The latest data from HR data and insights provider Brightmine shows that UK pay rises have stalled at 4% this quarter, while its 2025 Pay Forecast anticipates pay awards to continue to fall next year.
Inflation has played a key part in driving up pay increases in recent years, however business performance and affordability are set to drive next year’s anticipated drop in pay awards.
Brightmine’s data, representing nearly half a million UK employees, shows the median pay award forecast for the next 12 months is 3%, nearly two percentage points lower than the median pay award of 4.7% for the 12 months ending August 2024 and 50% lower than in the same period in 2023. However, pay rises are still forecast for most employees next year and few businesses anticipate enforcing pay freezes, with just 4% of businesses planning them.
Businesses reported that the three factors most likely to negatively influence organisations’ pay award decisions in the next 12 months are affordability (65%), organisation performance (36%) and inflation/cost of living (27%).
When asked about the factors most likely to increase the value of their pay awards next year, half of businesses stated skills shortages as one of the main factors, along with matching pay levels within their industry (58).
Meanwhile in Brightmine’s monthly Pay Trends Report, September saw pay rises remain flat at 4% for the third consecutive rolling quarter, based on 64 pay settlements that came into effect between 1 July and 30 September 2024.
Sheila Attwood, Brightmine senior content manager, data and HR insights, comments: “With economic pressures mounting, we’re seeing organisations re-evaluate their pay strategies, and many are shifting their focus toward enhancing employee benefits as a way to balance employee expectations with the needs of the business.
While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent.
Where organisations are perhaps falling short of employee expectations in regard to pay awards, good communication about pay decisions can help to mitigate this.
The next 12 months will require a careful balance between affordability and maintaining a competitive edge in employee engagement and retention.”
Brightmine October Pay Trends 2024 Highlights
October has seen pay rises remain flat at 4% for the third quarter, according to the latest Brightmine Pay Trends report.
Based on 64 pay settlements that came into effect between 1 July and 30 September 2024, covering 433,000 employees, Brightmine’s data has shown:
- Lower pay increases prevail. As per previous rolling quarters, this rolling quarter we find that the majority (63%) of pay awards in a matched sample are lower than the same group of employees received the previous year. The remainder are split evenly between those that are higher, or the same (18.4% each).
- Public sector deals keep median high: Pay settlements in the public sector over the 12 months to the end of September 2024 stand at a median 5.5%, unchanged from the previous rolling year (to the end of August 2024). This follows a full 12 months when pay awards in the sector were in excess of 6% at the median.
- Median stable. The median basic pay award in the three months to the end of September 2024 stands at 4%. It was previously higher – at 4.8% - in the three months to the end of June this year.
Pay review pattern - whole economy, September 2023 to September 2024
