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‘It’s such a shortsighted strategy’

More companies are open to “peanut butter” salary increases this year, according to Payscale Wage Increase Preview Report.

The term refers to general increases that are “spread evenly and thinly, like peanut butter on a sandwich,” according to career coach Colleen Paulson.

According to Payscale, nearly half (48%) of surveyed organizations said they would continue to give performance-based pay increases.

But the report found that many companies are considering “peanut butter” raises: In addition to the 9% of organizations that have already implemented across-the-board pay increases, 16% said they plan to implement this approach new this year, and 18% said they are considering it.

“There is always a tension in organizations about how to balance the needs of high performers while taking care of the entire group,” says Scott Hoffhines, compensation expert and vice president of rewards and systems at SalesLoft, especially when companies have “limited resources.”

Still, Hoffhines says, companies that give “peanut butter” raises need to be aware that they’re “essentially giving up on their best talent,” which could lead to morale and retention problems down the road.

Why are companies giving ‘peanut butter’ a raise?

Hoffhines says the concept of a “peanut butter” pay raise is not new. Last year, for example, Starbucks made headlines. gave a 2 percent raise to all corporate employees in order to reduce costs, according to The Wall Street Journal.

According to Paulson, some companies’ resorting to across-the-board raises may be due to limited wage budgets. “These companies are under a lot of pressure to cut costs, and this sounds like an easy way to do that,” he says.

Fairness is also a concern: The Payscale report noted that “tying merit pay increases to performance ratings has come under criticism in recent years for being too subjective and prone to bias.”

According to leadership coach and talent development expert Sarah Eppink, some companies may view across-the-board raises as a more “fair” approach: They ensure that front-line employees who “don’t have the visibility of individuals in Headquarters offices” aren’t overlooked for pay raises, says Eppink, who is also an adjunct instructor at Bowling Green State University.

“Peanut butter” raises are also easier to enforce from an administrative standpoint, Eppink adds. In general, he says, managers don’t want to “have to deliver bad news.” Implementing across-the-board raises eliminates the need for “difficult conversations” about why certain employees will or will not receive merit-based raises.

The effect of ‘peanut butter’ is increasing

Raises in general may seem “fair on the surface,” but they can be discouraging. High performing employees according to Eppink.

When wage increases are no longer tied to performance, workers who “go above and beyond” will ask: “Why should I make extraordinary contributions when minimum wage gets me the same reward I do?” he says.

In the long run, Eppink says, these workers will likely become “disconnected” and look for other jobs.

Companies may not see the impact of “peanut butter” increases on retention right now, according to Paulson. In light of the “tough” job market and low hiring rates, many workers are reluctant to leave their current roles, and employers are aware of this, he says.

“In a competitive job market, companies don’t really feel the need to raise wages like they do in any other market,” he says.

But employees who feel inadequate today will likely look for other roles when the job market is more favorable, according to Eppink.

Reducing compensation is “a very shortsighted strategy” for companies, Paulson says. Top performers, he says, will “get out the door as quickly as they can” once they find employers that better reward them for their skills.

For example, during the Great Resignation, people voluntarily quit their jobs at record rates; 47.8 million people left their jobs in 2021 and 50.5 million in 2022, compared to 42.1 million in 2019. Pew Research Center survey.

What can employees do?

In the past, Paulson said he has advised employees who are disappointed with pay raises to talk to their managers and sue for a larger increase. But he knows that in today’s job market, employees are nervous about “rocking the boat.”

“Everything feels a little weaker,” Paulson says. “It feels a little riskier to go in and have those conversations with your manager.” However, it’s okay to ask your manager if you’re eligible for other benefits, such as additional vacation time.

If you’re considering changing jobs, Paulson recommends updating your resume, optimizing your LinkedIn profile, and setting job alerts to “dip your toe in the water and see what’s out there.”

“You never know: You may find a great opportunity with people who truly appreciate what you bring to the table and will pay you what you’re worth,” he says.

Still, Eppink recommends taking a step back to evaluate the “long game” before deciding to leave your job due to compensation concerns. “I wouldn’t advise anyone to use this one example to make a life-changing decision like leaving their employer,” he says, “especially right now.”

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