Three-fifths (60%) of employers expect their pay awards post Budget for 2025 to be lower than originally anticipated, according to research by pay and reward organisation Paydata.
Its analysis of 169 employers also found that 38% of respondents do not expect to change their original pay award planned for 2025. Meanwhile, 27% expect to see their pay budget reduce by between 0.5% and 1%, while 15% expect it to reduce by up to 0.5%.
The research found that the median pay award for 2025, excluding those affected by the national living wage, is now expected to be 3%, down from a pre-Budget expectation of 3.5%. This is with an interquartile range of between 2% and 3.5%.
To mitigate the increased costs following the Budget, two-thirds of respondents are considering reducing their 2025 pay award budget, 35% are looking to reduce operational budgets, and 34% are looking at absorbing the additional costs via reduced profits.
Tim Kellett, managing director at Paydata, said: “With two-thirds of employers considering reducing their 2025 pay awards since the Autumn Budget, affordability has taken priority over other influences such as low inflation. However, there are also a range of other approaches being considered, including reducing operational budgets, increasing costs, and reducing headcount, sometimes through not replacing leavers.
“There are also some interesting sector trends, such as the majority of construction and electricity firms accepting a reduction in profits, while housing associations are more likely to opt for reducing internal budgets, both pay and operational. It is clear there is a changing picture within the market, and we will continue to support employers by monitoring market conditions early into the new year.”
