According to new data, the rate of pay increases in the private sector was 4% for the three-month period ending January 2025.
Incomes Data Research’s (IDR) latest data shows that the percentage of wage increases of 5% or higher in the sector increased to 17% during the quarter from 14% at the end of December 2024. This lifted the upper quartile from 4% to a 4.5%.
The manufacturing sector has been a major driver of these changes. The upper quartile rose to 4.5% in a month that was important for the sector.
IDR’s analyses, based upon 68 awards covering nearly 300,000 employees between 1 November 2024 and 31 January 2025 showed that the median award across the entire economy was 3.5%, which is 0.5% less than the private sector.
This number highlights a decline in the median which was at 4% for the second half of 2024. It is the first time since March 2022 that it has dropped below 4.0%.
This is due to the fact that the percentage of wage increases between 4% and 4.99% has been reduced. This range accounted for only 31% of all wage increases, down from 39% in December. In parallel, the percentage of pay increases in the bracket 3% to 3.99% increased from 33% to just over 40%.
The Consumer Price Index (CPI), which measures inflation, is currently at 3.0%. However, the recent rise in inflation could put upward pressure on salaries.
IDR also highlighted that the National Living Wage is expected to rise by 6.7% this April, a month when pay reviews are most important. This increase will bring the statutory minimum wage of adult workers over 21 years old to PS12.21 an hour. It will also affect pay awards for firms with employees who earn at least the minimum wage.
Zoe Woolacott is a senior pay researcher with IDR. She said that the median wage for the whole economy could rise by April, due to the impact of the upcoming increase in the NLW. The uptick in inflation may also have a part to play. The wage rises are usually behind inflation and may follow the upward trend of inflation in the future, depending on its extent.
The median pay award for the not-for profit sector is relatively low, at only 3.0%. This area also contributed to the overall median of the economy being below the private sector.
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