2026 NCM: Déjà Vu, With Real Consequences
If the 2026 rebuild of the National Compensation Matrix (NCM) feels familiar, that’s because it is. Much like the 2023 rebuild, the 2026 version represents a decrease from the prior year.
At Stambaugh Ness, we anticipated this, and now we are here to help you navigate the fallout.
The Decrements Aren’t Random
Our review of the rebuilt NCM reveals a consistent and concerning pattern: the smaller the firm, the larger the percentage declines from the prior year. As firm size increases, the impact of the decrement softens. Smaller and mid-sized firms have more to consider and understand.
Escalations vs. Reality
Since the 2023 rebuild, the NCM committee escalated the matrix for two consecutive years. On the surface, the 2026 rebuild suggests those escalations outpaced industry data—or did they?
A more plausible explanation is structural:
- Hiring Trends: Smaller firms may be hiring at a lower levels of experience, reducing average total compensation.
- Participation Gaps: Gaps in national surveys may be skewing representation, particularly for smaller firms.
It is likely a combination of both, but the result remains the same: a rebuilt NCM has outpaced an escalated NCM, leaving many firms with a significant disallowance.
What This Means for You
If you were negatively affected by NCM disallowances for FY 2024, this is not optional reading. To protect your firm’s profitability, you must:
- Review the 2026 NCM immediately.
- Quantify the impact on your FY 2025 overhead.
- Understand your available options for FY 2025.
- Consider strategic changes to FY 2026 and beyond.
What we’re seeing aligns with data from our strategic partner, Zweig Group, and recent salary studies we’ve completed—this does not appear to be an anomaly.
Your Options Are Limited—but Real
There are still remedies available, but they are narrowing. If you feel that you are negatively impacted by the rebuilt NCM and that your compensation is reasonable, there is relevant and authoritative guidance that you may need to consider. Contact us if you have questions.
The long-term path forward is clear:
- Ensure your firm participates in national compensation surveys to ensure accurate representation.
- Reassess your total compensation philosophy. Consider shifting spend towardsallowable buckets and away from unallowable executive compensation.
The Bottom Line: Review. Quantify. Act.
The 2026 NCM rebuild has highlighted that for many firms, their total compensation philosophy needs to be reconsidered. Firms that respond deliberately will protect cash flow and make the most meaningful impact on their future. Those who don’t risk compounding the impact into FY 2026 and beyond.
If you need help interpreting the NCM, quantifying its impact, or evaluating your options, our team is available to help you determine the path forward with clarity and confidence. Reach out to us today to start the conversation.
