Report finds that wages will rise faster than inflation.

New data shows that wages are expected to rise faster than inflation, for the first since the pandemic.

According to the fourth Global Salary Planning Report by UK-based pay & reward consultancy 3R Strategy, the gap between inflation & pay rises is shrinking. 2024 figures suggest a median budget of 4% in comparison with the latest inflation rate at the Office for National Statistics which stands at 1.7%.

According to the study, which surveyed organisations in more than 40 countries and across 20-plus industries globally, next year could also see higher-than-inflation increases, with budgets expected to be 3.5% while inflation is forecast at 2% to 2.5% in 2025.

In the report, respondents were asked to provide pay review data from 2024 as well as 2025 projections expressed as a percent of their base salary bill. The report also looked at pay transparency, communication and performance-related compensation, as well as the use of salary information.

In 2022, the median budget for pay was 5%. However, inflation rose to 8.6%. One year later, the pay rates were unchanged while inflation dropped to 6.3%. This year’s data shows a very different picture. It indicates that UK employees are now seeing their pay packets increase above inflation rates.

The report found that the UK’s financial services sector will have the highest pay budgets in 2025, at 5%. Meanwhile, the media and arts and charity sectors are expected to see the lowest increases, at 2% each.

3R Strategy warns that employers must factor in the 6.7% increase to the national living wage from April 2025 when planning their budgets.

The report also noted that the employer National Insurance contribution is set to increase from 13.8% to 15 %. It remains to be determined how this will impact pay budgets, but some organizations may reduce their wage budget to pass on the cost to employees.

Rameez Kaeem, the founder and managing director at 3R Strategy, commented on the data. He was happy to note that UK workers are expected to experience a real increase in their salaries, for the first year since the pandemic. This is in contrast with last year’s results.

He said: “As UK interest rates and inflation have started to decline, it is a positive sign for employees who are struggling with high costs of living.” Our report is intended to be a useful resource for businesses in 2025 when planning their salary plans.

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