Nearly half (47%) of employers have noticed increased staff turnover after delaying pay rises for professional and white-collar workers – a glaring example of the strain on businesses facing tough financial decisions in a difficult economic environment.
That’s according to new research from Robert Walters, a global talent solutions firm. Their survey found that many companies are prioritising overhead reduction, leading to the postponement or scaling back of salary reviews.
While these measures may provide short-term financial relief, they appear to be having unintended consequences for staff morale and retention. According to the survey, 36 percent of respondents reported that delayed pay rises have caused disengagement within their teams.
Pressure to cut costs
Chris Eldridge, CEO of Robert Walters UK&I, said, “Businesses are under immense pressure to keep costs down, and for many, salary increases just haven’t been feasible this year. In fact, 64 percent of business leaders said budget constraints and business performance were the top reasons for delaying or reducing pay rises.
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“Our research shows that these decisions, while understandable, are not without consequence. Whether it’s higher turnover or a gradual drop in motivation, companies are starting to feel the effects.”
The survey indicates that employees are increasingly dissatisfied, with many seeking opportunities elsewhere. Among those who did not receive a pay rise this year, 63 percent reported they were actively looking for new roles. Even employees who received a pay increase expressed discontent, with 61 percent saying the rise was lower than they had anticipated.
Employee expectations and retention strategies
“There’s a clear message here: even if employees understand the business pressures, unmet expectations are still pushing them to reconsider their options. And with AI tools streamlining the job application process, employees have more opportunities than ever to explore new roles,” Eldridge added.
Sinead Hourigan, Global Head of Talent Advisory, CX & Commercial at Robert Walters, highlighted the role of market data in managing pay-related communications. “This is where salary benchmarking and market insights become so important. Workers who haven’t seen a pay rise may be planning to discuss salary in their mid-year reviews, and employers will need market data to communicate credibly, demonstrate fairness, and manage expectations,” she said.
Hourigan advised employers to think creatively about how to retain talent beyond financial incentives. Robert Walters recommends that organisations focus on career development opportunities, flexible working arrangements and internal mobility pathways to enhance engagement.
“We’re seeing more employers ask how they can retain their best people when pay increases aren’t on the table,” Hourigan noted. “When salaries are constrained, culture and communication matter more than ever. The organisations that succeed will be those that balance cost control with a thoughtful, market-informed approach to employee engagement.”
