Half (49%) of UK organisations reported that their 2024 salary budgets were lower than the previous year, according to global advisory, broking and solutions firm Willis Towers Watson (WTW).
Its Salary budget planning report was compiled by its Rewards Data Intelligence practice. Approximately 32,000 responses were received from employers across 168 countries worldwide, with 1,179 UK organisations responding.
The findings revealed that overall salary budget increases are expected to rise by 4% in 2025, despite consistently declining since 2023, while the overall median pay rise for 2024 fell to 4.6%, compared 5.3% in 2023.
Two-fifths (39%) of respondents reported having trouble attracting and retaining talent in 2024, dropping from 48% over the past two years.
Three-quarters (75%) said their total payroll expenses, which include salaries, bonuses, variable pay and benefit costs, were higher than last year. Those that lowered salary budgets cited inflationary pressures, cost management concerns and weaker financial results as the causes, whereas those who raised salary budgets cited inflationary pressures and a tight labour market.
Almost half (45%) of those that made changes or are planning changes to compensation programmes, or workplace flexibility, have undertaken a full compensation review of all employees, while 42% raised starting salary ranges and 41% reviewed compensation for specific groups.
Paul Richards, Europe rewards data intelligence leader at WTW, said: “As the workplace stabilises and employers look more towards the future, employers 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 and 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.”
