and investment discipline.

  • Growing Pay Transparency Regulation

    Differentiated pay decisions may be harder to sustain if employees do not understand how decisions are made. As pay transparency requirements expand across markets, employers may need clearer criteria, consistent decision making and stronger documentation to explain why certain roles, skills or performance outcomes receive additional investment.

  • Competitive Market for Critical Skills

    Demand remains high for capabilities such as AI, cyber risk, digital transformation and sustainability-related expertise. Organizations must retain these employees while remaining attractive to external talent in a competitive market. At the same time, they should ensure that premiums for in-demand skills do not create avoidable pay equity or retention risks. 

Pay Equity Watchpoint: Balance External Hiring with Internal Fairness

Capability Overview

Pay Equity Watchpoint: Balance External Hiring with Internal Fairness

When organizations commit significant salary or equity to scarce external talent without reviewing the position of existing employees, gaps can emerge between internal and external market pay. These differences may become more visible as pay transparency expands, increasing retention pressure among existing employees who believe they have been left behind.

Scenario modeling, regular pay equity reviews and clear documentation can help employers address immediate hiring needs without creating longer-term retention risks.

3 Key Considerations for 2027 Reward Planning 

As organizations prepare for 2027, they should consider the following important questions: 

  1. Are critical talent definitions aligned with business priorities? Effective talent differentiation often begins with business strategy. Organizations can benefit from reviewing whether critical talent definitions are directly connected to long-term business objectives, workforce priorities and future capability requirements. Reward programs are often most effective when compensation decisions support broader organizational goals. 
  2. Does differentiation support workforce goals? Reward differentiation can help recognize contribution and retain critical capabilities, but it should align with broader talent and business strategies. Employers should also consider how pay decisions support the employee value proposition, including development, career progression and organizational values. 
  3. Is the approach sustainable and transparent? It’s important to determine whether managers can consistently explain and document reward decisions, particularly as pay transparency requirements increase. 

As workforce requirements evolve, employee expectations shift and transparency requirements increase, successful salary planning will depend not only on how much organizations invest, but also how effectively those investments support the talent and capabilities that matter most to future performance. 

76%

of organizations say hiring and talent development are prioritizing skills and competencies over formal degrees.

Source: Aon’s 2026 Human Capital Trends Study

Learn More

Aon’s Salary Increase and Turnover Study

Aon’s Salary Increase and Turnover Study is part of the Radford McLagan Compensation Database, helping organizations benchmark pay practices, salary increase budgets and workforce trends across markets. Learn more about participating in or purchasing the latest study.

Learn More

Aon’s Thought Leaders 

Ephraim Edelman 
Partner and Head of Data Solutions, Talent Solutions, North America 

Martín López 
Data & Advisory Talent Leader, Latin America 

Bruno Rocquemont 
Partner and Head of Talent Data Solutions, Europe, the Middle East and Africa 

With contributions from Belinda Armenta, Conrad Baumgarten, Connor Grant, Julie Mills, Karl Mischenko and Chris Tanana. 

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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