As the year draws to a close, Zoe Woolacott reviews how pay awards have tracked throughout 2024 and compares them to previous years.
Employees typically received pay rises centred on around 4.5% in 2024, according to our analysis of pay awards across the economy. Outcomes at the start of the year were higher at around 5% but started to come down in April and settled at around 4% from July onwards. The latest figures, for the three months to November, show that while the median increase remains at 4%, the interquartile range has drifted down a little. This is in line with the generalised, if slow, downward trend in pay awards this year, following highs of 5% in 2023 and 6% before that in 2022, on the back of historically high inflation rates.
Pay awards tend to lag inflation and as the latter has come down, pay increases remain above it for the moment. If inflation falls further then pay awards are likely to follow it, eventually. However, inflation is forecast to stay steady, in the short term at least, and therefore pay awards could remain at the current level into the early part of 2025.
Pay awards
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Nearly four-fifths (78%) of pay outcomes across the economy in 2024 were worth 4% or more. The largest cluster – 31% – of awards were worth between 4% and 4.99%. However, our analysis reveals that such high-end increases were more dominant in the first half of the year. Exactly four-fifths (80%) of pay rises effective between 1 January and 30 June were worth at least 4%. The proportion of pay rises at this level between 1 July and 31 December 2024 is much lower at just over three-fifths (61%).
The falling rate of inflation has reduced one key upward pressure on pay. But while the rate at which prices are rising was lower in 2024 than in 2023, the cost of living has remained high. Prices for items such as food, mortgages and rents, remain higher in 2024 than they were before the pandemic and this has maintained a certain amount of pressure on employers to award more generous increases. Many employers also faced upward pressure from both the National Living Wage (NLW), which rose by 9.8% in April 2024, as well as tight labour markets in many areas.
Despite the general downward trend in the level of awards over the past year, pay rises remain high in comparison to the last decade when the median increase was around 2% to 2.5%, and increases rarely showed above 3%.
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Analysis by sector reveals that outcomes in the public sector were slightly above those in the private sector in 2024, with the median award in each at 4.7% and 4.5% respectively. The differing outcomes in the private and public sectors reflect the cycle of pay between the two, with the public sector currently in the ‘catching-up’ phase, after a lengthy period in which pay awards lagged behind those in the private sector. In addition, many current public sector pay awards are based on recommendations made much earlier in the year, when inflation was higher.
Our analysis is based on a sample of 547 pay awards effective between 1 January and 31 December 2024, mostly at large private sector organisations, together covering more than 6.2 million employees.
