LONDON, December 7, 2023 – Overall average salary increase budgets in the UK are set to rise by 4.6% in 2024, declining slightly since their peak at 5.2% in 2023, but still higher than in the two prior decades. That’s according to the latest Salary Budget Planning survey by WTW, a leading global advisory, broking and solutions company.
Inflationary pressure is the leading influencing factor behind salary increase budgets, cited by almost three quarters (71%) of UK employers. Other influences include driving employee retention following concerns over a tight labour market (49%) and meeting employee salary expectations (28%).
Yet, while inflation has remained high for much of 2023, starting the year at 10.1%, and remaining relatively high at 7.3% in the 12 months to June 2023, that figure fell to 4.6% in October. This trend looks set to continue with inflation in 2024 projected to fall to 3.1%.
“Despite pay rises peaking in 2023, we are still seeing healthy salary increases forecasted for 2024. And while we’re not yet out of the woods, inflation is projected to continue to fall which offers some breathing space for employers and employees alike.”
Paul Richards | Europe Reward Data Intelligence Leader, WTW
“Despite pay rises peaking in 2023, we are still seeing healthy salary increases forecasted for 2024. And while we’re not yet out of the woods, inflation is projected to continue to fall which offers some breathing space for employers and employees alike. Yet, attraction and retention remains a problem, although it has eased marginally since 2022 (from 55% to 47%) so employers need to stay focused on balancing the entire package of rewards they offer, both monetary and non-monetary, in order to remain competitive and to align with employee wants and needs” said Paul Richards, Europe Reward Data Intelligence Leader, WTW.
In light of ongoing attraction and retention issues, employers have been focused on non-monetary actions to remedy them. These include more workplace flexibility (66%), broader emphasis on diversity, equity and inclusion (55%) and improving the employee experience (47%). Additionally, employers have committed to hiring staff in a higher salary range (50%), raising starting salary ranges (45%) and undertaking a full salary review of all employees (43%), which could also be seen as a reflection of the increased emphasis on pay transparency.
Companies are also moving towards greater work flexibility, as half (52%) of employers offer a choice of remote, onsite or hybrid working, while 37% offer a flexible work schedule. As this trend grows, some companies are changing rewards in line with remote working. One-in-six (17%) employers have taken action or are planning to change allowances, while 14% are moving to change benefits, and 10% have or are planning to adjust base pay.
Tom Wooldridge, Employee Experience Director at WTW said: “When allocating and communicating salary increases, organisations need to ensure everyone understands both the process and the objective factors that determine pay. Improving the pay conversation goes a long way in maintaining confidence that equitable pay is being delivered and improving the overall employee experience.”
The Salary Budget Planning Report is compiled by WTW’s Reward Data Intelligence practice. The survey was conducted in December 2023. Approximately 34,000 responses were received from companies across 168 countries worldwide. In the UK, 1,271 organisations responded.
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