Communicating the 2025 Pay Award: Building Trust Through Transparency

Employers are broadly divided between those able to offer competitive pay to secure in-demand skills and those contending with tighter budget constraints. In spring 2025, 42 per cent of organisations granted increases of up to 3 per cent, up from just 24 per cent in autumn 2024. Conversely, the share of companies offering 5 per cent or more has plummeted, underlining the growing financial caution across sectors.

While inflation remains stubbornly high, where CPI stood at 3.6 per cent in June 2025 – it has begun to ease compared to peak levels in early 2024. As pay growth moderates in response, organisations are rebalancing their reward strategies and refocusing attention on how they communicate pay decisions internally.

Pulse Survey 2026: Early insights point to ongoing caution

Initial 2026 insights from Paydata’s Pulse Survey reveal that most employers (37 per cent) expect to maintain the same pay award levels in 2026 as in 2025, while the remainder typically anticipate a modest reduction, largely between -0.5 per cent and -1.0 per cent. The projected median for 2026 remains at 3.0 per cent, but narrowing ranges and employer commentary suggest a continued tightening of pay review budgets.

This projected restraint underscores the need for more sophisticated communication strategies. As organisations ask employees to accept smaller pay increases amid a still-high cost-of-living, the clarity and quality of the message becomes pivotal to maintaining engagement and morale.

The evolving need for clear pay communication

Communicating pay decisions is about building organisational trust, managing expectations and reinforcing the overall employee value proposition. Our UK Reward Management Survey highlighted how the importance of this communication has steadily increased:

• Median importance rating for pay award communication hit 9/10 in 2025, up from 8/10 in 2023 and 2024.
• The lower quartile score rose from 5 to 7/10, highlighting that even organisations previously less focused on communications are now prioritising transparency.

This shift reflects a widespread recognition that employees expect context, consistency and honesty; especially when pay outcomes fall below personal expectations or external benchmarks. In a climate of high inflation and intense media focus on the cost-of-living, even modest pay awards can trigger disappointment or concern if not adequately explained. Without clear communication, employees may misinterpret decisions as unfair or arbitrary, potentially leading to disengagement, reduced trust in leadership and increased employee turnover.

The role of TRS: a strategic communication tool

Total Reward Statements have emerged as a valuable tool for pay award communication. By consolidating all elements of an employee’s remuneration and benefits into a single, easy-to-understand document, they provide:

• Clarity: Helping employees see the full value of what they receive
• Context: Linking base pay to broader organisational strategy and market position
• Comparison: Making year-on-year changes more transparent

With tighter budgets and rising expectations, they can help shift the focus from “salary dissatisfaction” to “value appreciation.” As more employers adopt digital platforms for TRS delivery, they are also using data analytics to personalise content and refine messaging.

Navigating future pressures through communication

As we look ahead, several macro trends will continue to shape the way organisations approach pay award communication:

• National Living Wage pressures will disproportionately impact lower pay bands, compelling employers to explain differential increases across the workforce.
• Out-of-cycle awards, often used to retain key staff or ease financial hardship, which will require careful messaging to avoid perceptions of unfairness or secrecy.
• Weaker labour market conditions, with falling vacancies and rising redundancies, could change employee expectations, but also increase demand for transparency and fairness.
• Moderating inflation and wage growth will challenge organisations to balance long-term sustainability with the need to remain competitive and retain key talent.

With the 2026 pay award forecast showing little deviation from current levels, the communication agenda will only grow in significance.

Trust: The key to sustaining employee engagement

In an environment of modest pay growth, how pay is communicated can be more powerful than the numbers themselves. Employees are not just comparing salaries – they are evaluating fairness, transparency and alignment with organisational values.

As 2025 continues to unfold, and the conversation shifts toward 2026 planning, leading organisations will be those that:

• Share context proactively
• Involve managers in meaningful conversations
• Make full use of tools like TRSs to highlight the total employment offer
• Reinforce a culture of openness and trust

Get in touch

If your organisation anticipates a smaller pay award, now is the time to strengthen trust - the opportunity to build trust, engagement and loyalty has never been greater. Communicating clearly, honestly and empathetically is the new competitive advantage. Talk to us about how we can help shape your internal communications to reinforce employee engagement, build understanding around difficult decisions and ensure your people feel supported as you navigate the year ahead together.