Wages in the UK are set to stabilise in the year ahead and workers should be feeling richer soon according to new research.

UK wages are set to increase by three percent in 2015, this follows a steady increase of 2.5 percent in 2014, according to Towers Watson’s latest Salary Budget Planning report. The figures suggest that this rate of salary growth is also likely to continue into 2016.

This year has seen comparatively low inflation, with an expected average of just 0.2 percent. However, UK workers should start feeling less pressure on disposable income as salary increases will surpass inflation.

Paul Richards, head of Towers Watson’s Data Services Practice for EMEA says:

“Across Europe, the Middle East and Africa, our research reveals that rather than Consumer Price Indices driving salary budgets, pay growth is increasingly being driven by factors such as the competition for talent, economic growth expectations and also the shifting weight of base salary or guaranteed cash within the overall reward package against other elements such as car allowances and performance-related bonuses. In the Middle East, for example, we see an increased use of allowances as a substantial portion of the reward package.

“A clear distinction remains between Western Europe and developing economies in terms of the scale of pay growth, with average increases higher than 10 percent in several African countries including Ghana and Malawi. However, it’s also important to bear in mind that such environments have different pressures on employers than those experienced in more developed economies, such as inflation and the demand for talent in a growing economy.”

The expected pay growth is predicted to hit all sectors but could be greater for certain skilled jobs with smaller talent pools, such as the pharmaceutical industry and hi-tech professionals.

Joris Wonders, Leader of Towers Watson’s EMEA Reward practice, adds:

“Our latest Global Workforce Study confirms that pay remains the number one factor in attracting and retaining talent. The challenge is working out how to use the salary budget more effectively to ensure sufficient recognition for top performers or those with critical skills, where the market might be moving at a faster pace. It really comes down to segmentation, differentiation and giving a bigger slice of the reward pie to key members of staff that companies want to keep for the long-term.”





Amie Filcher is an editorial assistant at HRreview.