LONDON, July 27, 2026— Average salary increase budgets for UK companies in 2027 are expected to remain stable at 3.4%, which is in line with 2026’s actual increase of 3.4%. This is according to the latest Salary Budget Planning Report by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.
The report found that pay budgets remained largely steady in 2025, with over half (52%)% of organisations reporting no change between anticipated and actual salary budgets. Cost management pressures (35%), inflationary pressures (30%) and anticipated recession or weaker financial results (27%), continue to drive employers’ cautious approach to salary planning.
“Salary budgets may be holding steady, but the way organisations are using their budget is changing significantly. Employers are moving away from broad-based increases and toward more precise, performance-driven pay strategies that target the roles, skills and talent segments that matter most,” said Paul Richards , senior director, Rewards Data Intelligence, WTW.
This shift is already reshaping how employers manage compensation programmes. Almost a third (31%) are adjusting their programmes, with another 19% planning future changes. Other changes include: raising starting salary ranges (32%), hiring at higher salary ranges (30%) and increasing the use of retention bonuses or spot awards to help secure key employees (29%)
“Employers will continue to experience salary increases in the “land of 3%” for the foreseeable future given these dynamics.”Ruchi Arorasenior managing director, Work & Rewards Europe
Economic uncertainty and financial pressures are also contributing to steady retention levels, with most employees (85%) remaining with their current employers and only 17% of companies adding head count. Rather than relying on hiring alone, employers are focusing on other ways to strengthen the employee value proposition, including improving the employee experience (43%), expanding training opportunities (38%) and placing a broader emphasis on diversity, equity and inclusion (38%).
“Salary increase budgets reflect the current balance between the supply and demand of labour. While the focus is often on the low demand for labour, most leaders forget that we are still in the throes of low supply. Employers will continue to experience salary increases in the “land of 3%” for the foreseeable future given these dynamics. Those who focus on using that money wisely will be the ones that win the inevitable war for talent once demand picks up,” said Ruchi Arora, senior managing director, Work & Rewards Europe, WTW.
About the survey
The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted from March to May 2026. 34,024 responses were received from companies across 156 countries worldwide. In the U.K., 1,081 organisations responded.
About WTW
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.
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