New data from HR insights provider Brightmine shows a further decline in pay awards for the final quarter of 2024, with increases averaging 3.3 percent. This represents a continued downward trend from earlier in the year.
The analysis, based on details from 12 pay awards covering around 3,000 UK employees, shows that most deals in the latest period ranged between 1 percent and 5 percent. Notably, there were no pay freezes during this quarter. However, 77.8 percent of the awards were lower than those granted to the same employee groups in 2023.
Brightmine’s data suggests that employers are preparing for the financial impact of higher National Insurance Contributions (NICs) and increased minimum wage rates, which are set to take effect in April 2025. These factors are expected to put further strain on pay budgets, potentially driving down the median pay increase for 2025 below the 4.5 percent recorded in 2024.
Pressure from NIC and Minimum Wage Increases
The UK Government’s decision to raise NICs and implement higher minimum wage rates is likely to influence pay decisions in 2025 . With inflation levels remaining stable, these additional costs may result in cautious adjustments to pay awards.
Sheila Attwood, Brightmine senior content manager, data and HR insights, said, “Businesses are feeling financial pressure as we kick off the beginning of the year and are looking for creative ways to minimise the impact on employee pay packets – whether that’s passing costs onto consumers or reducing the number of employee hours worked especially for entry-level, National Living Wage jobs, like in the case of Next Group.
“However, despite these precautions, there’s undoubtedly pressure on businesses, which is being reflected in the pay rises we’re expecting to see given this year.”
Brightmine’s preliminary data for January 2025 indicates a median basic pay award of 3.5 percent, based on 29 settlements analysed so far – suggesting that cautious pay adjustments will be a defining trend in the months ahead.
In these early 2025 settlements, the most common award is 2 percent, closely followed by 3 percent and 3.5 percent. This early data aligns with Brightmine’s broader pay forecasts, which predict a median pay increase of 3 percent for 2025, based on responses from 289 organisations.
Sheila Attwood added, “These early insights into January 2025 pay awards reflect the broader impact of the UK’s current economic conditions and shifting government policies. As pay strategies evolve, these trends offer a fascinating lens through which to understand how businesses are balancing workforce priorities with external pressures.”
