Brightmine says median UK basic pay awards have settled at 3% as employers balance continued cost-of-living pressure against tighter budgets and higher employment costs.
The median award was 3% in the three months to the end of August, the second consecutive rolling quarter at that level. The previous period was revised down from 3.2%.
Three percent was also the most common settlement, accounting for 32% of awards recorded by the HR data provider. Brightmine expects the pattern to continue, forecasting a median 3% award over the year to 31 August 2027.
The forecasts remain relatively concentrated. Around 71% of expected pay awards fall between 3% and 4%, suggesting most employers are planning increases rather than freezes but have limited appetite for a return to the larger settlements seen during the earlier inflation shock.
Sheila Attwood, senior content manager for data and HR insights at Brightmine, said: “Pay awards remain stagnant, and that very much looks to be the story of 2027.”
Affordability is the most frequently cited downward pressure. Two-thirds of organisations identified it as a constraint on future pay decisions, while 37% pointed to higher employer National Insurance contributions and 26% cited organisational performance.
Employees are pulling in the opposite direction. Almost two-thirds of employers said inflation and the cost of living were increasing pressure for higher awards, while 52% cited pay levels elsewhere in their industry and 47% pointed to statutory minimum-wage requirements.
Despite those competing pressures, Brightmine does not expect widespread pay freezes. Around 97% of forecast reviews are expected to produce some increase.
The moderation in settlements has consequences beyond payroll budgets. Pay growth is an important component of domestic inflation, particularly in service industries where labour accounts for a large proportion of operating costs. Slower awards can therefore ease pressure on company expenses and, over time, on inflation.
A lower headline settlement does not remove the retention problem. Employees continue to experience housing, energy, food, transport, and borrowing costs materially above their pre-inflation-shock levels. Businesses unable to increase base pay substantially may therefore need to reconsider benefits, bonuses, progression, flexibility, and other parts of the employee proposition.
Brightmine’s wider workforce forecasts suggest some organisations are already adjusting. Almost a quarter expect to reduce hiring over the next 12 months, 17% anticipate lower bonus spending, and 31% expect to increase their use of skills-based recruitment.
Restricting external hiring places more emphasis on retaining existing employees, developing internal skills, and reallocating roles. Skills-based recruitment can also widen candidate pools by placing less weight on conventional qualifications or previous job titles.
Pay planning for 2027 is therefore taking place against a more restrained labour market than during the peak of the post-pandemic recruitment cycle. Employers face greater cost pressure but may also encounter less competition for some categories of staff.
The 3% median does not imply that every sector or occupation will move at the same rate. Skills shortages, minimum-wage exposure, union bargaining, company performance, and local labour conditions can all produce substantial differences.
At aggregate level, however, Brightmine’s latest figures point to a period in which employers continue to raise salaries while increasingly treating affordability as the limit on how far those increases can go.
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