More than two fifths of UK employers are planning above inflation pay rises, suggesting that today might be a “not so blue Monday”.
Research has revealed that 44 percent of employers’ staff pay rises will be between 3 and 4 percent, surpassing the consumer prices index (CPI) rate of 2.5 percent.
CPI dropped to 2.5 percent in the 12 months to December 2024, down from 2.6 percent in the 12 months to November, suggesting people may feel their pay going a little bit further.
Another key measure of inflation, the consumer prices index including owner occupiers’ housing costs (CPIH), was 3.5 percent in the 12 months to December 2024, unchanged from November.
But commentators have suggested that the rise in employer national insurance contributions and minimum wage increases may drive up inflation come April.
‘Paltry’ pay rises
Robert Walters, which conducted the research, said the planned pay bump is due to 76 percent of professionals stating that they are looking for a new job this year. Better pay is a key reason for this renewed job search. A similarly high proportion of employers (69 percent) told researchers they believe they could lose staff this year if they offer “paltry” pay rises.
More than two-fifths (44 percent) of managers agree that the leading reason for awarding pay rises this year is to improve morale and retention. Almost a third said their planned pay rises were part of efforts to alleviate cost-of-living pressures (31 percent), and more than a fifth (21 percent) said the wage increases reflected employee promotions, length of service or targets being met.
Pay disappointment
However, 29 percent of employers said they will only be in a position to give pay rises of 2 percent or less.
Bonus payments, or the lack of them, are another potential issue this year. Recent Robert Walters research showed that 44 percent of white-collar professionals in the UK believe they’re ‘firmly on track’ to receive an annual bonus, but 45 percent of them may be left empty-handed.
Chris Eldridge, CEO of Robert Walters UK & Ireland, said: “The unexpected drop in inflation, paired with the 0.1 percent increase in GDP is allowing employers a small respite.
“However, with growth meagre, no guarantees that it will continue and professionals still prepared to leave a position for the promise of better pay – there is reason to keep optimism cautious.”
“Employers right now are finding their hands are tied. Coming into 2025, many are juggling shrinking budgets with increasing employee demands.
“It’s unsurprising that some professionals are willing to take the risk and scope out new opportunities to see if the grass is greener elsewhere. Especially if they feel their expectations aren’t being met with their current employer.”
Competitive compensation
The findings show that employees that remain in their current roles risk failing to significantly improve their financial take home. Researchers at Robert Walters said this suggests that the most viable path to securing a higher salary in the upcoming year for many involves switching jobs.
The firm’s salary survey found that on average a professional can secure a 10-15 percent pay increase for the same job role in a different company. This pay boost can be double that for in-demand roles or scarce talent.
Researchers found that a third of professionals said they would be open to leaving their current organisation for a salary increase of between 10-15 percent. However, 46 percent said they would only think about moving for a pay increase above 15 percent.
Alternative compensation
More than three in five employers said they were ‘concerned’ about losing important employees who have received below inflationary pay increases. More than half of employers also expect a dip in morale or productivity if compensation is not high enough.
In response to tight budgets and talent concerns, many employers have increased investment back into employee experience and staff perks.
Researchers found that employees increasingly place value on alternative compensation. For example, 52 percent of workers agreed they would consider a job offer based on an employer’s personal development funding, while 49 percent said work from home subsidies would make a job offer more attractive.
Work/life balance is still a top priority. Three fifths (60 percent) of professionals said they were willing to stay in a lower-paying job if it offers flexibility, rather than switching jobs just for more pay.
Eldridge said: “While the recent drop in inflation may calm some nerves for the coming year, many employers will be holding their breath once more as we edge closer to April.
“It shouldn’t be ignored that while salary will always remain a crucial part of any position, the degree of flexibility a role offers could be a vital incentive for professionals to stay.
“On the flip side, the recent drop in inflation could make some professionals consider if this is their time to take a calculated risk and move for a better salary, progression options or increased flexibility.”
