Pay settlements nudged up slightly in the three months to May, research has suggested, primarily driven by this year’s rise in the national living wage, as the wider jobs market remains hugely challenging for many.
The median pay increase across the economy rose from 3.2% to 3.4% in the three months to May 2025, according to the latest monitoring figures from Incomes Data Research (IDR).
Pay settlements
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While the cost of living was a factor, the primary driver in the uplift was April’s increase in the national living wage (NLW), it argued.
The proportion of pay rises worth 6% or more grew from 12% in April to 15% in the latest analysis period as a result of the latest increase in the NLW, which rose by 6.7% to £12.21 on 1 April, IDR said.
This change affected many pay reviews in the private sector, particularly those in low-paying areas such as hospitality and retail, and as a result the median here was higher at 3.5%.
Outcomes in manufacturing and production were largely unchanged since IDR’s April study, with the median here holding steady at 3.5% and the interquartile range narrowing a little from between 3.0% and 4.0% to between 3.0% and 3.9%.
“The National Living Wage has a less direct impact in manufacturing, compared to private services. However, manufacturing employers still face pressures to offer competitive rates of pay in order to recruit and retain staff,” said Zoe Woolacott from IDR.
Within the public sector, meanwhile, median pay award was 3.6%, with the fact the government has accepted most of this year’s recommended pay rises by the independent pay review bodies a key driver here.
The figures have come as research has suggested the jobs market remains very tough this year. A report from job-matching platform Adzuna has argued that entry-level opportunities have dropped by nearly a third since the advent of widely available generative AI tools at the end of 2022.
Research from jobs platform Indeed has also predicted graduate vacancies this summer will be 12% on last year and at their weakest level since at least 2018.
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