By Brian Kelly, Vice President, Executive Recruiter
For years, compensation conversations centered on one word: more. Employers offered more money to attract candidates, made more counteroffers to retain employees, and increased pay to address gaps created during the hiring boom.
Halfway through 2026 and heading into 2027, the conversation has changed. Employers are no longer asking how much more they can offer. They are asking where the next dollar will have the greatest impact.
Some employers are still handing out raises no one asked for, while others are watching their best people walk out the door over a gap they never bothered to check.
From reactive to strategic planning
Compensation planning has become more proactive and budget driven. After several years of significant market adjustments, employers are prioritizing predictability, internal fairness, and alignment with business goals.
Some organizations are continuing to provide broad increases across their workforce. Others are concentrating on limited budgets on top performers, critical positions, and employees with specialized expertise. Company size, industry, and business outlook often determine which approach is used.
Protect what is difficult to replace
Employers are becoming more selective rather than more generous across the board. In financial services and technology, targeted increases remain common for professionals with expertise in:
- Regulatory compliance
- Financial crimes
- Model and market risk
- Cybersecurity
- Cloud and data engineering
- DevOps
- Artificial intelligence and machine learning
In several of these specialties, we’re seeing counteroffers land 15% – 20% above initial offers (a gap most compensation committees never see coming until the candidate is already gone). These positions require specialized knowledge that cannot be replaced quickly. As a result, employers are conducting targeted compensation reviews, raising starting salary ranges, and hiring candidates higher within established bands.
The strategy has shifted from raising everyone’s pay, to be safe, to protecting what is expensive to replace.
Look beyond base salary
Salary is only one part of the compensation conversation. Employers are also using bonus structures, enhanced benefits, career development, recognition programs, and workplace flexibility to strengthen total rewards packages.
A raise is most effective when market data reveals a genuine compensation gap or when a flight risk employee has scarce expertise. It is less effective when the real problem is limited career progression, poor leadership, or an unsustainable workload. In those situations, additional compensation may buy time, but it rarely creates lasting loyalty.
Spend smarter, not more
Over the next 6 to 12 months, I expect compensation strategies to become even more selective. Employers should benchmark pay more frequently, conduct pay equity reviews and communicate a clear compensation philosophy.
At Madison-Davis, we help employers understand what offers are landing, where compensation gaps are costing them talent, and when a targeted adjustment can make the difference.
The organizations that succeed will not necessarily be the ones that spend the most. They will be the ones that spend the smartest.
Ready to put your compensation strategy into action?
Madison-Davis provides the market insight and recruiting expertise needed to make informed talent decisions. Whether you are planning for a critical hire or strengthening your long-term workforce, connect with our team today to start the conversation.
