In January 2025, the official inflation rate increased more than expected.
Brightmine’s revised figure for the period ending December 2024 shows that the median annual basic pay increase for the quarter ended January was 3%. This is the second rolling quarter in a row at this level.
This is the lowest median wage settlement since December 2021. It signals a move toward a more conservative approach to pay increases following the high awards made during the period when inflation was higher.
Office for National Statistics data released yesterday shows that the average annual earnings rose to 5.9% for the quarter ending December 2024. This is the fastest increase since April 2024. The annual earnings growth, including bonuses, climbed from 5,5% to 6%.
Office for National Statistics released the UK annual inflation figures today. Consumer prices index (CPI), for January, was 3%. This is a 10-month-high. It’s up from 2.5% in the previous year.
The increase was not as large as expected by economists. According to the ONS, airfares and food prices as well as private education fees were a major factor in driving up costs.
CPIH, which includes owner-occupier house costs, rose from 3.5% to 3.9%. Retail prices index (RPI), a measure of inflation often cited as a benchmark by trade unions was up 0.1% from December to 3.6%.
Grant Fitzner said that one of the main reasons for the increase in inflation was the smaller-than-average fall in retail prices in January, after slower price increases in December.
As inflation increases, employers will be under more pressure to increase pay.
Sheila Attwood is Brightmine’s senior content manager for data and HR insights. She said that the January pay trends data confirmed a clear shift towards more restrained pay awards, as businesses responded to continuing economic pressures.
As we approach 2025, rising national insurance contributions may complicate pay decisions and workforce planning.
Brightmine’s most recent labour turnover data indicates that rates are largely unchanged from the previous year in 2024. The 2024 calendar year saw a median voluntary turnover of 10.3% while the total turnover was 14%. This stabilisation follows the peak of 2022 when the median total labour turnover was 22.5%. It highlights the major shifts in the workforce that have been stabilised since then.
Attwood said: “While the labour turnover rate has stabilised, a combination of stalled pay awards and continuing concerns about workloads and career advancement could increase resignations in 2025. This is especially true if inflation continues to exert pressure on real wages. Employers will need to balance their cost-control measures with competitive salaries and other retention strategies to avoid staff losses.
Despite the stability of turnover, 36.1% are concerned about it. Over half (58.3%) of respondents cite limited opportunities for professional development or promotion as the main cause of employee turnover. Uncompetitive salaries and benefits (49.6%), and excessive workloads (28.3%) are also cited.
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