A third of employers have reduced planned salary increases for 2025 as a result of rises in employer national insurance from April.
A survey with 200 UK employers revealed salary budgets had been pruned by 1 percent, equating to a drop in planned wage increases to 3 percent at those organisations.
The NI Pulse Survey from Towers Watson, part of WTW, also found that April’s NI increases have prompted companies to ramp up hiring scrutiny (41 percent), make cuts to employee headcount (28 percent) and freeze recruitment (8 percent). Respondents told the survey they have also reviewed pension salary sacrifices and slashed non-salary budget rewards.
Researchers said that overall, salary budgets are aligned with current inflation rises. However, wage rises are not split equally. High performers and people being promoted take home a higher portion of the salary budget, meaning other employees receive a smaller percentage that equates to 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 NI accelerated this. We are now seeing salary budgets more aligned to the 3 percent 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 rewards can help support employee needs, particularly for those that might be affected by below inflation salary increases.”
