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Key Takeaways Peanut butter raises are small, across-the-board increases that ignore individual performance.
According to a new Payscale report, 36% of U.S. employers used peanut butter raises this year.
These flat raises run the risk of eroding morale and motivation, as high performers see little financial recognition for outsized contributions.
Top-performing employees are giving it their all and expect to be compensated better than employees who aren’t driving results. Now, a new Payscale report shows that some employers are trading merit-based pay bumps in favor of peanut butter raises, a controversial method for increasing pay that spreads raises evenly to all employees regardless of how well they perform.
The report found that 36% of U.S. employers gave out peanut butter raises this year as companies face economic uncertainty. Industries like government and education, and sectors with large workforces and hourly structures, were more likely to distribute raises evenly among staff.
Peanut butter raises are often insufficient to keep top talent. According to the Payscale report, one in four companies disclosed that they were losing talent this year because of smaller-than-expected pay increases. Some staffers are quitting and seeking other opportunities after receiving small raises that they believe do not align with their efforts.
“Peanut butter pay is often framed as the fairest approach because everyone receives the same increase,” Ruth Thomas, chief compensation strategist at Payscale, recently told Fortune.
However, she noted that “employees don’t typically judge fairness by whether everyone got the same.” Instead, they judge fairness based on if companies reward them appropriately for their individual contributions, she said.
“High performers want to know their extra effort mattered,” she added.
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