UK pay rises have reached a plateau, with new research from Brightmine revealing that the median pay award has stabilised at 3%, a level expected to hold steady throughout 2026.

According to Brightmine’s 2025 Pay Analysis, pay growth has now fallen below Consumer Prices Index (CPI) inflation since April 2025, marking a clear shift from the inflation-fuelled increases of the previous two years.

A return to pre-inflation pay trends

The findings suggest the era of record-breaking settlements is firmly over. While most organisations still plan to award increases in the year ahead, few anticipate matching inflation, with affordability and business performance now the dominant factors driving pay decisions.

Nearly half (45%) of employers expect to make awards at the same level as last year, 32% forecast lower awards, and only 23% anticipate higher ones.

“After two years of record-breaking pay awards driven by inflation, 2025 has seen a clear reset,” said Sheila Attwood, Senior Content Manager, Data and HR Insights at Brightmine.

“Employers are now operating in a more balanced environment, where affordability and performance are shaping pay budgets far more than headline inflation figures. The next year will test organisations’ ability to remain competitive while managing tight budgets. We’re seeing a growing focus on benefits, recognition and skills-based pay as employers look for new ways to attract and retain talent without overextending financially.”

Affordability defines 2026 pay strategy

Brightmine’s report highlights a marked shift in the factors influencing pay budgets. Affordability and employer National Insurance contributions are now the biggest downward pressures on pay awards, overtaking cost of living concerns and market comparisons.

While inflation remains a reference point, 69% of organisations use CPI rather than RPI as their benchmark when setting pay levels signalling a move toward more sustainable, cost-managed decision-making.

Outlook for 2026: Stability, not stagnation

Despite tighter conditions, few organisations expect to freeze pay. Instead, many are maintaining annual review cycles but looking beyond base pay to strengthen overall reward propositions including performance-based recognition, enhanced benefits, and skills-linked pay.

This approach reflects a broader trend toward reward diversification, as employers seek to balance cost control with talent attraction and retention.

Key findings from Brightmine’s 2025/26 Pay Forecast

The research draws on data from 213 organisations representing more than 600,000 employees, supported by Brightmine’s Compensation Planning insights.

Highlights include:

• Median pay awards are forecast to remain at 3% for the next 12 months — identical to the level recorded to August 2025.
• Pay awards are clustering more tightly, with the middle 50% expected to fall between 2.5% and 3.5%, indicating reduced volatility compared to 2024.
• Around 37% of organisations forecast a 3% increase, making it the most common outcome.
  Pay freezes remain rare, affecting just 4.2% of employee groups.
• Only 10% of reviews are expected to reach 5% or higher, broadly consistent with 2024 levels.
• All major sectors, private services, manufacturing and production, and not-for-profit, are centred on a 3% award.

October 2025 Pay Trends: Signs of slowdown

Brightmine’s latest quarterly analysis, covering 34 pay awards affecting 54,000 UK employees, shows the levelling trend continuing:

• The median basic pay award held steady at 3% for the quarter to September.
• Awards between 2% and 2.99% became the most common, overtaking 3% settlements.
• 61% of matched-sample pay deals were lower than last year’s outcomes, while just 16% were higher.

Recalibrating for the new normal

With pay growth cooling and inflation easing, the UK reward landscape is entering a period of recalibration. Employers face the challenge of sustaining engagement and competitiveness without relying solely on pay rises.

As Attwood concludes, “The focus is shifting from pay to overall value, how organisations recognise, support and develop their people within realistic financial boundaries.”