New research shows a growing divergence in pay award trends between the public and private sectors in the UK. According to the latest figures, the median basic pay award remains at 3% in the private sector, unchanged for the sixth rolling quarter, while the public sector has seen median awards rise to 4.4% in the 12 months to May 2025.

The higher public-sector figure reflects targeted increases for key worker groups, with recent pay review decisions delivering awards typically between 3.5% and 5%. These above-inflation settlements are seen as part of a broader government strategy to bolster public services, support essential workers and address long-standing staffing pressures.

“This clear gap between public and private sector pay reflects two very different reward strategies,” explains Sheila Attwood, HR Insights and Data Lead at Brightmine, which led the study. 

“In the public sector, government-led awards are being used to tackle workforce pressures and support key services. Meanwhile, private sector employers are holding steady at 3%, taking a more cautious approach as they wait for firmer economic signals.”

Mixed Economic Signals

The overall picture comes amidst continued economic uncertainty. Inflation has remained elevated, with CPI easing slightly to 3.4% in May (down 0.1 percentage point from April) and RPI falling from 4.5% to 4.3%. Forecasts suggest inflation is unlikely to return to pre-2022 levels until mid-2026, meaning real wages are still under pressure.

Meanwhile, the UK economy has shown signs of slowing. Following a 0.7% GDP rise in Q1, April saw a 0.3% contraction, suggesting that earlier momentum may be weakening. Labour market indicators also show a cooling trend, with unemployment nudging up to 4.6% and vacancies falling to 736,000, down from 760,000.

“With the economic outlook still uncertain and private sector pay settlements stuck at 3%, employers are clearly trying to balance cost pressures with the need to retain talent,” added Attwood. “We’re seeing a cautious approach to salary budgets, offset by investment in other areas such as employee benefits and wellbeing.”

Key Findings 

Brightmine’s analysis covers 196 pay awards effective between 1 March and 31 May 2025, representing over 2.9 million employees. Among the headline findings:

• 3% remains the most common pay award, accounting for 20.1% of all settlements.
  
  
• 2.5% was the second most common, featuring in 14.5% of cases.
  
  
• 79.7% of pay awards were lower than those received by the same employee groups in 2024.
  
  
• Only 4.7% of organisations awarded higher settlements than in 2024, with the rest freezing or maintaining previous levels.
  
  
• Just 3.6% of organisations implemented a pay freeze.
  
  
• Across both basic and performance-based pay, the overall median remains at 3%.

The data highlights a continued trend of pay restraint, particularly in the private sector, as employers navigate a challenging economic environment. In contrast, the public sector appears more willing to intervene, providing pay boosts in an attempt to sustain vital services.