Pay awards remain ‘cautious’ in uncertain economy

The median pay award in the UK remained steady at 3% in May, with public sector pay awards outstripping the private sector.

According to Brightmine, the 3% median stayed in place for the sixth consecutive rolling quarter as companies take a more cautious approach in the current economic environment.

In the public sector, the government has been responding to pressure from unions and the public to support essential workers and civil service employees.

This meant a range of awards between 3.5% and 5% among public sector employers, according to Brightmine’s data.

Sheila Attwood, HR insights and data lead, predicted that inflation – which rose sharply in April – is likely to remain above pay awards for the foreseeable future.

Job vacancies dropped from 760,000 to 736,000, the company pointed out, reflecting a more cautious hiring environment rather than widespread redundancies.

After “awful April” when businesses faced a hike in employer national insurance contributions and other costs, inflation dipped slightly to 3.4% in May – still way above the Bank of England’s target of 2%.

Across Brightmine’s data sample, a fifth of awards were worth exactly 3%, making this the most common award in the last quarter. This was followed by 2.5%, making up 14.5% of awards.

Almost eight in 10 awards were lower than the same group of employees received in 2024, and only 4.7% received higher settlements than a year ago. Among the remainder, most received the same award as last year.

Attwood said: “This clear gap between public and private sector pay reflects two very different reward strategies.

“In the public sector, government-led awards are being used to tackle long-standing workforce pressures and support key services. Meanwhile, private sector employers are holding steady at 3%, taking a more cautious approach as they wait for firmer economic signals.”

She added that employers were trying to balance cost pressures with the need to retain talent.

“What we’re seeing is a cautious approach to salary budget increases, balanced by a focus on other terms and conditions, including employee benefits,” she said.

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