by Sachin
As of March 2025, salary increase trends in the UK are viewed as appropriately cautious looking onward to the unpredictable situation of the economy on one hand, and inflation and escalating costs of employment on the other. This article points out the salary expectations for the year 2025 for employees in the UK according to various factors with insights into different industrial sectors.
Overview of Expected Salary Increases in 2025
As evident in several recent surveys, modest salary increases are what UK employers are planning for 2025. The Salary Budget Planning Report of WTW states that the employers intend to raise salaries by an average of 3.9%, a little lower than 4.3% for 2024 and 5.3% for 2023. Such a trend reflects the fact that salary budgets have been gradually contracting over the last years.
Incomes Data Research (IDR) further corroborates that 43% of employers plan for awards anywhere between 3% and 3.99% in 2025, whereas 37% expect increases of between 2% and 2.99%. Interestingly, 80% of those employers concede that increases proposed for 2025 would be less than in 2024, which demonstrates a continued alleviation of pressure for increases in pay.
Factors Influencing Salary Decisions
A set of influencing factors is in play for salary decision-making for the year 2025.
Affordability is the foremost consideration. Ninety-four percent of employers say that affordability is the paramount influence on pay decisions, as they are concerned about the financial viability of their business in the current economic climate.
Inflation has also made its way to the pay table. Approximately 60% of employers consider inflation when setting pay rises. The inflation rates have been falling, but the cost of living remains undesirable for both employers and employees.
The upcoming increase in the National Living Wage by 6.7% from 1st April 2025 to £12.21 per hour is playing a role in affecting pay structures so as to preserve wage differentials with roles above the minimum wage.
Salary Trends Specific to Different Sectors
Notable increases are being witnessed across certain sectors.
In the retail sector, a handful of big companies such as the John Lewis Partnership and Currys have now declared wage rises. John Lewis is investing £114 million to pay for a 7.4% pay rise for 65,000 employees. Currys is giving £8 million for a 6% September pay rise to 15,000 workers.
The hospitality sector has been home to sector recruitment above inflation to induce retention within the stiff labor market, including Costa Coffee.
Cost of Employment Pressures on Pay
Increased employer National Insurance contributions and a lowering of the earnings threshold will put further pressure on their salary budgets from April 2025, and more than one-third (37%) of employers would be ‘extremely’ likely to give lower pay rises because of this; 32% feel it to be ‘moderately’ likely.
Forecasts indicate that salary increases for workers in the UK can be less than 4% on average by 2025. Employers would thus have to find a balance between ensuring their pay remain competitive enough to retain the required talent versus what the economic realities state around them in terms of rising employment costs. Some industries may have an upward influence upon salaries, but the overarching trend indicates a more conservative stance toward salary budgets come the next year.
Conclusion
In a few words, it can be said that there may be slight improvements in the rate of salary increase of employees in the UK by the year 2025. The average increase can be expected at 3.9%. Employers are mainly dealing with the issue of how much competitive remuneration they should offer to retain good talent, while also dealing with the economic strain and increasing employment costs. While some sectors may outside the above-average levels, the general trend remains one of prudence in salary budgets for the forthcoming year.
Source:
https://iaca.in/uk-salary-projections-2025-what-employees-can-expect/