UK employers are expected to keep pay awards subdued into 2027, according to HR data and insights provider Brightmine.
The median basic pay award in the three months to the end of August stood at 3 per cent, marking the second consecutive rolling quarter at this level. This follows a downward revision from 3.2 per cent in the previous rolling quarter. The most common basic pay award was also 3 per cent, accounting for almost a third (32 per cent) of settlements.
Brightmine 2027 Pay Forecast research forecasts a continuation of this trajectory across the next 12 months, with a median 3 per cent pay award in the year to 31 August 2027. Awards are expected to remain tightly clustered, with 71 per cent of predicted pay awards falling between 3 per cent and 4 per cent.
There are competing financial pressures facing organisations as they consider pay budgets for the year ahead. The greatest of these downward pressures is affordability, cited by two-thirds (66 per cent) of organisations. More than a third (37 per cent) say increased employer National Insurance contributions will constrain their next pay award, while organisational performance is also expected to exert downward pressure for 26 per cent.
Almost two-thirds (64 per cent) of organisations say inflation and the cost of living are increasing upward pressure on pay awards, followed closely by pay levels within the same industry (52 per cent) and the statutory National Minimum or Living Wage (47 per cent). Despite this, employers are not expecting to return to pay freezes, with 97 per cent of forecast pay reviews expected to result in an increase.
Beyond pay awards, financial pressures are beginning to show up elsewhere in 2027 planning. Almost a quarter (24 per cent) of organisations expect to reduce hiring over the next 12 months, 17 per cent expect spending on bonuses to decrease, and close to a third (31 per cent) expect to increase their use of skills-based hiring.
Sheila Attwood, Senior Content Manager, Data and HR Insights at Brightmine, comments: “Pay awards remain stagnant, and that very much looks to be the story of 2027. Brightmine data shows pay growth settling at 3 per cent, and there is very little reason for that to shift significantly in the medium term.
“Pay rises are still expected to be the norm, which is a positive. But the size of those increases is being held back by affordability. Employers are having to balance employee expectations around the cost of living with higher employment costs and tighter budgets. As a result, many organisations are likely to beyond base pay, reviewing the wider reward package and recruitment approaches to help retain the skills they need.”
