Pay rises in the UK stalled in the three months to September at 4% and will drop in the new year, according to the latest data from Brightmine.
Data from the rolling three months between 1 July and 30 September showed that lower pay increases were the prevailing feature, with almost two-thirds of settlements lower than the previous year.
Those who offered higher pay rises and kept pay at the same level were evenly split, at 18.4% each.
Public sector deals in the 12 months to the end of September came in at a median of 5.5%, following a full 12 months where they were in excess of 6%. This kept the overall median pay award high.
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Brightmine’s analysis for the quarter was based on 64 settlements, covering 433,000 employees.
Its forecast for pay settlements in 2025 is less optimistic, however, predicting that the median pay award will be 3%, almost 2 percentage points lower than the median award of 4.7% for the year up to August 2024.
Businesses told Brightmine (formerly XpertHR) that the three factors most likely to influence pay decisions downward in the next 12 months would be affordability (65%), how the organisation performed (36%) and the cost of living (27%).
Half of businesses said skills shortages and pressure to match pay levels in their sector as factors that would influence pay rises positively.
UK inflation as measured by the consumer prices index (CPI) fell unexpectedly last week to 1.7% for the year to September, its lowest rate in three-and-a-half years. The retail prices index (RPI) – the inflation measure most used by trade unions in pay negotiations – also fell to 2.7%, its lowest rate since April 2021.
Sheila Attwood, Brightmine senior content manager, data and HR insights, said: “With economic pressures mounting, we’re seeing organisations re-evaluate their pay strategies, and many are shifting their focus toward enhancing employee benefits as a way to balance employee expectations with the needs of the business.
“While pay awards are expected to decline in 2025, businesses are continuing to find creative ways to support their workforce, particularly by addressing skills shortages and retaining key talent.”
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