Employers face lower wage expectations in 2025 after Budget | Article

Three fifths (60%) of employers expect their 2025 Budget payouts to be lower than originally expected, according to research from pay and rewards organization Paydata.

The analysis of 169 employers also found that 38% of respondents do not expect changes to the initial salary levels planned for 2025. Meanwhile, 27% expect their payroll budget to shrink by 0.5% to 1%, while 15% expect this to happen. reduce to 0.5%.

The study found that median wages in 2025, excluding those affected by the National Living Wage, are now expected to be 3%, down from a pre-Budget expectation of 3.5%. This is with an interquartile range of 2% to 3.5%.

To mitigate increased costs in line with the budget, two-thirds of respondents are considering cutting their payroll budget for 2025, 35% are looking to reduce operating budgets, and 34% are considering covering additional costs through lower profits.

Tim Kellett, managing director of Paydata, said: “With two thirds of employers considering cutting their payouts in 2025 following the autumn Budget, affordability is taking precedence over other factors such as low inflation. However, a number of other approaches are also being considered, including cutting operating budgets, increasing costs and reducing headcount, sometimes by not replacing those who leave.

“There are also some interesting industry trends, for example the majority of construction and electricity companies accepting profit cuts, while housing associations are more likely to opt for cuts to internal budgets, both wages and operating. It is clear that the market picture is changing and we will continue to support employers by monitoring market conditions as we begin the new year.”