Zarah ChoudharyOver four-fifths (80%) of employers anticipate awarding lower pay increases in 2025 compared to 2024, according to Income Data Research’s (IDR) latest poll of 168 employers on pay intentions.
The vast majority (94%) of respondents cited affordability as the key influence on their pay decisions.
Inflation, while still significant, was a less dominant factor, with three-fifths of employers mentioning it as an influence compared to 69% in the previous year.
Regarding pay rise expectations, 43% of employers planned to award increases between 3% and 3.99%, while 37% expect to offer rises between 2% and 2.99%.
Only 14% of employers anticipated awarding a pay increase of 4% or more; 16% expected to maintain pay rises at the same level as 2024, while just 4% foresaw awarding higher increases.
The National Living Wage grew in significance as a factor influencing pay decisions.
Around half (49%) of employers cited it as a consideration, up from 34% in the previous poll.
This shift comes despite the lower statutory uplift for 2025 – set at 6.7%, compared to 9.8% in 2024.
IDR said that this increase reflected the pressure to maintain pay differentials between lower-paid workers and more senior roles.
The voluntary living wage, in contrast, continued to have a smaller impact, with only 30% of employers identifying it as a factor.
The poll also explored the impact of changes to National Insurance (NI) contributions, which included an increase in employer NI rates and a lowering of the earnings threshold, taking effect in April 2025.
The most common response from employers was to award lower pay increases than they otherwise might have, with 37% describing this as ‘extremely likely’ and 32% as ‘moderately likely’.
However, many employers reported that they would be able to absorb the increased costs associated with these changes.
Premium pay is likely to gain greater prominence in 2025, with 14% of employers considering increases to rates for overtime, shift work, and unsocial hours, up from just 5% in 2024.
Additionally, some employers were considering enhancing employee benefits, such as maternity, paternity, or parental leave provisions, pension offerings, or holiday entitlements.
The poll, conducted in November and December 2024, gathered responses from mostly large and medium-sized employers, collectively representing over 1.2 million workers.
Two-thirds of respondents operated in the private sector, with 43% in private services and 23% in manufacturing and primary industries.
Public sector employers accounted for 13% of the sample, while 21% were from the not-for-profit sector.
