2026 Compensation Trends Your Organization Should Know About

Your compensation strategy affects how well your organization is able to recruit and retain top talent, but your strategy doesn’t play out in a vacuum. Compensation trends will affect your organization’s approach, whether you’re a small business or a large nonprofit. Keeping a pulse on these trends can help you fine-tune your own strategy in the larger context of what is going on in the economy.

As the roller coaster known as 2025 starts to come to an end, we now turn our focus to forecasting for 2026.

We’ve curated and interpreted the most up-to-date compensation trends your organization should know about, including:

• Base Pay Trends for 2026

• What’s New With Variable Compensation in 2026

• What Will Nonprofit Executive Compensation Look Like in 2026?

• 6 Resources for Keeping Up With Compensation Trends

• Astron Solutions’ Compensation Philosophy: Total Rewards

We’ll also provide our own perspective and recommendations for your organization to keep in mind based on the work we’re doing with our clients to navigate these trends.

Even if some trends don’t pertain to your organization at its current capacity, they’re still good information to have and can prepare you to scale up your operations in a sustainable way when the time comes. Let’s take a look at what is currently going on in the realm of compensation.

Base Pay Trends for 2026

2025 US Economy

As your organization budgets for base pay adjustments in 2026, you’ll need a strong understanding of the health of the U.S. economy. Here are some things to keep in mind:

The latest from the Economic Times (end of August, 2025):

• Economists anticipate ho-hum US economic growth for the remainder of the year and well into 2026, with steady, tariff-driven inflation buffeting consumers.
• Gross domestic product is now set to grow 1.1% in the second half of the year, a downshift from average growth of 1.4% during the first six months, according to the latest Bloomberg monthly survey of economists. Consumer spending, the economy’s primary growth engine, also is seen expanding at a 1.1% pace in both the third and fourth quarters.
• At the same time, economists expect core inflation – measured by the personal consumption expenditures price index – will top out at an average of 3.2% in the fourth quarter. While year-over-year inflation is expected to gradually ease through 2026, it will remain above the Federal Reserve’s 2% target.
• The results underscore expectations that higher import duties imposed by President Donald Trump will feed through more broadly into consumer prices and only gradually dissipate next year.
• The August 22-27 survey of 79 forecasters points to an economy that will continue to adjust to the effects of the President’s trade and investment policies that he hopes will spark stronger growth. It also indicates the Fed will remain challenged by stubborn price pressures and uninspiring economic activity.
• Economists in the Bloomberg survey expect the unemployment rate to rise to 4.4% in the fourth quarter and stay there through most of 2026.
• Still, forecasters now put the chances of a recession in the next 12 months at 32%, the lowest since March. While overall economic growth is expected to be modest, respondents see an acceleration in the growth of business investment through 2026.

Similar to forecasts in 2024 for 2025, there remains a high degree of uncertainty as to what 2026 will bring.

ADP Jobs Report

Along with the information from the Economic Times, Astron Solutions has been focusing more on historical data provided each month from the ADP Jobs Report. Unlike the data coming from the Bureau of Labor Statistics, which has recently been called into question, this ADP report focuses solely on payroll data from ADP client organizations. It tracks new jobs created in the payroll system as well as actual pay movement for both those who remain in positions and also those who change positions. Astron Solutions finds this data extremely helpful in determining short-term salary movement. The following is a summary from the September 2025 report for August 2025:

Jobs Report:

• Private employers added 54,000 jobs in August.
• Leisure & hospitality and construction performed well despite a broader month-over-month slowdown in hiring.
• Changes by Industry:
  • Goods-producing: 13,000
  • Natural resources / mining 4,000
  • Construction 16,000
  • Manufacturing -7,000
  • Service-providing: 42,000
  • Trade / transportation / utilities -17,000
  • Information 7,000
  • Financial activities -2,000
  • Professional / business services 15,000
  • Education / health services -12,000
  • Leisure / hospitality 50,000
  • Other services 1,000

ADP Pay Insights

• Pay gains were little changed in August 2025.
• Year-over-year median pay growth was 4.4 percent for job-stayers and 7.1 percent for job-changers.
• Median Change in Annual Pay for Job-Stayers by Industry:
  • Goods-producing:
    • Natural resources / mining 4.3%
    • Construction 4.4%
    • Manufacturing 4.7%
  • Service-providing:
    • Trade / transportation / utilities 4.2%
    • Information 4.2%
    • Financial activities 5.1%
    • Professional / business services 4.2%
    • Education / health services 4.4%
    • Leisure / hospitality 4.5%
    • Other services 4.1%

From Astron’s perspective, the key is to look at the average pay adjustments for both Job-Stayers and Job-Changers, which is currently 5.75%. The importance of this data is that, unlike a base pay forecast that looks only at the projection of the average base pay, the ADP report is reporting actual salary movement, which includes all reasons for salary adjustments including market, performance, equity, compression, and promotions. From Astron Solutions’ perspective, this data is more realistic in terms of actual salary movement budget planning.

