Compensation and benefits trends 2027: pay budgets beside benefit costs

Pay budgets for 2027 are forecast to stay close to 2026 levels, while health benefit costs are projected to grow more than twice as fast. WTW puts the average US salary increase budget for 2027 at 3.4%, and the Conference Board puts the median at 3.5%. Marsh’s preliminary survey projects total health benefit cost per employee up 8.2% on average, after planned cost-reduction measures. Employers told Marsh their current plans would cost 11% more on average if they took no action. BLS has already measured part of that gap. Over the 12 months to June 2026 private industry wages and salaries rose 3.1%, while health benefits rose 6.0%. Budget pay and health separately, and get your own renewal quote before you lock the salary increase budget.

This page sets the two US budget figures beside what BLS has measured for pay and benefit costs and what Marsh and WTW project for health plans. Each row gives its next release date where the publisher states one and says so where none is given, and a second table shows how a private employer’s compensation cost splits between pay and benefits. All figures were checked on October 27, 2026. The budget forecasts for every market are in Salary Increase Budgets 2027: Every Published Forecast with each figure labeled by publisher and statistic, so this page uses only the two US figures it needs. For AI use, engagement and the rest of the 2027 people picture, read HR Trends 2027.

Pay budgets, measured costs and health projections side by side

Both budget figures sit near 2026 actual increases. WTW’s 3.4% is slightly below its 2026 actual of 3.5%, and the Conference Board’s 3.5% matches its 2026 actual and planned levels. Marsh’s headline calls the 8.2% the biggest increase since 2003, and its projections make 2027 the fifth consecutive year of elevated health benefit cost growth. Marsh’s survey page sits on Mercer’s website and carries Marsh’s name.

Put the health projections over the budgets and the gap is wide. Marsh’s 8.2% is 2.3 times the Conference Board’s 3.5% median budget, and the 11% no-action figure is 3.2 times WTW’s 3.4% average. The pay percentage gets the argument, and the health percentage gets the invoice.

What BLS has measured, and what each cost line weighs

BLS’s Employment Cost Index (ECI) is the measured side. Its civilian workers group covers private industry plus state and local government. For that group, compensation costs rose 3.4% in the 12 months to June 2026 (not seasonally adjusted). Wages and salaries rose 3.2%, and benefit costs rose 3.8%. BLS reports constant-dollar changes in the same table. On that basis civilian wages and salaries fell 0.3% over the 12 months, while benefit costs rose 0.3%.

The weights come from BLS’s Employer Costs for Employee Compensation (ECEC) release, which says private industry employers paid $46.89 per hour worked in June 2026. Table 1 of that release splits the cost as follows.

Rows are as BLS prints them and differ from the total only by rounding.

These weights turn the rate gap into dollars. Take a hypothetical employer with $10,000,000 of compensation cost and BLS’s private industry mix: $7,000,000 of wages and salaries and $740,000 of health cost. A 3.5% pay budget applied to all wages and salaries adds $245,000. An 8.2% rise in health cost adds $60,680 and an 11% rise adds $81,400, about a quarter to a third of the pay increase. In this example health grows faster and pay still moves more of the money. Your own mix will differ, and the sums join BLS averages to survey projections, so treat them as an order of magnitude and rerun them with your payroll and your renewal quote.

BLS’s Employee Benefits in the United States release gives the March 2026 baseline for private industry workers. Retirement benefits were available to 72% of them, and 52% participated in a retirement plan. Medical care plans were open to 71%, and 46% participated. Paid sick leave was open to 81%. Paid vacation reached 80% and paid family and medical leave 49%. These are March 2026 levels. They are not forecasts, and this page has no earlier edition to show a trend.

What is pushing health costs up

Marsh names three newer drivers for 2027 and attributes the size of each to its actuaries. They estimate that rising GLP-1 use accounts for a full percentage point of the overall cost growth for 2027. Marsh adds that some employers needing immediate cost relief chose to drop GLP-1 coverage for next year. Two other developments each add as much as a percentage point to trend, according to Marsh. One is AI-enabled software that helps physicians submit claims, which has resulted in more and higher-level claims. The other is the independent dispute resolution process the No Surprises Act created. Marsh says case numbers there have far exceeded predictions, as have the amounts awarded.

WTW’s list is different. Its survey page says high-cost claimants, specialty drugs, chronic conditions and cancer care have emerged as the primary drivers, and it mentions GLP-1 drugs only as a topic for its full report. The page also says pharmacy costs are becoming a greater share of overall spend, expected to rise from 24.6% in 2025 to 25.5% in 2026. The two surveys use separate samples, so this page shows both lists and does not merge them.

Employers are weighing who pays. Marsh cites a Marsh survey from earlier in 2026 in which about two-thirds of large employers (500 or more employees) expected to increase employees’ share of premium costs in 2027. Marsh expects many employees to see paycheck deductions for health coverage rise by more than the overall average of 8.2%. In WTW’s survey, 49% of employers recognize the need for significant program changes in the next three years, up from 34% in 2025. Only 15% said they would be willing to make significant changes for a 5-percentage point reduction in healthcare costs.

