UK salary budgets forecast to drop in 2024

Research conducted by global advisory firm, Willis Towers Watson, indicates that salary budgets for UK workers are projected to drop in 2024, after reaching a high this year.

Willis Towers Watson’s most recent Salary Budget Planning Survey revealed that employers in the UK are planning for an average salary increase of 4.4% in 2024. This percentage is lower compared to the 5.1% average rise in 2023 and the 4.3% salary increase recorded in 2022.

The primary factor influencing changes in salary budgets, as cited by approximately 71% of the respondents, is the pressure of inflation. This is followed by concerns regarding a contracting labour market (54%). Other influences include employee expectations (27%), anticipated economic downturn or poorer financial performance (23%), and worries related to cost management (20%).

Moreover, a substantial 37% of respondents have raised starting salaries and have conducted comprehensive compensation reviews. Further steps involve higher base salaries (36%), hiring within relevant salary brackets (35%), targeted salary raises (34%), and increased use of retention bonuses (27%).

Also, 58% of respondents have incorporated greater workplace flexibility, 57% have expanded their focus on diversity, equity, and inclusion, and 41% have taken measures to enhance the employee experience. Additional changes involve altering health and wellness benefits (35%) and adjusting compensation programmes (29%). The percentage of those who financed a total compensation spend increase through total reward optimisation has doubled from 2022, now reaching 44%.

Paul Richards, UK Reward Data Intelligence Leader at Willis Towers Watson, stated: “Even though we are forecasting lower salary increases for the coming year, they are still significantly higher than what we have observed over the past decade. Companies with a well-defined compensation strategy and a deep understanding of the affecting factors will be more effective in attracting and retaining employees, keeping up with a rapidly changing environment where past assurances no longer hold true.”

He added, “As the workforce grows more diverse, dynamic, and demanding, it’s vital to comprehend their specific needs and preferences, while offering the desired employee experience and career opportunities within the company.”

Originally published 11th July 2023