Private sector pay rises remain at 4%

Pay rises in the private sector remained at 4% in the three months ending in January 2025, according to new figures.

The latest data from Incomes Data Research (IDR) showed that during the quarter, the proportion of wage increases worth 5% or more in the sector rose to 17% from 14% in December 2024, lifting the upper quartile of awards from 4% to 4.5%.

These changes have largely been driven by trends in the manufacturing industry, where the upper quartile has risen to 4.5% from 4.3% during a key month for agreements in the sector.

IDR’s analysis, based on 68 awards covering almost 300,000 employees from 1 November 2024 to 31 January 2025, showed that across the whole economy, the median pay award stood at 3.5%, 0.5% below that in the private sector.

This figure highlights a drop in the median, which remained at 4% throughout the latter half of 2024, and marks the first time it has fallen below 4.0% since it stood at 3.8% in March 2022.

The recent reduction from 4% in December to 3.5% in January is largely down to a reduced percentage of pay increases in the 4% to 4.99% range. Only 31% of wage rises fell within this range, down from around 39% in December. Concurrently, the proportion of pay awards in the 3% to 3.99% bracket increased to just over 41%, up from 33%.

Pay awards in this quarter are generally higher than the current Consumer Price Index (CPI) inflation rate of 3.0% for the year, but the recent inflation rise could soon put upward pressure on wages.

Additionally, IDR highlighted that the National Living Wage (NLW) is set to increase by 6.7% in April, which is a key month for pay reviews. This increase will raise the statutory minimum wage for adult workers aged 21 and over to £12.21 per hour and will affect pay awards in firms where most employees earn the minimum wage or slightly more.

Zoe Woolacott, senior pay researcher at IDR, said: “The whole economy median may rise again by April due to the influence of the forthcoming uplift in the NLW and the uptick in inflation could also play a role. Wage rises tend to lag behind inflation, and so the former may eventually follow the upward trend in the latter, depending on the extent of any rise in inflation.”

While the data predominantly reflects developments in the private sector, it found the median pay award in the not-for-profit sector is comparatively low at only 3.0%. Additionally, outcomes in this area contributed to bringing down the median for the wider economy to below that of the private sector.

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