LONDON, January 7, 2026 – UK salary increase budgets for 2026 remain stable at 3.6%, matching 2025’s actual increases. Inflation expectations have regulated across many economies, reducing the need for reactive pay increases and instead allowing organisations to plan proactively. That’s according to WTW’s latest Salary Budget Planning survey (NASDAQ:WTW).
Budgets expect to remain stable due to greater clarity, more disciplined prioritisation and understanding where compensation can drive meaningful impact.
For the current cycle, half of employers (51%) have made no change to their projected pay budgets, since they were first set mid-way through the year. While only 10% are increasing budgets, 27% of employers will decrease pay budgets. For those making changes to their initial budget projections, inflationary pressures (28%), anticipated stronger financial results (20%), concerns over a tight labour market (20%) and changes to compensation strategy (11%) are factors influencing pay budgets.
“Employers are entering 2026 with clearer pay priorities and stronger discipline, using salary budgets not simply as financial inputs but as strategic levers. Yet beneath the steady medians lie meaningful shifts in how organisations allocate pay, manage complexity, and plan for a workforce that continues to evolve faster than traditional budgeting cycles.” said Paul Richards, UK Reward Data Intelligence Leader, WTW
“In the year ahead, success will depend not on how much budget organisations have, but on how effectively they direct it.”
Paul Richards | UK Reward Data Intelligence Leader
“In the year ahead, success will depend not on how much budget organisations have, but on how effectively they direct it. Stability may be the story at year-end, but strategy will define what comes next.”
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 (planned) |
| 2.4% | 3.2% | 5.3% | 4.3% | 3.9% | 3.6% |
The recent consistency in salary budgets reflects underlying changes in how leaders are approaching workforce planning and compensation decision-making, with many organisations reporting stronger governance around pay decisions, more sophisticated use of market data and segmentation and increased focus on affordability and maintaining internal equity. As such, only a fifth (22%) of organsations have reported issues with attracting or retaining employees.
Staff voluntary turnover rates have also continued to drop (moving from 10.1% to 8.6%) over the last year, with companies directing limited budget capacity toward retaining critical talent and addressing pay compression where it is most acute. Other staff retention actions have included increasing use of training opportunities (52%), improving the employee experience (51%), making changes to health and wellness benefits (39%), greater workplace flexibility (34%), and changes to compensation programmes (28%).
Gaby Joyner, Head of Employee Experience, Europe at WTW said “As pay budgets stabilise, we’re seeing just how important it is to focus on honing the employee experience. While we’ve seen a surge of investment in AI and automation pilots in the last two years, as organisations test new ways to improve productivity and operational efficiency, this hasn’t yet translated into actionable labour-cost savings. So, it’s key that organisations proactively plan how to make the best use of their budgets for employee satisfaction and productivity.”
The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted from September to November of 2025. Approximately 36,960 responses were received from companies across 156 countries worldwide. In the U.K 1,264 organizations responded.
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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Nearly half of organisations report that salary increase budgets for 2024 were lower compared to last year, but still higher than historic norm
