Should you hear your colleagues in HR talking about peanut butter, you might be disappointed to find out they’re not actually planning to restock the office pantry.

Instead, they may be referring to the decidedly less tasty practice of compensation planning. In the total rewards world, “peanut butter” pay can refer to giving workers flat raises across the board, in the same way you might spread the snack evenly across a piece of toast.

Starbucks recently said it would switch to the peanut butter approach, giving all salaried employees in North America the same 2% raise, rather than allowing managers to grant merit raises at their discretion. The shift is part of a broader turnaround effort that necessitates cost containment, the coffee chain said.

Granting flat raises isn’t unusual when companies are dealing with tighter budgets, experts told HR Brew, but employers should clearly communicate the strategy behind this decision, and consider its implications for performance management.

Shrinking budgets. US employers expect to give employees a 3.5% raise, on average, next year, according to a recent report from Payscale. A majority of those who expect to scale back their compensation budgets cited concern about “future economic conditions or business performance.”

Such trends may play into employers’ decision to grant flat raises, said Megan Nail, VP of the total rewards practice at insurance broker NFP. “When budgets come down…it lends itself towards companies thinking more across the board, because they have fewer dollars to work with,” she said.

There are some upsides to the peanut butter approach, Nail said. Flat raises are easier to administer than those granted under a pay-for-performance system, and may be perceived as more fair by employees. That being said, HR leaders should clearly explain the rationale if their organization is changing its approach, she added, and be honest about “what they don’t know right now.”When talking about decisions surrounding pay, “it’s helpful for an organization to be clear about the hows, whats, and whys,” said Ron Seifert, senior client partner at Korn Ferry. If a company is facing operational challenges, investing in other parts of the business, or navigating an uncertain economic environment due to tariffs, those details can help them shape their messaging.

Dealing with downsides. HR teams, according to multiple professionals we spoke to, could consider how different members of their workforce may be affected by pay decisions. Lower-paid employees are particularly sensitive to inflation, so a flat raise may be important when you consider their ability to cover costs of everyday items like food or gas, said Seifert.

On the other hand, a potential negative effect of granting flat raises is that top performers may become dissatisfied with how they’re rewarded.

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