Targeted Pay Strategies Replace Broad Salary Increases for UK Employers

UK employers are shifting their salary budgets from broad increases to more targeted pay strategies that focus on specific skills and retention, according to a report by WTW. The advisory company found that 52% of organisations reported no change between anticipated and actual salary budgets in 2025.

The majority of employers (35%) cited cost management pressures, while 30% mentioned inflationary pressures and 27% said they were concerned about recession or weaker financial results.

Paul Richards, senior director for rewards data intelligence at WTW, noted that companies are moving away from uniform salary increases towards 'more precise, performance-driven pay strategies' that target specific roles and skills. As a result, 31% of employers are adjusting their reward programmes, and 19% plan to make changes in the future.

Employers are also exploring other ways to boost retention, including improving employee experience (43%) and placing more emphasis on diversity, equity, and inclusion (38%). Ruchi Arora, senior managing director at Work & Rewards Europe, added that 'those who focus on using that money wisely will be the ones that win the inevitable war for talent once demand picks up.'