However, it is still important to review the projections from WorldatWork and the larger compensation consulting firms, as well as what the Federal Government is planning for raises.

Federal Government Plans:

Consider this except from Yahoo Finance: “Social Security’s COLA projection seems to be on an upward path. The Senior Citizens League, an advocacy group, puts out a Social Security projection as new inflation data are released by the Bureau of Labor Statistics each month. The group has consistently been raising its COLA projection since March. Back in March, the group was calling for a 2.2% COLA. Here’s what those projections have looked like since:

• April: 2.3%
• May: 2.4%
• June: 2.5%
• July: 2.6%
• August: 2.7%”

In addition, the following has been sent by President Trump to Congress as a recommendation for 2026 federal employee pay adjustments:

Most civilian federal employees will see a 1% pay increase in 2026, according to a pay plan the White House quietly transmitted to Congress, with one big exception: Law enforcement officers will see bigger raises, though it’s not yet clear exactly which ones.

For the majority of workers, the annual increase is the smallest it’s been since 2021, when President Trump also directed a 1% increase during his last year in office. Presidents are required to submit an “alternative pay plan” by September 1 of each year in order to keep larger formulaic raises from taking effect the following year under the Federal Employee Pay Comparability Act (FEPCA).

However, a yet-to-be-determined number of federal law enforcement officers will get a 3.8% raise next year, in line with the increase military members will receive in 2026.

WorldatWork:

The following is a summary of 2026 base pay compensation budgeting forecasts as reported by WorldatWork:

• Payscale: 3.5% average annual increase
• WorldatWork: 3.6% average annual increase
• Willis Towers Watson: 3.5% average annual increase
• Gallagher: 3.8% average annual increase
• Economic Research Institute: 3.6% average annual increase
• Salary.com / CompAnalyst: 3.5% average annual increase

Per WorldatWork, the highest budgeted increases by industry are Business Services at 4.0% and Engineering at 4.2%.

Astron Solutions’ Perspective

Currently, Astron Solutions utilizes a 4.5% annualized aging factor for moving 2025 survey data. Our focus is to look at what we see organizations having to pay when taking into consideration not only traditional base pay adjustments but also market adjustments, promotions, equity adjustments, and pay compression corrections. We recommend the same 4.5% figure going into 2026.

What’s New With Variable Compensation in 2026

As we continue our annual tradition of assessing the compensation landscape moving into the new year, it’s time to turn our focus to variable compensation.  Pay for performance, incentives, and bonuses are hot topics this time of year!  What’s the latest in variable compensation?  Let’s explore together.

The following is from the Conference Board’s recent research regarding the failure of current pay for performance programs (https://www.conference-board.org/north-america/):

• Pay for Performance may have a negative effect on teamwork if employees feel they are competing with each other.
• Pay for performance can distract from team objectives if employees are more focused on their own skills or productivity.
• Pay for performance can result in too much focus on quantity of work, rather than quality. This, in turn, can lead to employee stress.
• Pay for Performance can risk putting too much focus on objective skills that can be measured by quantifiable metrics. This can result in less focus on subjective but equally valuable skills, such as communication and creativity.
• An established performance-based compensation plan can be difficult to change or update. It can also be difficult to end if the program is not giving you the results you expected. This can lead to increased turnover if employees feel cheated out of previously offered bonuses.
• Finally, if you don’t ensure your managers apply your pay for performance strategy consistently, it can lead to favoritism. It can also highlight potential deficiencies. For example, certain employees might not meet expectations because they do not have sufficient training.

In 2025, Lattice  provided research and some guidance on best practices in incentive/variable compensation design. A summary of those findings follows.

1. Consider your culture.

Incentive-based compensation is standard in many roles. For example, sales teams and executives often consider commissions or profit-sharing a given. But not every team thrives under this model. After all, commissions and bonuses are a form of “risk pay,” with no guarantee that employees will earn them. Economic downturns, industry volatility, or a competitor’s unexpected product launch could all have an outsized impact on an employee’s productivity and an organization’s success. For incentives to drive performance, there has to be an intrinsic motivation. What’s more, for incentive pay to work, you need a workforce motivated to be top performers. Some employees meet job requirements but lack the drive to go above and beyond.

