Private sector median pay increase rises to 3.4%
Press Release March 2026
The median pay award across the private sector rose from 3.0% to 3.4% in the three months to January 2026, according to the latest monitoring figures from Incomes Data Research (IDR). This rise has been influenced by a larger proportion of pay rises worth 4% or more. Exactly a fifth – 20% – of pay awards were worth at least 4%, down from 17% in the three months to December 2025. This change was mainly influenced by outcomes in manufacturing and production, although outcomes in private services also played a part. January is a key month for deals in the manufacturing sector.
“The uptick in the median is an indication that cost-of-living pressures persist, even though the rate of inflation started to come down during 2025. The path of inflation, however, may once more become an important determinant of pay outcomes in 2026, particularly in light of the current geopolitical situation,” commented Zoe Woolacott from IDR.
IDR’s analysis of pay outcomes for the whole economy reveals a median of 3.2%, which is 0.2 percentage points lower than that in the private sector. In its latest sample, the proportion of increases worth 4% or more grew from 15% to 19% across the economy as a whole. At the same time, instances of increases worth between 3% and 3.99% also grew a little, with around three-fifths (59%) of awards in the latest sample occurring in this bracket, compared to 57% in December.
Manufacturing and production versus private services
There are subtle differences within the private sector. Outcomes in manufacturing dominate at the start of the year and the median pay award here rose from 3.0% to 3.4%. The largest cluster of awards continued to occur in the 3% to 3.99% bracket (61% of awards were at this level in the three months to January 2026, compared to 67% in December). Some 15% of pay rises in manufacturing and production were worth 4% or more in IDR’s latest analysis.
Analysis of awards in private services reveals a different picture. Here, as in December, the median remained higher than in manufacturing, showing at 3.5%. This was mostly due to a comparatively large proportion of pay awards worth 4% or above in the current period. The proportion of high-end awards at this level grew from 28% in December to 29%.
The latest pay settlement figures are based on a sample of 54 awards from across the economy effective between 1 November 2025 and 31 January 2026, mostly at large organisations and together covering nearly 200,000 employees. Very few awards in the sample are from the public sector and therefore the results predominantly reflect the picture in the private sector. The median pay award in the not-for-profit sector is comparatively low at just 2.5% and outcomes in this area – although a minority of the overall sample – have helped bring down the median for the wider economy below that for the private sector.
Note for Editors
Incomes Data Research (IDR) monitors pay reviews across the economy throughout the year and publishes findings in ‘Pay Climate’, our quarterly e-bulletin, with additional monthly updates on our website: https://www.incomesdataresearch.co.uk/.
Our data is used by all those concerned with decisions on pay, including employers in the private and public sectors, government bodies, trade unions and economists. We have conducted research for a wide range of clients including the Low Pay Commission and the Office of the Pay Review Bodies, as well as for a range of employers and employee representative organisations.
Median pay award figures calculated by IDR are usually somewhat lower than the regular earnings growth figures reported by the ONS each month. Our article here explains why average weekly earnings (AWE) figures do not tell the whole picture on pay growth. In particular, AWE is a monthly measure of increases in average pay including bonuses, shift and overtime, rather than the typically annual percentage increase in basic pay most employees receive under pay awards. In other words, the AWE figures are not ‘average pay increases’, as is sometimes reported, but increases in average earnings. Various factors can affect how much an employer spends on pay in a given month, such as restructuring of the operational aspects of the company, a change in working hours in response to demand, or simply staff turnover, as more experienced, higher-paid employees leave and are replaced by staff at the lower end of the earnings distribution. These factors particularly affect the AWE but are not present in the IDR figures on pay awards.