The latest government data from August 2024 shows that the average weekly wage in the UK, including bonuses, across all sectors in England and Wales, is £690 gross, which translates to an annual pre-tax salary of £35,880.
The Office for National Statistics (ONS) also reported that wage growth slowed to 5.4% over the three months leading up to the end of July 2024 (excluding bonuses). Despite this slowdown, wage growth continues to outpace the current inflation rate.
During the same period, the unemployment rate decreased to 4.2%, down from 4.4% in the previous quarter. The last time the unemployment rate was at 4.4% was between July and September 2021.
Wages can vary significantly based on factors such as age, location, whether one is in the public or private sector, industry and seniority level.
Salary expectations
According to the CIPD, employers’ expectations for basic pay increases during 2024 have declined for the first time since spring 2020. After remaining steady at 5% for over a year, UK employers now anticipate a 4% increase in basic pay, marking the first drop since the onset of the pandemic.
In the private sector, the median expected basic pay increase has decreased from 5% to 4%, while in the public sector, expectations have fallen even further, from 5% to 3%. This gap could potentially complicate recruitment and retention efforts in the public sector.
However, average salaries have increased significantly this year as companies, including nearly all major UK supermarkets, strive to keep pace with soaring inflation and remain competitive in the battle for talent.
This has sparked a competitive environment where employees are pushing for wage increases to cope with rising household expenses. Notably, payroll and benefits have become the largest financial challenges for small and medium-sized enterprises (SMEs), with a quarter of businesses identifying these as their highest costs.
Overall, 71% of employers believe they will be able to meet wage expectations this year, though optimism varies significantly across different sectors.
Tech companies, known for offering higher salaries to attract skilled workers, are the most confident, with 80% of firms in this sector stating they are likely or very likely to provide pay increases.
In contrast, the hospitality and retail sectors, which are already struggling with staff shortages, are less optimistic. Around 19% of restaurants and cafes expressed that they may not be able to meet employee wage expectations this year. The upcoming increase in the National Minimum Wage, which will boost the average hourly wage by over £1,000 annually, is expected to further strain their budgets.
Salary expectations and demands in the UK are influenced by several factors, including inflation, sector-specific trends and overall economic conditions.
On average, UK employees can anticipate a nominal salary increase of about 4.4% in 2024. This figure marks a slight decrease from the 5.1% increase seen in 2023, but is still above the decade’s average. Adjusted for inflation, the real salary increase is expected to be around 1.3%, the first real-term increase in several years.
Sector-specific variations are notable. For instance, sectors like technology, finance and hospitality are experiencing stronger pay growth compared to others. In particular, roles in IT and finance have seen robust demand, leading to higher salary expectations in those fields.
Overall, while employees in the UK can expect a moderate rise in their salaries, the rate of increase varies significantly by sector and is tempered by the broader economic environment, especially with a new government in power.
How can organisations meet the demands of the businesses and employee salary expectations?
Navigating employee wage demands, especially in a climate of rising expectations, requires a strategic and multifaceted approach. Here are some key strategies:
Open communication and transparency
- Engage in dialogue: regularly communicate with employees about the financial health of the company, market trends and how compensation decisions are made. Transparency can build trust and understanding
- Expectation management: help employees understand the broader economic context, including inflation rates and industry benchmarks, so they can set realistic expectations
Review and adjust compensation structures
- Benchmarking salaries: regularly benchmark your salaries against industry standards to ensure you remain competitive, while avoiding overcommitment. Utilise resources like salary surveys to stay informed
- Performance-based increases: consider linking wage increases to performance metrics or the achievement of specific business goals. This can help control costs while rewarding high performers
Enhance non-monetary benefits
- Flexible work arrangements: offering flexibility, such as remote work or flexible hours, can compensate for lower wage increases and improve job satisfaction
- Professional development: invest in training and development programs. Employees value opportunities for growth, which can sometimes offset wage expectations
Optimise workforce efficiency
- Automation and technology: implement technology to increase productivity, allowing you to manage wage demands without increasing the workforce size. This could involve automating routine tasks or improving processes
- Cross-training employees: encourage multi-skilling within your team to increase efficiency and reduce the need for additional hires, thereby controlling wage-related expenses
Strategic workforce planning
- Long-term planning: develop a workforce plan that aligns with your financial forecasts. Anticipate future wage pressures and budget accordingly to avoid sudden, unsustainable increases
- Selective recruitment: focus on recruiting for critical roles that directly contribute to revenue generation or operational efficiency. This approach ensures that wage investments yield the highest return
Consider profit-sharing or bonuses
- Variable pay structures: implement profit-sharing schemes or bonuses instead of permanent wage increases. This aligns employee rewards with company performance, ensuring sustainability
Engage in collective bargaining
- Union negotiations: if dealing with unions, approach negotiations with a clear understanding of what is affordable while being open to compromise. Consider offering phased increases or conditional wage adjustments tied to company performance
By implementing these strategies, businesses can better manage wage demands, maintain employee satisfaction and ensure financial stability.
