Pay awards remain stable but employers cautious for future
Businesses are keeping a tight hold on pay budgets amid ongoing concerns about political uncertainty and inflation, according to the latest predictions from Brightmine.
The median basic pay award for the three months to May and year to May was 3.2%, with most pay deals clustering between 3% and 4%, it said.
More than half of employers told Brightmine that they expect to award pay awards below 3% for 2027, and 41.6% forecasted settlements of between 2% and 3%.
Sheila Attwood, senior content manager, data and HR insights, said the latest analysis could indicate the end of elevated pay rises seen in recent years as organisations balance affordability concerns with economic uncertainty.
The resignation of prime minister Keir Starmer earlier this week has added to this instability, she said, and inflation remains above the Bank of England’s 2% target at 2.8%.
“While many employers are currently planning for lower pay awards in 2027, last week’s inflation figures highlight why there is still significant uncertainty around next year’s settlements,” she added.
“With inflation still above the Bank of England’s 2% target and close to the current median pay award, employers may come under renewed pressure to go further than they are currently planning to support employee living standards.
“For now, pay awards remain remarkably stable, with most organisations continuing to award increases between 3% and 4%, but the picture for 2027 remains uncertain, and these early forecasts may shift as inflation and affordability pressures evolve.”
Most settlements for the latest rolling quarter continue to cluster within a relatively narrow range, suggesting employers and employees may be settling into a more consistent pay award pattern, following the volatility of the recent inflationary period.
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Matched sample analysis shows that 42.3% of settlements were lower than those awarded to the same employee group last year, while 32.5% were higher and 25.2% remained unchanged.
Performance-based awards were higher but less common than in previous periods. There were 16 performance-related settlements recorded during the quarter, with the median pay award at 3.6%.
Last week, the Office for National Statistics found that average growth in regular earnings, excluding bonuses, was 3.4%, and 4.4% including bonuses.
Brightmine’s analysis covered 251 pay awards implemented between 1 March 2026 and 31 May 2026, representing pay settlements for approximately 3.2 million UK employees.
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