As a leading recruitment agency, we closely monitor trends that impact both employers and employees. Recent research indicates that pay awards in 2025 are expected to be lower than those in 2024, reflecting changing economic conditions and employer strategies.
New findings suggest that four-fifths of organisations anticipate offering lower pay increases in 2025 compared to the previous year. Meanwhile, 16% of employers expect to maintain the same level of pay increase, and only 4% foresee awarding a higher pay rise. These insights suggest a gradual easing of pay pressures, influenced by factors such as changes to National Insurance (NI) contributions.
The majority of employers predict pay increases within the range of 3% to 3.99%, with 43% of organisations expecting to offer rises within this bracket. Additionally, 37% of employers plan to provide increases between 2% and 2.99%, while only 14% anticipate pay rises of 4% or more. This represents a shift from 2024, when median pay increases were centered around 4.5%.
Sector-specific trends highlight that in private services and manufacturing, over 50% of employers expect pay awards between 3% and 3.99%. In contrast, the not-for-profit and public sectors are more likely to see pay rises in the 2% to 2.99% range.
With employer National Insurance contributions set to change in April 2025, many organisations are reassessing their pay strategies. Over 37% of employers indicate they are ‘extremely likely’ to reduce pay increases due to rising costs, while another 32% state they are ‘moderately likely’ to take this step. Meanwhile, 45% of employers report they are willing to absorb additional costs by accepting lower profits, and 57% indicate they may take alternative measures such as adjusting pricing structures.
Affordability remains the dominant factor influencing pay decisions, with 94% of organisations citing it as their primary concern. Inflation also plays a significant role, with 60% of employers indicating it as a key consideration - though this figure has declined from 69% at the end of 2023.
While inflation rates have decreased, employers remain cautious as the cost of living continues to be a concern. Organisations are balancing competitive pay strategies with financial sustainability, making careful adjustments to compensation structures in response to economic conditions.
As trusted experts in recruitment, we recognise that compensation trends are integral to attracting and retaining top talent. Employers must remain agile, adopting informed pay strategies that align with business goals while ensuring they continue to motivate and retain their workforce.
We are committed to helping organisations navigate these changing dynamics by providing industry insights and strategic recruitment solutions. If you are looking for expert guidance on workforce planning and pay structuring, contact our team today.