Pay award plans and expectations for 2025

The figures reported mark a slight decrease from previous expectations, reflecting budgetary constraints driven by the autumn budget and increasing employer costs, such as National Insurance contributions.

Pay review approaches

The survey highlighted a diverse range of pay review strategies, demonstrating that employers are adopting tailored approaches to meet both business needs and employee expectations. The key findings include:

• 30 per cent plan to offer a combination of across-the-board and individual increases.
• 36 per cent expect to provide a standard across-the-board increase.
• 13 per cent will determine increases on an individual basis.
• 12 per cent expect to adopt a mixed approach, applying across-the-board increases for some groups and individually determined awards for others.

Other creative and bespoke approaches identified in the survey include:

• Staggered increases (e.g. 5% for lower-paid staff and 3% for higher-paid employees).
• Pro-rata increases based on length of service.
• Pay-for-performance models.
• Real Living Wage uplifts with minimal adjustments for others.
• A combination of percentage increases, non-consolidated payments, and additional holiday leave for certain groups.
• Reviews influenced by performance ratings and position within salary ranges.

Anecdotally, we have heard from employers who have also been refining their communication strategy and increasing manager training around pay and reward decisions.

These varied strategies underline a key shift towards greater flexibility and customisation in pay reviews as organisations navigate economic uncertainty.

Key drivers of pay actions

Employers identified a range of factors influencing their pay decisions, each with distinct merits depending on business priorities and workforce strategies:

• External relativities (72 per cent): As the most common driver of pay, these decisions are very often influenced by the external market to ensure competitive pay levels, helping organisations attract and retain talent in a competitive job market.
• Internal relativities (53 per cent): Employers focusing on internal relativities aim to maintain fairness and equity across roles within the organisation.
• Targeting high-performing individuals (35 per cent): Rewarding top performers can drive productivity and motivate employees to deliver exceptional results, directly impacting business success.
• Scarce resources (18 per cent): Prioritising pay increases for critical skill sets ensures organisations can secure and retain specialised talent essential to operations.
• Core roles (15 per cent): Elevating compensation for core roles highlights their importance in sustaining essential functions and operational efficiency.

Additional factors cited include government negotiations, union discussions, cost-of-living considerations, benchmarking against market rates and affordability constraints. Some employers also emphasised alignment with public sector pay policy and gender pay gap targets.

Balancing these varied influences allows organisations to design pay strategies that are both financially sustainable and aligned with strategic goals.