Pay, Reward & People Strategy: Our latest UK Reward Management Survey

Recruitment and Retention: Skills shortages and strategic responses

Retention and recruitment continue to be pressing concerns. Over the past six months: 30 per cent struggled with retention, with 33 per cent anticipating difficulty in the coming six months. 39 per cent faced recruitment challenges, with 40 per cent expecting similar hurdles ahead. To attract talent, 49 per cent of employers paid new recruits more than existing employees, with 73 per cent offering up to 10 per cent more and 27 per cent up to 20 per cent more.

Looking forward, 64 per cent expect these recruitment premiums to remain steady. Key recruitment challenges include labour shortages (84 per cent), lack of suitable candidates (78 per cent), and career development limitations (62 per cent).

Employers are responding strategically. In terms of recruitment, 76 per cent are leveraging digital tools, 63 per cent are investing in upskilling, and 61 per cent are offering competitive benefits. From a retention perspective, 76 per cent are analysing exit interviews, 69 per cent are communicating full reward packages, 66 per cent are reviewing benefits and total reward strategies. Clearer communication of the investment on offer for employees and the chance for progression is at the heart of recruitment and retention efforts.

A stable picture of absence and labour turnover

Employee absence and turnover are largely steady and consistent with levels captured in autumn 2024. The median turnover is 14 per cent, consistent with the previous year. Over half (54 per cent) expect turnover to remain unchanged. The median number of sick days is 3.04 in 2025, up slightly from 3.00 in 2024.

This stability suggests that while pay and recruitment pressures are acute, overall workforce health and retention have not deteriorated.

Looking Ahead to 2026: Priorities and challenges

As organisations prepare for 2026, the top challenges identified are:

• Cost pressures and affordability
• Talent attraction, skills, and retention
• Pay transparency and fairness
• Structural change, job architecture and reward strategy
• Legislative and regulatory changes
• Technology, data and AI adoption
• Employee experience, culture and engagement

It is evident that HR leaders are balancing traditional reward considerations with emerging strategic priorities, particularly in technology, transparency and culture.

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Our autumn 2025 survey underscores how employers are navigating a landscape shaped by cost pressures, talent shortages and employee expectations for flexibility and fairness. While pay growth is stabilising, bonuses remain an important tool for motivation, and hybrid working is firmly embedded.

Pay equity and transparency are rising on the agenda, reflecting both regulatory pressures and a cultural shift toward fairness. Recruitment and retention continue to challenge organisations, driving innovation in digital tools, upskilling and reward communication.

Looking ahead, HR leaders must remain agile, balancing affordability with engagement, embracing technology, and creating reward strategies that reflect organisational values and employee needs. As ever, these shared insights provide the data and context needed to navigate these complex decisions with confidence. Through careful planning and a strategic approach to pay, reward and people management, organisations can position themselves for growth in the year ahead.