2. Consider the metrics.

Incentive compensation plans correlate worker performance to specific metrics, including organizational goals and business strategy. Sometimes goals are set so high that even top talent can’t meet them, which demotivates employees at every level. Or, conversely, some employers set goals too low, and every employee earns a bonus, which is costly for an organization. It’s looking at data, perhaps bringing in a specialist, and then tying everything back to your revenue generation. To set the right benchmarks, look back at six or 12 months of data, such as sales data, rate of on-time project completion, and other company goals you’re tracking. As part of the analysis, also talk to your employees to fully understand what each individual is doing and whether it aligns with their job description.

3. Tie incentives to specific roles.

In organizations with an incentive compensation plan, employees may earn rewards based on both the business’s overall success and their individual performance in their specific roles. Employers should be careful to set clear, measurable targets for each position, so employees know what’s expected. Incentive programs are designed to reward employees for great performance. But what if workers have not been set up for success? A manager, for example, may need some guidance on how to coach and mentor direct reports. A salesperson may be great at reeling leads in but has trouble closing. Before launching into any incentive compensation plan, companies should assess their learning and development programs to ensure that employees have the skills and capabilities required to meet the goals established through an incentive plan.

4. Ensure transparency.

Transparency builds trust — especially in compensation. Employees should know how much they can potentially earn and how they can do better. Because incentive programs tie pay to individual, company, or shared performance, employers must be transparent about how well employees and the business are meeting their goals. Any organization with an incentive compensation plan should prioritize regular check-ins between managers and their direct reports to ensure everybody is kept abreast of their individual progress. Company-wide updates should also be held to provide clarity even if full financial statements can’t be shared. Those broad updates also are an opportunity to praise high performance and nudge workers where needed.

5. Adapt compensation strategy as needed.

Companies should regularly re-evaluate their compensation strategy, adjusting quotas and incentives to match market shifts, new product launches, overly ambitious goals, or other business needs. With incentive plans, there’s a danger that top talent or high-performing salespeople might take a break if they hit every target. A salesperson, for example, might earn a base commission when they reach their goal. Above that goal, there may be different tiers where they earn a higher commission.

Incentive-Based Compensation vs. Fixed Compensation Considerations

Many employers adopt a mixed compensation strategy, offering incentive-based compensation to some employees and fixed compensation to others. Some employers and employees prefer the stability of a fixed compensation plan because it provides a predictable paycheck. After all, some workers can be risk-averse, unmotivated by the promise of a bonus for extra work or may work in roles — like administrative and operational functions — that don’t directly impact revenue. Companies should also consider the effort required to build and maintain effective incentive compensation programs. Without the time or resources for ongoing adjustments, a fixed-pay structure may be the better choice. It will avoid the frustration or distrust that can crop up when targets aren’t met and bonuses aren’t earned.

Adopting a “Strategic Scorecard”

Over the past year, Astron Solutions has seen a marked increase in the design and adoption of “strategic scorecards” in incentive and variable pay administration. These are a simple concept to design and implement. First, determine key performance indicators (KPIs) based on the organization’s strategic plan, then determine outcome targets to be met. Finally, weigh each in terms of the incentive to be earned. In this approach, the target incentive payout is tied to the organization’s target market percentile for the position, such as the 50th or 75th percentile.

Due to the challenges inherent in pay for performance, Astron projects that 2026 will be a year where we will continue to see movement away from base compensation pay for performance adjustments towards scorecard-based variable and incentive compensation programs.  Clearly define valued skills and competencies in employees, and establish clear KPIs.  These, in concert with your organization’s variable compensation program, will energize employee performance, leading to organizational success.  Transparency too is critical to compensation program success in 2026 and beyond.  Regularly review and update compensation strategies and supporting systems to ensure alignment with organizational strategies & values. 

Overall, Astron Solutions continues to monitor creative solutions to better address pay, performance, and recognition.  Clearly moving away from a fixed base pay adjustment tied to performance continues to grow.  We have one last thought / example to share with you.  We have a number of clients that have returned to the “Make a Difference” Employee recognition program.  Organization managers annually nominate employees who, based on very specific strategic criteria, have exhibited consistent performance that makes a difference to the organization.  The nominees are reviewed and agreed to by the senior management team.  Those designated receive a combination of a cash award and additional PTO days. We urge all our clients to think out of the box in the future on this issue.

What changes in your organization making to variable compensation programs for 2026?  Please share your feedback in the comments section below!

What Will Nonprofit Executive Compensation Look Like in 2026?

Our annual compensation preparation series has reached the final stop in this year’s journey!  

