UK employers are holding salary increase budgets steady at 3.6% for 2026, in line with last year, according to WTW’s latest Salary Budget Planning survey.
The findings suggest inflation expectations have eased across many economies, reducing the need for reactive pay awards and giving employers more confidence to plan pay rises.
WTW says greater clarity on economic conditions has led to more disciplined pay decisions, with employers focusing on where reward spend can have the most impact.
It found that around half of employers (51%) have made no changes to their pay budgets since setting them earlier this year. Just 10% have increased budgets, while 27% have reduced them.
It also found that for organisations that have revised their plans, inflation pressures (28%) remain the main driver, followed by stronger expected financial results (20%), labour market concerns (20%) and changes to reward strategy (11%).
WTW notes that stable budgets reflect a more measured approach to pay, with stronger governance, better use of market data and a sharper focus on affordability and internal pay fairness. As a result, only 22% of employers report problems attracting or retaining staff.
Meanwhile, voluntary turnover has continued to fall, from 10.1% to 8.6% over the past year. Alongside targeted pay increases for key roles, employers are also investing in training (52%), improving the employee experience (51%), enhancing health and wellbeing benefits (39%), increasing flexibility (34%) and reviewing wider reward programmes (28%).
WTW UK reward data intelligence leader Paul Richards says: “Employers are entering 2026 with clearer pay priorities and stronger discipline, using salary budgets not simply as financial inputs but as strategic levers. Yet beneath the steady medians lie meaningful shifts in how organisations allocate pay, manage complexity, and plan for a workforce that continues to evolve faster than traditional budgeting cycles.
“In the year ahead, success will depend not on how much budget organisations have, but on how effectively they direct it. Stability may be the story at year-end, but strategy will define what comes next.”
WTW head of employee experience, Europe Gaby Joyner says: “As pay budgets stabilise, we’re seeing just how important it is to focus on honing the employee experience. While we’ve seen a surge of investment in AI and automation pilots in the last two years, as organisations test new ways to improve productivity and operational efficiency, this hasn’t yet translated into actionable labour-cost savings. So, it’s key that organisations proactively plan how to make the best use of their budgets for employee satisfaction and productivity.”
