As employees prepare for year-end performance reviews—those annual conversations about accomplishments, career development, and goals for the coming year—many are also hoping for good news about bonuses, raises, or even a promotion heading into 2026. But new research suggests those expectations may run headlong into a much cooler compensation environment than in recent years.
After an extended period where a tight labor market gave workers more leverage, bonuses have been losing steam since 2021. With hiring, firing, and quitting rates all trending downward, employees are increasingly “hugging” their jobs. In a less fluid labor market, employers face less pressure to spend aggressively to retain talent—and it shows in the numbers.
Bonuses Continue to Shrink
A new ADP study released today highlights the shift. Analyzing payroll data from 12 million workers at companies with 50 or more employees, the firm found that fewer than 40% of workers received a bonus in December 2024—down from 44% in 2021. Bonuses remain most common among senior employees and industries where project-based work is central, such as construction and manufacturing. Even there, though, payouts are tapering off.
The median bonus fell 4% year-over-year to $1,786 in December 2024. According to Jeff Nezaj, senior principal data scientist at ADP, employers appear to be reverting to pre-pandemic norms after several years of exceptional spending on talent.
Raises in 2026: Flat Is the New Normal
The outlook for raises is similarly restrained. Mercer’s latest compensation survey shows employers are planning to keep 2026 salary increase budgets flat. Merit increases will average 3.2%, and total increases—including adjustments for promotions, cost-of-living, and other factors—are expected to land at 3.5%, mirroring 2025 levels.
Economic caution and a cooler labor market are the key drivers. When job openings no longer outnumber available workers, companies do not need to compete as aggressively on pay. Mercer also reports that employers expect fewer promotions in 2026, projecting that only 9% of employees will advance—down from 10% last year.
Bright Spots: Industries Still Bidding Up Talent
Despite the general slowdown, a few sectors are poised for continued compensation growth—largely where funding, innovation, and specialized skill gaps remain significant.
Artificial Intelligence
With Gartner forecasting that global AI investment will hit $1.5 trillion in 2025, companies across the spectrum—from foundational model developers to application-focused startups—are paying a premium for in-demand skills.
Artificial intelligence engineers now earn a median salary of $184,000, according to Payscale. Median wages for DevOps and senior network engineers climbed 12% and 10% respectively this past year, reaching $131,000 each. While these growth rates are lower than 2023’s surge into the 30% range, they still outpace most other fields.
The AI ecosystem is also driving demand in adjacent areas, such as energy. Nuclear engineering roles, tied to surging interest in reliable power sources for compute-intensive workloads, have seen demand jump 108% year-over-year, with median pay at $128,000.
Bonuses are another differentiator: in the information sector, they account for 6.8% of gross pay—nearly double the 3.5% average across all workers.
Banking and Financial Services
A strong year in the public markets—driven largely by outsized performance from major tech names—continues to lift compensation in banking and financial services. Mercer’s data shows salaries in the sector rising another 3.7% in 2026.
Bonuses, a larger component of compensation in this industry, are also primed to grow. Johnson Associates projects:
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Traders could see up to a 25% increase in bonuses
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Merger advisors and wealth managers are also positioned for meaningful gains
However, the sector’s long-term outlook is more complex. Johnson Associates predicts a 10% to 20% reduction in headcount over the next three to five years, driven in part by AI-enabled automation and efficiency gains.
As performance review season begins, employees across many industries may find a more austere pay landscape than in recent years. Bonuses are shrinking, raises are flattening, and promotions are becoming slightly less common. Still, for those in high-demand fields—particularly AI and certain areas of financial services—compensation growth remains robust.
For everyone else, this year’s review conversations may focus less on immediate financial reward and more on long-term development, career pathing, and opportunities to differentiate in a more competitive labor market.