The UK, India and Southeast Asia in brief

Brightmine’s September 2026 pay trends report says employers are not expecting a return to pay freezes, with 97% of forecast UK pay reviews expected to result in an increase. It names affordability as the greatest of the downward pressures on pay budgets, cited by two-thirds (66%) of organizations. Brightmine also reports that 37% say increased employer National Insurance contributions will constrain their next pay award (its sentence names no base for the 37%). Brightmine says employers are balancing employee expectations on the cost of living against higher employment costs and tighter budgets, and that many organizations are therefore likely to review the wider reward package and recruitment approaches to help retain the skills they need. Its October 21, 2026 report says affordability and increased employer National Insurance contributions are continuing to constrain budgets, and it does not repeat the September percentages.

Aon’s Annual Salary Increase and Turnover Survey for India 2026-27 covers more than 1,200 organizations. It reports overall attrition of 18% in 2026, against 16.2% in 2025 and 17.1% in 2024. In its Wage Code paragraph, Aon reports that 65.4% of employers are already compliant and a further 20.9% expect to be ready within six months, while 42.8% anticipate payroll cost increases of at least 1%. For Southeast Asia, Aon’s study covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It draws on more than 1,200 businesses, was fielded from July to September 2026, and says organizations across Southeast Asia are budgeting for salary increases of 5.2% in 2027, up from 5% in 2026. The release does not say whether 5.2% is an average or a median.

Reward communication and the EU reporting date

Korn Ferry’s Global Total Rewards Pulse Survey, fielded in June 2026 with 5,512 organizations in 135 countries, says retention is shifting from “pay me more” to “make me more marketable.” The same page says reward communication remains a major weakness, with manager capability emerging as a critical success factor in explaining pay decisions, transparency requirements and AI-related changes to employees.

For employers in the EU, Directive (EU) 2023/970 puts a date on that conversation. It sets June 7, 2027 as the first reporting deadline for employers with 250 or more workers, who then report every year, and for employers with 150 to 249 workers, who then report every three years. The smallest band, 100 to 149 workers, must report first by June 7, 2031. Member States were due to have their implementing laws in force by June 7, 2026, and each employer’s deadline depends on its country’s law. The Directive defines pay as the ordinary basic or minimum wage or salary and any other consideration in cash or in kind. Check which benefits in kind your payroll data can attach to individual workers before the first report is due. Country status is in EU Pay Transparency 2027: Country Tracker.

Numbers still moving

What we could not confirm

• Retirement contributions and paid leave policies for 2027. The sources used here give no 2027 projection for either, and the BLS shares and access rates above describe 2026.
• Mental health benefits, voluntary benefits and bonus and equity budgets for 2027, for the same reason.
• How many employers are dropping GLP-1 coverage. The Marsh text we read says some chose to, with no count.
• What WTW’s 2027 pharmacy figure measures. Its page follows the 2026 share sentence with a 2027 projection but does not name the measure, so the 2027 number is left out.
• How Aon’s 2027 medical cost projection compares with Marsh and WTW. Aon’s October 6, 2026 release gives a global average increase of 9% and a North America gross medical trend rate of 9.2%. It gives no US-only figure and does not say whether the 9% is before or after plan design changes, so this page does not set it beside Marsh’s 8.2% or WTW’s 11%.
• Health benefit costs outside the US. None of the sources used here gives a figure for any other market.
• Marsh’s scope and definition. Its article text names no country, and we read it as US employers because the page sits in Marsh’s US health news section and the article refers to the No Surprises Act. The page does not say whether the 8.2% includes employee contributions, and the results are preliminary.
• Brightmine’s sample. The September report states no sample size, and the sentence behind its 37% National Insurance figure names no base.
• Which EU states have passed their pay transparency laws. The country tracker holds that, and this page did not check it.

Building the 2027 plan

1. Split the budget into a pay line and a health line. Keep a third line for the other benefits. Weight them with your own payroll, and use the BLS shares in the second table only until you have it.
2. Get your health renewal projection from your broker or insurer before the salary increase budget is fixed, then test it against Marsh’s 8.2% and 11%.
3. Decide how any increase is shared between company and employees, and write the pay message and the premium message together.
4. For EU entities, compare each entity’s headcount with the Directive’s reporting bands and read the national law of its country. Legal dates for the year are in the HR Compliance Calendar 2027.
5. Mark October 30 and December 16 in the calendar and swap the new BLS figures into your budget file the day they appear.

Enter the pay budget, the health renewal projection and the other benefit lines in the HR Budget Template 2027, then check the January limits in US Payroll Tax and Benefit Limits 2027.

Written and reviewed by the HR Riant Editorial Team. General information, not legal advice.