More than half of employers are planning pay awards of less than 3 percent in 2027, suggesting the period of elevated wage settlements seen in recent years may be beginning to ease despite ongoing uncertainty over inflation.
Early forecasts indicate organisations are taking a more cautious approach to pay increases as they balance affordability concerns against continued pressure on household finances and employee expectations.
The outlook comes as inflation remains above the Bank of England’s 2 percent target and wage growth continues to outpace price rises in some parts of the economy, creating uncertainty over where pay settlements will settle next year.
Employers signal more cautious approach
New data from HR data and insights provider Brightmine found that 41.6 percent of organisations expect their 2027 pay award to be worth more than 2 percent but less than 3 percent. A further 41.6 percent expect pay awards to fall between 3 percent and 4 percent, while only 2 percent anticipate increases of more than 4 percent.
The figures suggest employers are preparing for a moderation in pay growth after several years of higher settlements driven by inflation and labour market pressures.
Sheila Attwood, senior content manager for data and HR insights at Brightmine, said inflation remained an important factor in determining next year’s awards.
“While many employers are currently planning for lower pay awards in 2027, this week’s inflation figures highlight why there is still significant uncertainty around next year’s settlements.
“With inflation still above the Bank of England’s 2 percent target and close to the current median pay award, employers may come under renewed pressure to go further than they are currently planning to support employee living standards.”
Current settlements remain stable
While employers are forecasting lower increases next year, current pay awards have remained largely unchanged.
Brightmine’s analysis of 251 pay settlements covering around 3.2 million employees found the median basic pay award stood at 3.2 percent in the three months to the end of May. The same figure was recorded for the year to date.
Three-fifths of settlements fell between 3 percent and 4 percent, suggesting that employers and employees may be settling into a more predictable pattern after the volatility experienced during the recent inflationary period.
The data also showed that 42.3 percent of settlements were lower than those awarded to the same employee groups last year, while 32.5 percent were higher and 25.2 percent remained unchanged.
Labour market conditions remain mixed
The findings come against a backdrop of a cooling labour market. Latest figures from the Office for National Statistics showed vacancies have continued to fall, while unemployment stood at 4.9 percent.
Although many employers report easing recruitment pressures, skills shortages persist across sectors including technology, engineering, healthcare and construction, leaving organisations under pressure to remain competitive when attracting and retaining talent.
Performance-related pay awards continue to exceed the overall average. Among the performance-based settlements recorded by Brightmine, the median increase was 3.6 percent, above the overall median award of 3.2 percent.
Attwood said the outlook for 2027 remained uncertain and could change as economic conditions evolve.
“For now, pay awards remain remarkably stable, with most organisations continuing to award increases between 3 percent and 4 percent, but the picture for 2027 remains uncertain, and these early forecasts may shift as inflation and affordability pressures evolve.”
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
