Startups.co.uk’s 2025 Workforce Report has revealed that over half of UK businesses will give below average pay rises this year.
UK businesses to fall short of average pay rise offering this year
5.9% was the average UK pay rise employees received from Nov 2024 – Jan 2025, according to ONS data. However, Startups.co.uk’s findings show a staggering 63% of businesses plan to increase wages by just 5% or less this year.
This means a significant proportion of UK workers could lose out on receiving even just an average pay rise.
An equally concerning insight from the report highlights that 12% of UK business owners don’t plan to increase employee wages at all in 2025.
What could be fuelling below average pay rises?
Certain financial factors could be leading to employers distributing below average pay rises.
The recent increase in employer National Insurance Contributions (NICs), combined with the new National Minimum Wage and the National Living Wage, may be deterring businesses from spending further money on employee salary increases.
UK industries planning below average pay rises (5% or less) this year:
- Construction – most likely (65%) to raise pay by 5%
- Manufacturing – most likely (40%) to raise pay by 5%
- Technology – most likely (37%) to raise pay by 5%
- Healthcare – most likely (36%) to raise pay by 5%
- Ecommerce/Retail – most likely (30%) to raise pay by 5%
- Consulting – most likely (30%) to raise pay by 3%
- Creative Arts – most likely (30%) to offer no pay rises
- Finance – most likely (27%) to raise pay by 3%
The Startups.co.uk report also reveals that new businesses could be struggling the most with the rising cost of employment. Young startups are the least likely group to offer a pay rise, despite many relying on talent to scale.
In fact, 26% of UK startups less than one year old are not planning to offer pay rises this year – the largest of any surveyed age group.
When this same question was put to firms that have made it through their first year in operation, this figure halved to 13%, showing the older a firm becomes, the more likely they are to offer pay rises.
Editor of Startups.co.uk, Zohra Huda, said, “With the 15% National Insurance hike coming into effect this month, it’s no surprise that business leaders are holding those purse strings tight as they try to navigate their way between attracting and retaining talent and cost-cutting measures.
“Our Workforce Report indicates that whilst less than average pay rises are forecast for 88% of small businesses, soft benefits are a successful strategy to sweeten the lowballing. From free breakfasts to four day work weeks, wage strategies need to get creative.”
