French Wage Growth Slows to its Weakest in Five Years

The latest annual survey of mandatory wage negotiations (NAO) in France, conducted by consultancy Mercer between October 2025 and March 2026, reveals that the median budget for base salary increases has dropped to just 2% for 2026. That is down from 2.5% in 2025 and a post-pandemic peak of 4% in 2024. It also falls below the country’s current annual inflation rate, meaning real take-home pay for many employees will shrink this year.

Sophie de Heer, head of compensation at Mercer France, says the backdrop is an uncertain economic environment that has slowed negotiations and kept social tensions high—17% of rounds ended in disagreement. At the same time, companies are preparing for the European Union’s pay transparency directive, using the NAO talks to close internal wage gaps and strengthen equity. The survey, covering 277 firms of all sizes and sectors, including 45% listed companies, shows a clear strategic pivot: broad across-the-board rises are being replaced by carefully calibrated individual increases.

On average, 66% of employees will receive a personal pay rise this year, but the typical amount is just 1.80%, slightly lower than in each of the three previous years. General increases, mainly for non-management staff, have been pared back to a median of only 0.35–0.38%. Employers are now using more varied tools during negotiations: raising the contribution for restaurant vouchers, reviewing profit-sharing agreements, handing out exceptional bonuses, and reinforcing salary equity programmes. Teleworking arrangements are also well established, with most companies offering two days a week and an annual allowance of around €200.

Looking ahead, Mercer expects the 2027 bargaining round to be difficult again, but forecasts a modest recovery in median budgets to 2.5% – a figure that would merely match the inflation levels of recent years rather than deliver real gains.

Why French Companies Are Rethinking How They Reward Staff

The return of individual merit increases

After years of broad-based raises driven by high inflation, companies are now concentrating their limited pay budgets on top performers and roles deemed critical. The survey shows individual increases are overwhelmingly merit-based, especially for managers (cadres). However, even these targeted rewards have shrunk: the median individual rise of 1.80% is the smallest in three years. This suggests that while employers want to keep key talent, they are doing so at a lower cost than before—a sign that the labour market is cooling.

EU pay transparency directive reshapes the agenda

Mercer points directly to the upcoming European directive on pay transparency as a driver of the new focus on equity. By addressing unequal pay now, companies hope to avoid future compliance headaches and reputational damage. The survey findings indicate that closing salary gaps between men and women, and between different employee categories, has become a formal priority during negotiations, complementing the traditional tug-of-war over percentages.

Beyond base pay: a broader compensation mix

Faced with small base salary envelopes, employers are leaning on other levers to preserve employee purchasing power and engagement. The survey highlights higher meal voucher contributions, reviews of profit-sharing (intéressement) and participation agreements, and one-off bonuses. These measures are attractive because they are often tax-advantaged and can be adjusted year by year. The solid anchoring of telework—two days a week, plus a €200 annual allowance—is now a permanent feature rather than a temporary concession.

Outlook for 2027 negotiations

Mercer’s projection of a 2.5% median budget for 2027, while a modest improvement, still implies no widespread real wage recovery if inflation runs at a similar pace. The forecast also underlines a structural shift: companies appear to be preparing for a prolonged period of moderate pay growth, using the NAO framework not just to divide a shrinking pie, but to redesign the way employees are valued—blending base pay, variable rewards, and non-monetary benefits in a way that will likely outlast the current economic cycle.

What French Workers Should Expect in Their 2026 Pay Packet

  • Prepare for a raise of around 2% or less in 2026. Unless you are in a high-demand role with strong individual performance, the median base salary increase will be enveloped at 2%, below inflation. Real purchasing power will dip.
  • Performance matters more than ever. With individual merit increases now the dominant tool, your year-end review and demonstrated results will largely determine whether you get any raise at all. Two-thirds of staff receive something, but the average is just 1.80%.
  • Look to total compensation, not just base pay. Employers are boosting benefits that put cash in your pocket without lifting base salary: higher meal voucher contributions (tickets restaurant), improved profit-sharing, one-off bonuses, and a teleworking allowance of about €200 per year. Factor these into your real income.
  • Non-management staff face especially thin general increases. The median general rise for ouvriers and employés is only 0.35–0.38%. If you are in this category, any meaningful uplift will come from individual top-ups or the ancillary benefits mentioned above.
  • Salary equity is on the table. The EU pay transparency directive is pushing companies to close gender and other pay gaps. If you have reason to believe you are underpaid relative to peers, the current NAO cycle may be a moment to raise it—firms are actively auditing internal equity.
  • 2027 budgets may edge up to 2.5%, but don’t bank on a big rebound. Even if the forecast holds, that level only matches current inflation, so real gains will remain elusive. Budget with caution and consider negotiating for one-off bonuses or flexibility if a higher base increase isn’t forthcoming.