The Salary Squeeze: When Candidate Expectations and Hiring Budgets Collide

One of the more challenging conversations I have as a recruiter is explaining to a hiring manager that their salary budget may not attract the experience they're seeking. Equally challenging is explaining to a qualified candidate why an employer simply can't meet their compensation expectations.

As companies prepare their 2027 hiring budgets, this disconnect is becoming increasingly difficult to navigate. And the reality is, both sides have legitimate concerns.

Two Sides of the Same Squeeze

For candidates, salary expectations increasingly reflect the rising cost of everyday life. Housing, groceries, insurance and other necessities have become significantly more expensive. Even as inflation moderates, those higher prices remain. According to a 2026 survey reported by SHRM, 69% of workers feel underpaid, while 49% believe their wages will never catch up with the rising cost of living.[1]

Employers, meanwhile, face their own financial pressures. Rising operating costs, economic uncertainty and the expense of employee benefits leave many businesses—particularly small and midsize organizations—with limited flexibility. Mercer's 2026 compensation survey projects average total salary increases of just 3.5% for 2027.[2] A candidate seeking $90,000 for a position budgeted at $75,000 isn't necessarily being unreasonable. Nor is the employer necessarily undervaluing the position. Both may be responding rationally to very different financial realities.

When Budgets Don't Match the Market

The consequences can include prolonged searches, declined offers and qualified candidates withdrawing from consideration.

Robert Half's 2027 Salary Guide reports that 57% of surveyed employers are offering salaries above their planned ranges to attract talent.[3]

That raises an important question: If employers repeatedly exceed their salary budgets to secure qualified candidates, were those budgets realistic in the first place?

There's also an important distinction between cost of living—what candidates need to maintain their standard of living—and cost of labor—what employers actually pay for comparable skills and responsibilities. Understanding both is essential to establishing competitive, sustainable compensation.

Finding Common Ground

For employers, realistic compensation planning should begin before a position is advertised. That means researching current market salaries, distinguishing essential qualifications from preferences, and considering whether flexibility, benefits or growth opportunities can strengthen an offer.

Candidates benefit from understanding how their expectations align with market conditions and evaluating the entire opportunity, not simply the base salary.

Sometimes, despite everyone's best efforts, the gap simply can't be bridged. Recognizing that early saves everyone time and frustration.

As employers finalize their 2027 hiring plans, compensation deserves more than a line item in the budget. It should be an integral part of their hiring strategy.

Successful hiring isn't about convincing candidates to accept less or pressuring employers to spend more. It's about understanding what the market requires, what the business can sustain and where the two can realistically meet.

Sources

[1] SHRM, 2027 Pay Raises Expected to Hold Largely Flat Amid Cost Pressures, August 2026.

[2] Mercer, US Employers Stick With Moderate Pay Increases for 2027, August 2026.

[3] Robert Half, 2027 U.S. Salary Guide, 2026.

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