Data from HR data and insights provider Brightmine has shown that the UK median basic pay award remains at 3 per cent for a sixth consecutive rolling quarter, but that private sector pay increases are continuing to lag behind inflation. In contrast, median pay awards in the public sector stand at 4.4 per cent in the 12 months to May 2025, driven by targeted increases across key worker groups.
The results confirm that recent public sector pay review decisions have resulted in a range of awards between 3.5 per cent and 5 per cent. With the overall public sector median sitting above inflation, these rises reflect the government’s efforts to support essential workers and civil service departments, and address sector-specific pressures.
“This clear gap between public and private sector pay reflects two very different reward strategies,” notes Sheila Attwood, HR Insights and Data Lead at Brightmine. “In the public sector, government-led awards are being used to tackle long-standing workforce pressures and support key services. Meanwhile, private sector employers are holding steady at 3 per cent, taking a more cautious approach as, they wait for firmer economic signals.”
Pay restraint across sectors continues against a backdrop of mixed signals. Inflation rose sharply in April, before easing slightly in May. Consumer Prices Index (CPI) inflation dipped by 0.1 percentage point to 3.4 per cent, while the Retail Prices Index (RPI) fell from 4.5 per cent to 4.3 per cent. Inflation is expected to remain elevated over the summer, with more significant declines not forecast until mid-2026, therefore it is likely to remain above pay awards for the foreseeable future.
Economic growth has also shown signs of slowing. After a 0.7 per cent quarter-on-quarter rise in Q1 2025, GDP contracted by 0.3 per cent in April, suggesting that earlier momentum is faltering. At the same time, the labour market is beginning to cool.
Unemployment edged up from 4.5 per cent to 4.6 per cent, while job vacancies dropped from 760,000 to 736,000. Rather than indicating widespread redundancies, economists suggest these figures point to a more cautious hiring environment.
“With the economic outlook still uncertain and private sector pay settlements stuck at 3 per cent, employers are clearly trying to balance cost pressures with the need to retain talent,” said Attwood. “What we’re seeing is a cautious approach to salary budget increases, balanced by a focus on other terms and conditions, including employee benefits.”