To better understand 2026 Nonprofit Executive Compensation, it is important to understand the future of the nonprofit sector itself. We’ve gathered here for you several key trends on the sector from IntraVista research:

1. Digital Transformation in Nonprofits

• Embracing Technology for Greater Impact
  • Technology is no longer a luxury but a necessity for nonprofits aiming to scale their operations and improve efficiency. Digital tools enable organizations to streamline processes, engage stakeholders, and measure impact effectively.
• Virtual Engagement and Fundraising
  • The COVID-19 pandemic accelerated the adoption of virtual platforms for fundraising and community engagement. From online donation drives to virtual galas, nonprofits are leveraging technology to connect with donors and supporters.
• The Rise of Hybrid Events
  • As in-person events return, nonprofits are embracing hybrid formats that combine physical and virtual participation. These events increase accessibility and engagement, allowing organizations to reach broader audiences while reducing logistical barriers.

2. Collaborative Partnerships

• The Power of Collaboration
  • In an increasingly interconnected world, nonprofits can achieve greater impact by forming strategic partnerships with other organizations, businesses, and government agencies. Collaboration allows nonprofits to pool resources, share expertise, and address systemic issues more effectively.

3. Shifting Donor Expectations

• The Rise of Impact-Driven Giving
  • Today’s donors demand transparency and measurable outcomes. They want to see the tangible impact of their contributions and prefer to support organizations that align with their personal values.
• Generational Shifts in Philanthropy
  • Millennials and Gen Z donors prioritize social justice, environmental sustainability, and diversity. Nonprofits must adapt their messaging and strategies to resonate with these tech-savvy, cause-driven generations.

4. The Growing Importance of Diversity, Equity, and Inclusion (DEI) Why DEI Matters

• Diversity, equity, and inclusion are not just buzzwords but essential components of a thriving nonprofit. Embracing DEI fosters innovation, strengthens community trust, and ensures that programs address the needs of all stakeholders.

5. The Push for Sustainable Funding Models: Moving Beyond Traditional Fundraising

• Nonprofits are exploring innovative funding models to reduce reliance on grants and donations. These models provide stability and ensure long-term financial health.

6. Environmental Sustainability in Nonprofits: Addressing Climate Changes

• As climate change intensifies, nonprofits must consider their environmental footprint and integrate sustainability into their operations and programs.

7. The Role of Artificial Intelligence and Machine Learning: Transforming Nonprofit Operations

• AI and machine learning are revolutionizing the way nonprofits operate by enhancing efficiency and providing deeper insights.

Based on the above, nonprofit Boards are now asking their executives to focus on and compensating those executives based on:

Leadership Strategies

• Investing in continuous learning and professional development.
• Encouraging experimentation and risk-taking within teams.
• Building resilience by planning for potential disruptions.

Engaging Stakeholders

• Maintaining open lines of communication with staff, donors, and community members to ensure alignment and adaptability.

Building a Shared Vision

• Hosting strategic planning sessions to align stakeholders around future goals.
• Using storytelling to inspire and motivate teams.

Executive Compensation Planning for 2026: Five Trends that Matter.

Based on research prepared by Grant Thornton, the following trends should be explored in advance of 2026’s executive compensation activities.

• • Salary increase budgets are showing signs of contraction, as early indications suggest that 2026 budgets will step down from 2025 forecasts that were made around this time last year. The consensus 2026 forecast seems to be between 3.2% and 3.5%, slightly down from reported actual 2025 budgets. For example, according to WorldatWork’s 2025–2026 Salary Budget Survey, U.S. organizations are projecting mean salary increase budgets of 3.6% in 2026, down from 3.7% actual in 2025 and 3.9% actual in 2024. This marks a continued pullback from the post-pandemic highs of 4.4% in 2023.

• • This trend will vary across labor sectors and local markets. For example, healthcare and social service organizations continue to have labor pressure. This resulted in wages and salary growth of 4.5% over the 12-month period ending in June 2025 based on recent BLS Employment Cost data that was recently released. In terms of location variances, wages and salaries in the Minneapolis area increased by 5.7% over the 12-month period ending in June 2025.

• • The reasons for this moderation and sector variations include the following:
    • Availability of labor
    • Economic uncertainty and cost management concerns
    • Lower voluntary turnover
    • A shift toward more targeted pay strategies

• • The potential for these compensation budgets to be different depending on the employer’s use of general or across-the-board increases and performance-based merit increases. This trend can be particularly challenging for organizations that continue to rely on general or across the board increases.

• Despite the dip and sector differences, these projections remain above the 3% norm seen throughout much of the past decade — indicating that employers still feel pressure to stay competitive in a tight labor market.

