Private sector median pay rise falls to 3.4% but high-end awards continue
Press Release June 2025
The median pay increase in the private sector fell slightly from 3.5% to 3.4% in the three months to April 2025 according to the latest monitoring figures from Incomes Data Research (IDR). The proportion of private sector pay rises worth 6% or more grew from 2% in March to over one-in-ten (11%) in the latest analysis period. This shift is largely a result of the latest increase in the National Living Wage (NLW), which rose by 6.7% to £12.21 on 1 April and impacts many pay reviews in the private sector, particularly those in low-paying areas such as hospitality and retail. April continues to be the most popular month for pay setting and it remains a key milestone for the tracking of pay trends across the year.
IDR’s analysis of pay outcomes for the wider economy reveals a steady median of 3.2%, 0.2 percentage points lower than that in the private sector. The interquartile range for the whole economy widened from between 3.0% and 4.0% in March to between 2.5% and 4.3% in this latest period. These changes have been influenced by various movements in the distribution of awards. Firstly, the proportion of increases worth 5% or more grew and now accounts for nearly a quarter (24%) of all outcomes – up from one-in-ten in the three months to March 2025. Meanwhile, the proportion of awards worth between 4% and 4.99% halved: from 24% last month to 12%. Instances of increases worth between 3% and 3.99% also dropped, with around a third (32%) of awards in the latest sample occurring in this bracket, compared to nearly half (47%) in the three months to March.
Impact of the latest National Living Wage increase
In contrast to the figures for the whole economy and the private sector as a whole, the median pay award in private services rose from 3.2% to 3.3%. The upper quartile here is now 4.6%, up from 4.0% in March. This upward trend has been influenced by a larger proportion of high-end pay increases, worth 6% or more, in April (12% of awards this time, up from 5% in March). Increases awarded in response to the 6.7% increase in the NLW have contributed to this change.
Meanwhile, outcomes in manufacturing and production are largely unchanged since March, with the median here holding steady at 3.5% and the interquartile range remaining between 3.0% and 4.0%. Awards continue to cluster in the 3% to 3.99% bracket with nearly half (47%) of increases occurring at this level, up a little from 45% in March. Increases at this level were common across a number of sub-sectors such as construction, engineering and among food and drink manufacturers. However, the proportion of increases worth 5% or more grew from 11% to nearly a third (30%) of outcomes in the three months to April. This caused the average pay outcome to rise from 3.6% in March to 3.9%.
“The National Living Wage has a less direct impact in manufacturing, compared to private services. However, manufacturing employers still face pressures to offer competitive rates of pay in order to recruit and retain staff,” commented Zoe Woolacott from IDR.
The latest pay settlement figures are based on a sample of 129 awards from across the whole economy effective between 1 February and 30 April 2025, mostly at large organisations and together covering over 1.3 million workers. 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 lower at 2.7% and outcomes in this area – although a minority of the total – have contributed to the median for the wider economy being lower than 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 Manpower Economics, 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.
For any queries relating to this research please contact Zoe Woolacott (01702 669549 /zoewoolacott@incomesdataresearch.com) or Ken Mulkearn (07392 018997/ kenmulkearn@incomesdataresearch.com).