UK-based pay and reward consultancy 3R Strategy recently released its 4th Global Salary Planning Report to assist companies in preparing for the challenges of budgeting for 2025. The report, based on data from organizations in over 40 countries and 20 industries, sheds light on salary budgets in 2024 and forecasts for 2025, as well as aspects such as pay transparency, communication, performance-related pay, the use of salary data, and gender pay gap reporting.
In 2022, with UK inflation peaking at 8.6%, most organizations set their pay budgets at 5%. Despite a drop in inflation to 6.3% in the following year, the median pay increase budget remained the same. However, with inflation hitting a low of 1.7% in September 2024, the lowest in over three years, and the 2024 median pay increase budget at 4%, with 2025 forecasted at 3.5%, it seems that UK employees can expect to see their wages increase at a rate higher than inflation for the first time since the pandemic.
The report also highlights variations in pay budgets across different sectors and countries. For example, the financial services sector in the UK has the highest pay budgets for 2025 at 5%, driven by the need to retain technical expertise and fierce competition for talent. In contrast, the charity and media & arts sectors are anticipating the lowest increases at 2% and 2.8%, respectively.
Moreover, the recent announcement of a 6.7% increase in the National Living Wage from April 2025 by the government poses a challenge for organizations with a planned budget of 3.5% for that year. This means that entry-level positions paid at the National Living Wage will require a 6.7% rise, impacting overall salary budgets. Additionally, the proposed increase in employer National Insurance Contributions (NIC) from 13.8% to 15% could lead some organizations to offset this cost by reducing pay increase budgets.
The importance of clear pay principles and processes cannot be understated, as effective communication of these principles can foster trust and understanding among employees. While a majority of organizations have implemented clear pay principles, there is room for improvement in communication, with 35% of respondents not sharing this information with their teams at all.
The push for greater pay transparency is evident, with 66% of organizations displaying pay ranges on job adverts in some countries. However, there is still work to be done, as 29% of respondents do not include salary ranges in job postings, potentially limiting their ability to attract top talent. Similarly, the practice of asking for candidates’ current salaries can perpetuate pay disparities and impede diversity efforts.
Overall, the findings of the report indicate positive growth in UK employees’ salaries for 2025, offering hope to individuals grappling with the rising cost of living. 3R Strategy’s commitment to providing valuable insights for salary planning in 2025 reflects their dedication to helping businesses attract and retain talent in a competitive market.
