Abstract: WTW’s Wage Finances Planning survey of 1,264 UK organisations reveals wage improve budgets are secure at 3.6% for 2026. Half of employers (51%) made no adjustments to projected pay budgets, whereas 27% decreased and solely 10% elevated them. Voluntary turnover has dropped from 10.1% to eight.6%, with organisations investing in coaching (52%), worker expertise (51%), and well being advantages (39%) to retain expertise. The shift displays a transfer from reactive pay responses to strategic workforce planning.
Based on WTW’s newest Wage Finances Planning survey of 1,264 UK organisations, wage budgets for 2026 stay at 3.6% – the identical degree as 2025’s precise will increase.
What’s driving this stability? With inflation expectations now regulated throughout many economies, employers are not compelled to reply reactively to financial shocks. As a substitute, organisations can plan proactively, bringing better readability and self-discipline to compensation choices.
Are UK employers altering their wage budgets for 2026?
Most aren’t. Half of employers (51%) made no adjustments to their projected pay budgets since they had been first set mid-year. Amongst these making changes, 27% decreased budgets whereas solely 10% elevated them.
What’s influencing these choices? For organisations making adjustments, the important thing components had been:
- Inflationary pressures (28%).
- Anticipated stronger monetary outcomes (20%).
- Considerations over a good labour market (20%).
- Modifications to compensation technique (11%).
Paul Richards, UK Reward Knowledge Intelligence Chief at WTW, explains the shift: “Employers are getting into 2026 with clearer pay priorities and stronger self-discipline, utilizing wage budgets not merely as monetary inputs however as strategic levers.”
He provides: “Within the 12 months forward, success will rely not on how a lot price range organisations have, however on how successfully they direct it.”
How have UK wage will increase modified over the previous 5 years?
UK wage budgets have adopted a dramatic trajectory, reflecting the financial turbulence of current years:
- 2021: 2.4%
- 2022: 3.2%
- 2023: 5.3% (peak inflation response)
- 2024: 4.3%
- 2025: 3.9%
- 2026 (deliberate): 3.6%
The spike in 2023 reveals how organisations scrambled to answer hovering inflation. Now, with that stress easing, there’s a shift towards extra refined decision-making – stronger governance round pay choices, higher use of market knowledge and segmentation, and elevated deal with affordability and inner fairness.
Surprisingly, solely 22% of organisations report points attracting or retaining workers. Voluntary turnover has dropped noticeably too, from 10.1% to eight.6% over the previous 12 months. The expertise disaster many feared hasn’t materialised in the best way predicted.
What are employers doing as an alternative of elevating salaries?
With tighter budgets, organisations are redirecting assets towards retention methods that stretch past base pay. The highest 5 actions are:
- Coaching alternatives (52%): Upskilling and growth programmes.
- Worker expertise enhancements (51%): Higher office tradition and engagement.
- Well being and wellness advantages (39%): Enhanced wellbeing help.
- Office flexibility (34%): Distant work and versatile preparations.
- Compensation programme adjustments (28%): Bonuses, fairness, and complete rewards changes.
This shift displays an important recognition: worker satisfaction and retention rely on extra than simply wage. As Gaby Joyner, Head of Worker Expertise, Europe at WTW, places it: “As pay budgets stabilise, we’re seeing simply how vital it’s to deal with honing the worker expertise.”
Her remark about AI is especially telling. Whereas organisations have invested closely in AI and automation pilots over the previous two years, this hasn’t but translated into actionable labour-cost financial savings. “It’s key that organisations proactively plan make one of the best use of their budgets for worker satisfaction and productiveness.”
How ought to HR leaders strategy wage budgets in 2026?
The stabilisation of wage budgets presents you with each problem and alternative. Restricted will increase imply you’ll must work more durable to make sure pay stays aggressive and equitable. However the shift towards strategic planning opens house for extra considerate workforce choices.
The query isn’t ‘How a lot can we afford to pay?’ It’s ‘How can we deploy our assets to draw, retain, and inspire the expertise we’d like?’
Three priorities for navigating this panorama:
- Transfer past one-size-fits-all approaches: Generic wage will increase received’t lower it anymore.
- Use market knowledge intelligently: Direct assets the place they’ll have actual impression.
- Handle pay compression strategically: Concentrate on the areas the place it issues most.
Whole rewards – not simply wage – form the worker expertise. In a 12 months outlined by stability, technique turns into your differentiator. The way you allocate restricted assets will matter greater than how a lot you must spend.
