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Salary budgets set to continue falling

Published on: 21 Jan 2025

Budgets for salary increases fell at nearly half of UK organisations in 2024, according to a survey.

Salary budgets set to continue falling

The poll by global adviser and broker WTW found that 48% of organisations cut their salary budgets last year, in a trend set to continue in 2025. The average budget increase in 2024 was 4.3%; this is expected to fall to 3.9% this year.

However, 82% of organisations reported higher payroll expenses last year, including salaries, bonuses, variable pay and benefit costs.

Of companies that were planning to reduce pay rise budgets, 35% cited cost management as the main reason, while 31% mentioned weaker financial results. Among companies planning to increase salary budgets, 44% cited inflationary pressures as the chief reason, followed by 26% mentioning tight labour markets.

Fewer organisations were struggling to attract and retain employees, with 35% of companies saying this was an issue – a fall of 8% over the past two years.

However, companies were acting to improve their workplace cultures, with 51% emphasising diversity, equity and inclusion, 50% offering greater workplace flexibility and 49% looking to improve employees’ experience. Some 28% were looking to increase training opportunities.

“After several years of higher salary budget increases, rates are starting to decline, as companies face a new set of challenges in place of the pandemic and Great Resignation,” said WTW Europe rewards data intelligence leader Paul Richards.

He suggested that “as budgets become tighter in light of increased employer national insurance contributions, companies should continue to review their overall offering, placing emphasis on workplace culture, communication and benefits and rewards as a whole”.