Paydata’s survey shows that the impact of the Autumn Budget will result in a large proportion of pay awards being lower than anticipated by 2025.
According to the pay and rewards analyst, 60% of employers expect their pay awards next year to be lower than what they planned in advance. 38% don’t expect anything different.
Paydata estimates that the median wage award for 2025 will be 3%. This is down from the 3.5% pre-budget estimate. Employers are reacting to the higher national insurance contributions and the increase in national living wages, along with a lower threshold where they must pay national insurance.
In addition, the survey found that 2/3 of employers were considering reducing 2025’s overall pay budget. 35% are looking at reducing operational budgets and 34% are absorbing additional costs through a reduction in profits.
Only a little over a quarter of respondents (27%) anticipate reducing their budget by 0.5% to 1%. 15% are expecting a reduction up to 0.5%.
Tim Kellett said, “Affordability is more important than other factors such as low inflation”.
“However, a variety of other approaches are being considered. These include reducing operational budgets and increasing costs.
Paydata noted several sector-specific trends. For example, construction and electric companies accepted lower profits in order to absorb the rising cost of wages, while housing associations chose to reduce their internal budgets.
The outlook of the company for 2025 is similar to that of Brightmine which also predicted a median wage award of 3% for 2025.
A wide range of employers have responded to budget announcements in uncertainty. Some sectors claim that the wage and NI increases will lead to job loss and closures.
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