What Wage Compression Looks Like — With Numbers
Wage compression happens when new hire starting salaries catch up to (or exceed) what experienced employees earn after years of modest annual raises. It's not theoretical in AEC. It's documented, it's growing, and it's a direct consequence of not knowing what you're paying.
The American Council of Engineering Companies defines it plainly: "the difference in base salary between new hires and existing experienced employees is minimal."3 But the ACEC example makes it concrete.
Consider a Design Engineer hired in 2020 at $80,000. The firm runs merit cycles— 3% annually, which feels reasonable. By 2024, that engineer earns $92,663. A new hire joining that same year starts at $97,948. Nearly $6,000 more. Less experience. No awareness of the gap unless someone compares files that never get compared3.
The warning signs are predictable once you know them:
- Small pay differentials between new hires and employees with two to three years of tenure
- Senior staff quietly declining internal promotions (the math doesn't work for them)
- Experienced engineers disengaging without ever naming compensation as the reason
This happens when firms run merit cycles from memory and annual raises from a blank spreadsheet with no visibility into internal equity. The causal link is this article's thesis, not an established research finding— but the evidence points in one direction. Firms without real-time compensation visibility can't catch compression forming. They find out after it's already cost them someone.
The replacement math matters here. According to PSMJ4, replacing a mid-level AEC professional costs 150–200% of their annual salary. For senior leaders and specialized technical experts, that figure exceeds 300%. Wage compression isn't a policy problem. It's a balance sheet problem.
Architecture and Planning Firms' Transparency Gap
Less than half of architecture firms have transparent compensation and promotion practices— and fewer than one in four have formal retention plans. These aren't edge cases. They're the industry norm.
But the AIA data makes the shape of that norm specific. The AIA's 2025 Compensation & Benefits Report2 covers 13,227 positions from 817 firms across 34 states — which makes its finding difficult to dismiss: less than half of firms have transparent promotion and compensation practices. A separate AIA survey5 found fewer than one in four firms had formal employee retention plans, and only 17% have formal mentorship pathways1. These aren't outlier firms. The sample is the industry.
The AIA Guides for Equitable Practice provide a compensation audit framework— but adoption is thin: 8% of small firms, 13% of mid-size firms, and 21% of large firms use them2. The gap between having a framework and using it is wide.
Pay transparency laws have passed in more than a dozen states since 2021, and the trend is accelerating— comp opacity that was accepted practice is increasingly a legal exposure. Firms that haven't built compensation governance policies are behind a trend that's only moving one direction.
The underlying problem: firms don't have a single source of truth for their compensation data. Transparency is impossible when the data isn't clean, current, or centralized. The data doesn't support optimism about where most firms actually stand.
External Market Pressure Is Making This Worse
Engineering roles in AEC received 8.84% salary increases in 2025. Architecture roles received 1.05%. That divergence (across teams that often share the same firm, the same project, and the same org chart) is a structural challenge that spreadsheet-based comp planning cannot address6.
And fast-growth AEC firms are handling this differently. Zweig Group's 2025 data shows that firms growing at 20%+ revenue gave average salary increases of 8.2%— nearly triple the 3.17% at slow-growth peers6:
| Average Salary Increase | |
|---|---|
| Fast-growth AEC firms (20%+ revenue growth) | 8.2% |
| Stable firms | 4.9% |
| Slow-growth firms | 3.17% |
For multi-discipline firms, the entry-level gap is already measurable. PSMJ's 2026 data shows entry-level electrical engineers at a median of $73,751— a 23% premium over architects at $60,000, up from a 19% gap the year before7. When disciplines share a P&L and your comp data isn't integrated, that gap becomes invisible until someone leaves.
Compensation represents 50–65% of total operating expenses in AEC professional services4. Decisions that feel like HR are actually the largest line item on the P&L. Firms that can't see their internal equity in real time are flying blind on their biggest cost.
What Structured Comp Planning Looks Like, by Firm Size
Structured comp planning in AEC means one thing: you have a single source of truth for what you pay, you benchmark against validated external data at least annually, and your merit cycle isn't a six-week spreadsheet sprint.
Start with the benchmarking cadence. ACEC Engineering Inc. recommends conducting compensation analyses every 6–24 months using validated third-party data from sources like AIA, Zweig Group, or Pearl Meyer surveys3. Most firms aren't doing this. Those that are catch compression early.
Budget a compression relief fund. ACEC recommends setting aside 1–2% of annual payroll specifically for compression remediation— used proactively when new-hire market rates threaten internal equity3. This is a specific tactic with a name and a cited source. Build it into your annual budget as a line item, not a reactive decision made when someone brings in a competing offer letter.
Technology matters— but only if it matches your firm's scale:
| Firm Size | Tool Approach | Priority Action |
|---|---|---|
| <20 staff | Gusto or BambooHR + Monograph | Establish benchmarking cadence (AIA/Zweig data) |
| 20–100 staff | BambooHR + Monograph or Deltek Vantagepoint | Create comp philosophy; run first equity review |
| 100+ staff | Deltek Vantagepoint (full integration) | Integrate comp with project budgets; build compression relief fund |
For project-based firms above 20 people, Deltek Vantagepoint connects project budgets, labor costs, utilization rates, and payroll in a single system8. That integration pays for itself— though it takes 3–6 months to stand up, not a weekend. For smaller studios, BambooHR or Gusto paired with Monograph is more pragmatic8.
For mid-size AEC firms, the question isn't which platform to buy. It's whether compensation is currently managed or merely tracked. Those aren't the same thing.
A principle worth building in at every firm size: salary increases should trigger a parallel review of fees and billing rates. That's why a solid framework for technology decisions in AEC starts with understanding how comp connects to the numbers that drive your firm.
