Year-End Bonuses Are Shrinking And 2026 Raises Will Be Modest. But Not For Everyone.

Year-End Bonuses & 2026 Raises: A Forbes Analysis

Key Concepts:

• Bonus Decline: Reduction in the percentage of employees receiving year-end bonuses and the amount of those bonuses.
• Merit Increases: Planned salary increases based on employee performance.
• Cooling Labor Market: A decrease in job openings relative to the number of unemployed individuals, reducing competitive pressure on salaries.
• AI Talent Premium: Significantly higher salaries and bonuses offered to professionals in the Artificial Intelligence field.
• Magnificent Seven: Refers to the large-cap tech companies driving market growth (implicitly: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta).

1. Declining Bonuses & Modest Raises – The Overall Trend

The Forbes report details a trend of shrinking year-end bonuses and limited salary increases projected for 2026. Data from ADP, analyzing payroll data from 12 million workers in companies with 50+ employees, reveals that fewer than 40% of employees received a bonus in December 2024, a decrease from 44% in 2021. The median bonus also fell by 4% in December 2024. Employers are largely reverting to pre-pandemic bonus levels.

Mercer’s survey indicates employers are planning average merit increases of 3.2% and total increases (including merit and other adjustments) of 3.5% for 2026 – consistent with 2025 increases. This restraint is attributed to economic caution and a cooling labor market, where companies face less pressure to compete for talent through higher salaries. As Jack Jones, a principal compensation and rewards consultant at Mercer, states, “When the total number of unemployed is greater than the job openings, companies don't have to compete as much on salaries to attract or retain the best talent.”

2. Reduced Promotion Rates

Alongside limited salary increases, employers are also planning fewer promotions. Mercer’s survey projects only 9% of workers will be promoted in 2026, down from 10% in 2025. This further limits opportunities for significant income growth for employees.

3. Industries Bucking the Trend: AI, Nuclear Energy & Financial Services

Despite the overall trend, certain industries are expected to see more substantial salary growth.

• Artificial Intelligence (AI): Driven by projected investments of $1.5 trillion worldwide in 2025 (according to Gartner), the AI sector is experiencing high demand for talent and willingness to pay premium salaries. AI engineers currently earn a median of $184,000 (Paycale data). The fastest-growing median wages in the past year were for Development Operations and Senior Network Engineers, increasing by 12% and 10% respectively, reaching $131,000 each (Paycale). However, Ruth Thomas, chief compensation strategist at Paycale, notes these increases are lower than the 30% growth seen in the previous year.
• Nuclear Energy: Increased demand for nuclear engineers, up 108% from last year, is driving salaries to a median of $128,000 (Paycale), likely due to growing energy demands related to AI.
• Financial Services: Fueled by the strong performance of the “Magnificent Seven” tech stocks, the financial services sector is projected to see salary increases of 3.7% in 2026 (Mercer). This industry relies heavily on bonuses, averaging 5% of total compensation compared to the 3.5% average for all US workers (ADP). Bonuses for traders, merger advisors, and wealth managers could potentially rise by up to 25% (Johnson Associates).

4. Bonus Structures in Specific Sectors

The information sector (which heavily includes AI-related roles) stands out with bonuses accounting for 6.8% of gross pay (ADP), almost double the 3.5% standard for all US workers. This figure doesn’t account for exceptional spending by companies like Meta on top-tier AI talent. The financial services sector also features significant bonus potential, with 5% of total compensation derived from bonuses.

5. Potential Headcount Reduction in Financial Services

Despite projected salary increases, Johnson Associates forecasts a 10-20% sector-wide headcount reduction in financial services over the next 3-5 years, partially attributed to the increasing adoption of AI. This suggests that while compensation may rise for remaining employees, overall employment opportunities in the sector could decrease.

6. Data & Statistics Recap

• Bonus Recipients: Down from 44% in 2021 to under 40% in December 2024 (ADP).
• Median Bonus Decline: 4% decrease in December 2024.
• Merit Increases (2026): 3.2% average (Mercer).
• Total Increases (2026): 3.5% average (Mercer).
• AI Engineer Median Salary: $184,000 (Paycale).
• Development Operations Wage Growth: 12% to $131,000 (Paycale).
• Senior Network Engineer Wage Growth: 10% to $131,000 (Paycale).
• Nuclear Engineer Median Salary: $128,000 (Paycale).
• Information Sector Bonus Percentage: 6.8% of gross pay (ADP).
• Financial Services Salary Increase (2026): 3.7% (Mercer).
• Potential Financial Services Headcount Reduction: 10-20% in 3-5 years (Johnson Associates).

Conclusion:

The Forbes report paints a picture of a cautious economic environment impacting employee compensation. While widespread salary growth and substantial bonuses are unlikely for most workers in 2026, opportunities remain in high-demand fields like AI and nuclear energy. The financial services sector presents a mixed outlook, with potential for increased compensation for some, but also the risk of job losses due to automation. Employees should be prepared for modest increases and focus on developing skills in areas experiencing strong growth to maximize their earning potential. As Jeff Naz, senior principal data scientist at ADP, succinctly puts it, employers are “scaling back towards prepandemic levels.”