LONDON, July 15, 2024 - Half (49%) of UK organisations reported that their salary budgets for the 2024 cycle were lower than the previous year, as the overall median pay rise for 2024 fell to 4.6%, compared 5.3% in 2023. That’s according to the latest Salary Budget Planning Report by WTW, (NASDAQ: WTW), a leading global advisory, broking, and solutions company.
As employers report that a period of high resignation and turnover has passed and organisations maintain headcount, employers are more conservative with their salary budgets as they look to longer term stability in their employee base. While two-fifths of employers (39%) have reported having trouble attracting and retaining talent in 2024, this figure has dropped from 48% over the past two years.
Overall salary budget increases are expected to rise by 4% in 2025, which despite consistently declining since 2023, remain fairly high.
In addition, total annual payroll expenses (which includes salaries, bonuses, variable pay and benefit costs) continue to rise substantially in the UK, as three quarters (75%) of companies report that their total payroll expense was higher than last year.
Inflation can impact salary budgets in both directions. Those organisations that lowered salary budgets cited inflationary pressures, concerns related to cost management and weaker financial results as the leading causes. Whereas those who raised salary budgets this year cited inflationary pressures and a tight labour market. Inflation has dropped significantly in 2024 to 2.3% and is expected to remain at a similar level in 2025.
In light of these issues, 45% of companies that have made changes or are planning changes to compensation programs or workplace flexibility have undertaken a full compensation review of all employees, while 42% have raised starting salary ranges and a similar percentage (41%) have reviewed compensation for specific groups.
Additionally, organisations are taking actions to address current market conditions and employee needs, particularly placing broader emphasis on diversity, equity and inclusion, more workplace flexibility and improving the employee experience.
“As the workplace stabilises and employers look more towards the future, companies are aligning pay priorities with their compensation philosophy and business strategy.”
Paul Richards | Europe Rewards Data Intelligence Leader, WTW
Paul Richards, Europe Rewards Data Intelligence Leader, WTW, said “As the workplace stabilises and employers look more towards the future, companies are aligning pay priorities with their compensation philosophy and business strategy.
“In light of inflationary pressures, cost management concerns, and continued tight labour market in some areas, employers are taking more of a holistic approach to their rewards programmes, factoring in bonuses, long-term incentives and health and wellness benefits.
“However, a more targeted review of specific employee groups could allow for greater support for those roles/skills in demand or those in lower salary ranges. Pay transparency and equity is top of mind for employers and giving a big-picture view of what employees are offered can ensure the salary increase process is clear and emphasize the connection between pay increases and business performance.”
The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted between April and June. Approximately 32000 responses were received from companies across 168 countries worldwide. In the UK 1179 organisations responded.
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