According to its 4th Global Salary Planning Report UK-based pay and reward consultancy 3R Strategy is forecasting a higher than inflation wage rise for UK employees for the first time since the pandemic. In 2022, with UK inflation soaring to 8.6 per cent, most organisations set their pay budgets at 5 per cent. A year later, inflation dropped to 6.3 per cent, yet the median pay increase budget remained at the same level. However, with inflation at 1.7 per cent in September 2024, the lowest in over three years, and the 2024 median pay increase budget at 4 per cent, with 2025 forcasted at 3.5 per cent, this suggests that UK employees are likely to see wages rising at a higher rate than inflation for the first time since the pandemic.
The report analyses the data by country and industry, identifying key differences between sectors. In the UK, the financial services sector has the highest pay budgets for next year at 5 per cent, fuelled by intense competition for talent and the need to retain technical expertise. In contrast, the charity and media and arts sectors report the lowest increases at 2 per cent and 2.8 per cent, respectively.
Importantly, in the recent Autumn Budget, the government announced a National Living Wage increase of 6.7 per cent from April 2025, which exceeds the planned budgets for that year. Organisations will need to factor this into their planning, as a 3.5 per cent budget doesn’t mean that everyone can receive a 3.5 per cent pay increase – entry-level positions that are paid at the National Living Wage will require a 6.7 per cent rise. Also in the budget, employer National Insurance Contributions (NIC) are set to increase from 13.8 per cent to 15 per cent. It remains to be seen how this will impact pay budgets, but it is possible some organisations will look to pass this on to employees by reducing their pay increase budget.
According to survey data, nearly two-thirds (64 per cent) of organisations have implemented clear pay principles and processes. However, the emphasis should now be on effectively communicating these to foster trust and understanding among employees. While 57 per cent of companies engage in some form of pay communication, 3R Strategy notes there’s a significant opportunity to improve both the reach and quality of this communication. As many as 35 per cent of respondents don’t communicate this crucial information to their teams at all.
Although 68 per cent of organisations have salary ranges, only 26 per cent make them available to employees in at least some countries. To build trust and engagement, businesses should prioritise carefully communicating this information to bridge the gap in pay transparency internally.
There’s a growing awareness of the need for greater pay transparency, as evidenced by a reported 66 per cent of organisations displaying pay ranges on job adverts in at least some countries. This aligns with the EU Pay Transparency Directive, regulations aiming to increase pay transparency and ensure fair and equal pay in the European Union (not directly applying to the UK due to Brexit). However, 29 per cent of respondents still don’t include salary ranges when advertising open positions, potentially missing out on attracting a wider pool of highly talented candidates.
Furthermore, the results reveal that more than half (51 per cent) of organisations still ask for candidates’ current salaries, a practice that can perpetuate pay disparities and hinder diversity efforts.
“Conducting our Global Salary Planning Survey for the fourth year in a row, we were delighted with the level of participation, with responses collected across over 40 countries and more than 20 different sectors,” commented founder and managing director of 3R Strategy Rameez Kaleem. “We were especially pleased to note that UK employees are expected to see real growth in their salaries for the first time since the pandemic, contrasting with last year’s findings. As UK inflation has declined significantly over the past year and interest rates have begun to ease, this is an encouraging sign for all employees struggling with the high cost of living. We hope our report will serve as a valuable resource for 2025 salary planning to help businesses attract and retain talent.”
The full report is now available for free on the 3R Strategy website here.
