UK Pay Growth Stalled In September, Likely To Slow Next Year: Survey

Growth in the employee earnings in the U.K. stalled in the September quarter and the rate of increase is expected to fall next year as employers weigh the cost, the performance of their companies and possibly lower inflationary pressures.

Median pay award forecast for the next 12 months was 3 percent, nearly two percentage points lower than the median pay award of 4.7 percent for the 12 months ending August 2024, results of a survey by the HR data and insights provider Brightmine, formerly XpertHR, showed Wednesday. The forecast was also 50 percent lower than in the same period in 2023.

“With economic pressures mounting, we’re seeing organizations re-evaluate their pay strategies, and many are shifting their focus toward enhancing employee benefits as a way to balance employee expectations with the needs of the business,” Sheila Atwood, senior content manager at Brightmine, said.

“While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent.”

Latest official data showed that UK wage growth softened to the lowest in more than two years in the three months to August, adding support to expectations that the Bank of England will cut interest rates further at the November policy session over concerns about a slowing economy and a cooling labor market.

The survey showed that businesses reported affordability, organization performance and inflation/cost of living as the three factors that are most likely to negatively influence pay award decisions in the next 12 months.

Meanwhile, skills shortages and matching pay levels with their industry were the two factors most likely to boost pay awards next year for half of businesses.

The monthly Brightmine Pay Trends report, based on a survey of 64 pay settlements between July 1 and September 30 covering 433,000 employees, showed that September saw pay rises remained flat at 4 percent for the third consecutive rolling quarter. That compared to the 4.8 percent pay award in the June quarter.

Pay settlements in the public sector over the 12 months to the end of September was a median 5.5 percent, unchanged from the previous rolling year to the end of August. This follows a full 12 months when pay awards in the sector were in excess of 6 percent, the report said.

However, employers plan to raise the pay for most employees next year, while about 4 percent of businesses are planning wage freezes.

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