Nearly half (48%) of UK organisations have reported that salary increase budgets for 2024 were lower than 2023, according to global advisory, broking, and solutions firm Willis Towers Watson (WTW).
Its Salary budget planning report, which analysed 37,000 responses from organisations across over 150 countries, with 1,425 from UK employers, also found that 2025 planned increases were projected to be 3.9% on average, compared to the 4.3% average budget in 2024. Total payroll expenses, including salaries, bonuses, variable pay and benefit costs, continued to rise this year, with 82% of organisations reporting higher payroll expenses than in 2023.
Among those planning to reduce budgets for pay rises, cost management (35%) and weaker financial results (31%) were the leading reasons. For those planning to increase salary budgets, inflationary pressures (44%) and tight labour markets (26%) were the main reasons.
In response to new budget levels, 41% that have made, or are planning, changes to their compensation programmes or workplace flexibility have taken on staff on higher salary ranges, while 37% have undertaken a full compensation review of all employees.
Just over a third (35%) of organisations are experiencing difficulties in attracting and retaining employees, a decrease of eight percentage points across the last two years. Half have placed broader emphasis on diversity, equity and inclusion or greater workplace flexibility, at 51% and 50% respectively, 49% have improved the employee experience and 33% intend to further improve this.
Paul Richards, Europe rewards data intelligence leader at WTW, said: “After several years of higher salary budget increases, rates are starting to decline. The market conditions of the past few years have prompted action from employers to review their culture, benefits and reward and, in turn, ease attraction and retention issues. But as budgets become tighter in light of increased employer national insurance contributions, organisations should continue to review their overall offering, placing emphasis on workplace culture, communication and benefits and reward as a whole.”