Final Perspectives

As part of the planning for 2026, it is always good to have a reminder of these key points: 

1. Stay Compliant

• IRS “Reasonableness” Standard: Pay must not be excessive. Compare with similar roles in similar. Organizations to ensure reasonable and defensible pay levels.
• Conflict of Interest: The CEO / ED should not be present for board deliberations or voting on their compensation

2. Review of Market Data

• Examine nonprofit salary surveys (regional and national).
• Consider organization size, mission area, and geographic cost of living.
• Factor in local housing and labor market pressures as relevant to the organization.

3. Assess Organizational Health

• Can the current budget sustain a raise?
• How has the organization performed financially and programmatically?
• Has the CEO / ED advanced strategic goals or improved sustainability?

4. Evaluate Leadership Performance

• Quality of leadership with staff and board.
• Stewardship of resources and fundraising effectiveness.
• External relationships and community impact.

5. Support Retention

• Fair pay helps retain strong leadership in a competitive market.
• Salary decisions communicate respect and value for the CEO’s / ED’s contributions.

6. Use a Clear Process

• Tie salary decisions to an annual performance review.
• Document all data and discussion in board minutes.
• Clearly communicate the decision to the CEO / ED.

From Astron’s perspective, after working with hundreds of nonprofit organizations on executive compensation, the following points need to be emphasized:

1. Nonprofit Boards must be educated in the executive compensation process. They also must be involved from the very beginning in all executive compensation reviews, to ensure success moving forward.
2. Discussions need to focus on how current executives are supporting the organization’s vision and strategic objectives.
3. Discussions also need to be had on succession planning, if not already underway. Waiting until an executive is six months out from leaving the organization is too late.
4. Consideration needs to be given to executive benefit and executive non-qualified deferred compensation arrangements as alternatives to cash-based compensation adjustments.

What are you seeing in the area of non-profit executive compensation? Please share your thoughts in the comment box below!

6 Resources for Keeping Up With Compensation Trends

There’s one thing that your organization can be sure of when it comes to the compensation landscape—it’s always changing. The good news is that you don’t have to wait for end-of-year summaries or projections to stay up-to-date on the trends. Here are some resources you can turn to for general information:

5. 5. • • Cost-of-Living Adjustment (COLA) Information from the Social Security Administration

5. 5. • • Employment Cost Index from the Bureau of Labor Statistics

5. 5. • • Payscale

5. 5. • • Salary.com

5. 5. • • LinkedIn

5. 5. • • News articles from Forbes, Harvard Business Review, SHRM, and WorldatWork

Astron Solutions’ Compensation Philosophy: Total Rewards

At Astron Solutions, our consultants recommend a total rewards approach to plan your compensation strategy around hot trends. A total rewards approach takes into account both direct and indirect forms of compensation:

5. 5. • • Direct compensation: This includes the financial aspects of a compensation package like salary or base pay, incentive pay, allowances, bonuses, overtime, and equity benefits.

5. 5. • • Indirect compensation: This includes all of the non-financial aspects of a compensation package such as traditional benefits (health insurance, retirement, PTO), workplace flexibility, performance recognition, career development opportunities, and miscellaneous perks (e.g., a company car or phone).

Many organizations turn to a total rewards compensation philosophy to help strike a better balance in how they compensate their employees, which can be especially valuable for companies or nonprofits working with lean budgets. Plus, a total rewards approach helps you provide a more holistic compensation package that can have a greater positive impact on your employees and your retention rate.

Our consultants can help your organization transform its compensation strategy using a total rewards framework. If you’re ready to take action on the compensation trends we’ve outlined above, contact us today!

Wrapping Up

In order to ensure your compensation strategy is helping your organization recruit and retain top talent, you need to understand your organization’s compensation context. Staying on top of current compensation trends can help you understand that context and keep your compensation strategy strong.

Looking for more information about compensation? Check out some of our other articles:

5. 5. • • Communicating Compensation to Your Employees: A Quick Guide. How you talk about compensation matters. Learn how to communicate compensation with transparency and candor.

5. 5. • • Executive Compensation: Taking Charge of Your Organization’s Approach. Designing effective executive compensation can feel like navigating a minefield, but a foundational understanding can help. In this article, we demystify executive compensation for nonprofits and for-profit organizations.

5. 5. • • Employee Compensation 101: What Your Org Needs to Know. Get back to the basics with this comprehensive guide to employee compensation. In it, we talk about measuring compensation, designing a successful strategy, and how a consultant can help.

5. 5. • • Pay Transparency: What It Is & How to Navigate New Laws. Have you been hearing a lot about pay transparency, or will a new law soon take place in your area? Learn more in this guide!