Half of UK organizations reduce 2024 salary budgets from last year.
- The overall median pay rise falls to 4.6% for 2024, down from 5.3% in 2023.
- Employer challenges in attracting and retaining talent drop from previous years.
- Total payroll expenses continue to rise, driven by inflation and cost management.
- Companies are emphasizing diversity, equity, and pay transparency in reward programs.
In 2024, half of the UK’s organizations reported that their salary budgets were lower compared to the previous year, highlighting the cautious approach employers are taking amidst a stabilization of the employee base. The overall median pay rise has seen a decrease from 5.3% in 2023 to 4.6% in 2024, according to the latest findings in the Salary Budget Planning Report by WTW.
This conservative stance is attributed to the passage of a phase characterized by high resignation and turnover rates, allowing organizations to maintain their current headcount. Employers are now prioritizing long-term stability in their workforce management strategies. While 39% of employers faced difficulties in talent acquisition and retention in 2024, this marks an improvement from the 48% who reported similar challenges over the past two years.
Despite a trend of decreasing salary budget increases since 2023, the inflation rate, having dropped significantly to 2.3% in 2024 and projected to remain steady into 2025, continues to contribute to higher total payroll expenses. Three-quarters of companies noted that their total payroll expenses, encompassing salaries, bonuses, variable pay, and benefits, rose compared to the previous year.
Organizations have cited inflationary pressures, cost management concerns, and weaker financial results as leading factors in adjusting salary budgets. Some, however, increased their budgets this year, driven by both inflationary pressures and a competitive labor market environment. In response to these challenges, 45% of companies have conducted comprehensive reviews of their compensation programs, with adjustments in salary ranges and specific group compensations being a focal point.
In terms of strategic adjustments, businesses are increasingly focusing on diversity, equity, inclusion, and workplace flexibility to better meet market demands and employee expectations. Paul Richards of WTW emphasizes that as the workplace stabilizes, employers are reassessing their pay priorities, aligning them with business strategies and compensation philosophies. Richards notes that a holistic view of reward programs, which includes bonuses, long-term incentives, and health benefits, is becoming more prevalent. He highlights the need for targeted support for roles and skills in demand and emphasizes the importance of pay transparency and equity, stating, “giving a big-picture view of what employees are offered can ensure the salary increase process is clear and emphasize the connection between pay increases and business performance.”
The stabilization of the UK employee base has led employers to adopt a more measured approach to salary budgeting.
