A third (33%) of UK employers have reduced planned 2025 salary rises in light of the increase to employers’ national insurance contributions from April, according to Towers Watson, which is part of risk, broking, HR and benefits consultancy Willis Towers Watson.
Its National insurance pulse survey, which surveyed more than 200 UK employers across a range of industries, also found that among respondents that have reduced salary increases this year, the pay budget pot fell by around 1%, taking planned rises to 3%.
In addition, almost half of respondents said they are looking to make additional HR changes, including plans to increase scrutiny around hiring (41%), making cuts to employee headcount (28%) and implement a hiring freeze (8%). Other changes they are considering making include reviewing pension salary sacrifice arrangements and reducing non-salary budget rewards.
The report highlighted that, overall, salary budgets look to be aligned with current inflation rises. However, because salary increases are not split equally, with high performers and those being promoted receiving a higher portion of the budget, this has resulted in other employees receiving a smaller percentage, which is a below-inflation increase.
Lindsey Clayfield, senior director, work and rewards at Towers Watson, said: “We were starting to see salary budget increases moving down towards pre-pandemic levels, and the change to the employer national insurance contributions has accelerated this. We are now seeing salary budgets more aligned to the 3% we last saw in 2019.
“Employers will need to be smart about how they allocate the salary budget increases, ensuring key and high-performing talent is being rewarded effectively. Equally, reviewing benefit offerings and non-monetary reward can help support employee needs, particularly for those that might be affected by below-inflation salary increases.”
