Salary budgets for UK employees are expected to decline in 2024 after peaking this year, according to research by Willis Towers Watson.
The global advisory, broking and solutions firm’s latest Salary budget planning survey found that UK employers are budgeting an average increase of 4.4% for 2024. This is lower than the average 5.1% increase in 2023 and the average 4.3% 2022 pay rises.
Nearly three-quarters (71%) of respondents cited inflationary pressure as the main driver influencing changes in salary budgets, followed by concerns over a tighter labour market (54%). Other factors include employee expectation (27%), anticipated recession or weaker financial results (23%) and concerns related to cost management (20%).
More than one-third (37%) have raised starting salaries and embarked on a full compensation review. Additional measures include higher base salaries (36%), hiring people in relevant salary ranges (35%), targeted base salary increases (34%) and enhanced use of retention bonuses (27%).
Additionally, 58% have introduced more workplace flexibility, 57% have broadened their diversity, equity and inclusion emphasis, and 41% have taken action to improve their employees’ experience. Other changes include changing health and wellness benefits (35%) and modifying compensation programmes (29%), while those who funded an increase in total compensation spend through total reward optimisation doubled from 2022 to 44%.
Paul Richards, UK reward data intelligence leader at Willis Towers Watson, said: “While we are seeing lower salary increases forecasted for next year, they’re still well above the ones we’ve seen for the last 10 years. Those businesses that have a clear compensation strategy, as well as a good understanding of the factors affecting it, will be more successful attracting and retaining employees while keeping pace with an evolving environment in which yesterday’s certainties no longer apply.”
“As workforces become more diverse, demanding and dynamic, the key is understanding their specific needs and preferences, while providing the desired employee experience and careers within the business.”