UK employees are projected to see their wages rise faster than inflation for the first time since the pandemic, a new report reveals.
- The 3R Strategy’s Global Salary Planning Report analyzes salary budgets for 2024 and provides forecasts for 2025, noting significant sector differences.
- While UK inflation has dropped to 1.7% in 2024, the median pay increase budget is set at 4%, indicating real wage growth.
- The financial services sector leads with a 5% pay increase budget, whereas charity and arts sectors lag behind at 2% and 2.8%, respectively.
- A 6.7% increase in the National Living Wage, effective April 2025, will outpace planned salary budgets, impacting companies’ pay strategies.
UK employees can look forward to their wages increasing at a pace faster than inflation for the first time since the pandemic, based on insights from the 3R Strategy’s Global Salary Planning Report. The report compiles responses from organizations across over 40 countries and 20 industries, focusing on salary budgets set for 2024 and anticipated for 2025. This improvement is largely due to a significant drop in UK inflation, which now stands at 1.7% as of September 2024, marking the lowest point in more than three years. Despite the drop, the median pay increase budget for 2024 is set at 4%, with a forecast of 3.5% for 2025, suggesting a favorable trend for employees.
The report highlights varied pay increase budgets across different sectors. Notably, the financial services sector is poised to offer the highest pay increases at 5%, driven by strong competition for talent and the necessity to retain skilled professionals. Contrastingly, the charity and media & arts sectors are forecasted to offer some of the lowest pay increases, standing at 2% and 2.8% respectively. These disparities highlight the diverse economic pressures and talent competition faced by different industries in adjusting their salary strategies.
An important announcement in the recent Autumn Budget involves a 6.7% hike in the National Living Wage starting April 2025. This increase is above the salary budgets planned for next year, presenting a challenge for organizations to reconcile their pay strategies with mandated wage floors. Furthermore, a forthcoming rise in employer National Insurance Contributions from 13.8% to 15% could impact pay budgets, as businesses might pass on these costs by adjusting their salary increment plans.
Globally, the trend towards pay transparency is becoming more pronounced. According to survey data, 64% of organizations have established clear pay principles, but only 57% communicate these effectively. There remains considerable room for improvement as 35% of respondents admit to not sharing this crucial information with employees. Ensuring transparent communication around pay policies is vital in building trust and engagement within the workforce.
Additionally, the report underscores a shift towards transparency in recruitment, with 66% of organizations sharing pay ranges on job adverts, aligning with broader European regulations. However, some companies risk missing out on attracting top talent by not including salary information in job postings. A concerning finding is that over half of the organizations still inquire about candidates’ current salaries, a practice that could perpetuate existing pay gaps and hinder diversity initiatives.
Gender pay gap reporting remains a critical area for development. While obligatory in some regions like the UK, the trend is shifting towards more detailed accounts by job level. Only 28% of firms currently conduct such detailed reporting, despite its potential to uncover disparities hidden in broader figures. As noted by Rameez Kaleem of 3R Strategy, the survey results are promising for UK employees with anticipated real salary growth, a positive turn amid ongoing economic adjustments in the aftermath of high inflation.
UK employees are set to benefit from wage increases outpacing inflation, signaling potential for improved financial stability.