The tool isn't the solution. Switching to Deltek doesn't fix a firm that hasn't established a comp philosophy. The behavioral change has to come first. But building a data-first culture in your firm makes the behavioral change sustainable.
Which brings us to where AI actually fits into this — and where it doesn't.
How AI Is Changing the AEC Compensation Equation
AI tools are beginning to change how AEC firms access comp data— but they don't change what the data needs to say. The strategy has to come first.
Adoption is still early. Most AEC firms haven't yet brought AI into their decision-making in any systematic way— and compensation planning is rarely among the early use cases. But the areas where AI is creating real value right now are worth knowing:
- Faster market benchmarking: Tools like Perplexity and Claude can cross-reference AIA, Zweig, and PSMJ benchmark data faster than manual research— cutting days of comp analysis to hours
- Catching compression before it costs you someone: HRIS platforms with built-in compensation analytics can surface compression patterns before they become retention problems, flagging when a role's comp has drifted below market
- Merit cycle "what if" planning: AI can help you model scenarios before you commit the budget— "what happens to internal equity if we bring all new hires to market rate this year?"
But here's the caveat that matters: AI can surface data, detect patterns, and run scenarios. It cannot decide what your firm values, how you communicate about pay, or what you owe an employee who's been there for twelve years.
That judgment is human. AI amplifies the capacity to see clearly. It doesn't replace the responsibility to act. No matter the question, people are the answer— and compensation decisions are where that principle shows up most directly.
For firms evaluating where to start, the right sequence is data integration before AI tooling. If your comp data lives in three versions of a spreadsheet, the output of an AI compensation analysis reflects that mess. Clean the source first. For AI implementation planning for professional services, this sequencing question is always step one.
And if you want to understand what AI actually changes in your comp process, start by timing your merit cycle. Before and after. The gap will tell you everything.
FAQ
What percentage of architecture firms use spreadsheets for compensation?
54% of architecture and engineering firms still manage resources through spreadsheets or manual meetings, according to Total Synergy's 2025 A&E Industry Benchmark Report1. That figure likely understates the problem— it covers resource management broadly; compensation specifically may be higher.
What is a compression relief fund?
A compression relief fund is a budget reserve of 1–2% of annual payroll set aside specifically to address pay compression— used when new-hire market rates threaten internal equity for existing employees. ACEC Engineering Inc. recommends AEC firms establish this proactively rather than reactively3.
How often should AEC firms benchmark compensation?
ACEC Engineering Inc. recommends conducting compensation analyses every 6–24 months using validated third-party data from sources like AIA, Zweig Group, or Pearl Meyer surveys3. More frequent cycles make sense in periods of rapid market movement, as seen in engineering disciplines in 2024–2025.
What does architect turnover cost?
Replacing a mid-level AEC professional costs 150–200% of their annual salary, according to PSMJ research4. For senior leaders and specialized technical experts, that figure exceeds 300%. Most firms don't calculate this number— which is part of why retention investment never gets prioritized.
Conclusion
The same design systems thinking that made AEC firms fluent in BIM, Revit, and project management platforms has not yet reached compensation planning. That's the gap.
Professionals who trained at programs like UB's School of Architecture and Planning and institutions like it spend years learning to manage complex information inside integrated systems. The firms they join shouldn't be the exception to that principle when it comes to their own people.
Compensation opacity isn't a natural state of AEC. It's an inherited process failure. It's costing firms their most experienced people— and annual turnover numbers won't tell you it's happening until it already did.
A useful starting point: pull last year's merit cycle spreadsheet and check how many people with three-plus years of tenure are within $10,000 of what you'd offer a new hire today. If the answer surprises you, you have a compression problem. If you don't have a way to run that check, you have a data problem. Both are fixable.
If you're trying to figure out where to start with this, Dan Cumberland Labs works with professional services firms on exactly these operational questions.
References
- Total Synergy, "2025 Architecture & Engineering Industry Benchmark Report Highlights" (2025) — https://totalsynergy.com/2025-architecture-engineering-industry-benchmark-report-highlights/
- American Institute of Architects, "AIA Compensation & Benefits Report 2025 Now Available" (2025) — https://www.aia.org/about-aia/press/aia-compensation-benefits-report-2025-now-available
- American Council of Engineering Companies, "Wage Compression in the AEC Industry: Bridging the Pay Gap Between New Hires & Tenured Employees" (2024) — https://engineeringinc.acec.org/feature/wage-compression-in-the-aec-industry-bridging-the-pay-gap-between-new-hires-tenured-employees/
- PSMJ Resources, "How Evolving Total Compensation Strategies Drive Talent Success in the AEC Industry" (2025) — https://go.psmj.com/blog/how-evolving-total-compensation-strategies-drive-talent-success-in-the-aec-industry
- American Institute of Architects, "How Do Your Firm's Benefits and Pay Stack Up?" (2025) — https://www.aia.org/aia-architect/article/how-do-your-firms-benefits-and-pay-stack
- Zweig Group, "Zweig Group Releases 2025 Salary and Compensation Data for AEC Firms" (2025) — https://zweiggroup.com/blogs/news/zweig-group-releases-2025-salary-and-compensation-data-for-aec-firms
- PSMJ Resources, "2026 Compensation Trends: AEC Industry Benchmark Survey Data" (2025) — https://go.psmj.com/blog/key-compensation-trends-for-architects-and-engineer
- Comparisoft, "Best HR & Payroll Software for Architecture Firms in 2026" (2025/2026) — https://comparisoft.com/best-hr-payroll-for-architecture-firms/
