2024 pay forecast: falling inflation resulting in pay awards drop

Published: 20 March 2024 | by Brightmine

• The latest pay forecast predicts a median basic pay award of 4% for 2024.
• For the three months to the end of February 2024, the median basic pay award stands at 4.8%, down for the second consecutive rolling quarter.

The latest pay forecast data from Brightmine, formerly XpertHR, predicts the median basic pay award in 2024 will be 4%, down two percentage points on the median in 2023, which was the highest recorded level for 32 years.

In the three months to the end of February 2024, the median basic pay award stands at 4.8%, down for the second consecutive rolling quarter, indicating the downward trajectory has already started.

Sheila Attwood, Brightmine senior content manager, data and HR insights, comments: “Our forecast indicates the value of pay awards will fall further as we head towards April, the busiest month of the year for this activity. Over the year as a whole, we forecast a median 4% pay award, although 5% is the most common prediction, suggesting a final outturn somewhere in the region of these two figures.

“The fact that pay awards are now higher than CPI inflation shows that organisations are doing all they can to pay what they can afford to retain talent and are not looking to reduce pay awards as quickly as inflation is falling.

“Employers know that they might struggle to match employee expectations on pay this year. They will be keeping a keen eye on inflation levels and what their competitors are offering. Organisation performance and affordability will also be key drivers of decisions on pay increase levels this year.”

Pay forecasts for 2024

Employers and employees have felt the impact of high inflation in the last few years. In 2023, the median pay award stood at 6%, a two-percentage-point jump from the previous year – a direct impact of inflation. However, the landscape is changing, with measures of inflation continuing to decline, and as a result, so are pay awards.

Ahead of April, the busiest period for pay awards, Brightmine collected details of 213 pay award forecasts for 2024, representing close to a quarter of a million UK employees from 158 organisations, and found that:

• The median pay award forecast for 2024 is 4%. When combining organisations that reported in the survey they had already settled and those yet to finalise the pay award 2024, the median forecast for all employee groups remains at 4%.
• The most commonly predicted pay award value is 5%. This figure represents around one-fifth (23%) of all forecasts, closely followed by 4% and 3%.
• Few pay deals are expected to be worth more than those in 2023. Close to half (47%) of forecast pay awards are expected to be lower than the 2023 award employees received. Around one-third (34%) are expected to be the same, whilst just 19% are expected to be worth more than the previous settlement.
• Pay awards are higher in larger organisations. The median forecast for large organisations is slightly higher at 4.5%, while predictions for smaller organisations (less than 1,000 employees) are 4%.

Latest rolling quarter findings

The median pay award has dropped for the second consecutive rolling quarter to 4.8%, the lowest level seen since the rolling quarter to September 2022. Most deals this rolling quarter came into effect in January, contributing to the figure being down 0.2 percentage points from the previous rolling quarter, which had already been revised down from 5.1%.

Based on 94 pay settlements that came into effect in the three months to the end of February 2024, covering close to 200,000 employees – Brightmine found that:

• The most common pay rise given is 4%. A fifth (20%) of pay awards are worth exactly 4%.
• A quarter of deals are worth 6% or more. Following a revision to January data, the upper quartile has dropped to 6% for two consecutive rolling quarters.
• More than half of pay deals were worth less. Based on a matched sample of 76 employee groups, 58% of pay deals were lower than those given to employees a year ago. Just a quarter of deals (28%) were worth more than the previous year.

Sheila Attwood added: “After historically high pay awards during 2023, that came largely off the back of the jump in inflation, we knew that employers would show more restraint in their 2024 pay reviews.

“The data for the first deals concluded in 2024 confirms this, with Brightmine recording a median 4.8% award in the three months to the end of February. However, this is just the beginning of the year, and the beginning of us building a picture for what reviews over the full year will look like.”

Pay review pattern – whole economy, February 2023 to February 2024