Steady outlook for pay in 2026 but affordability and inflation remain key influences
Press Release February 2026
Over two-fifths (44%) of employers expect that pay will grow at much the same rate in 2026 as it did in 2025, according to new research from Incomes Data Research (IDR), with more than three-fifths of pay awards likely to fall between 3% and 3.99%. This finding is from the company’s latest poll of employers’ pay intentions for the coming year, which received indications on the direction of pay from 89 employers yet to decide their 2026 pay award. Meanwhile, 28% of the sample said that the level of pay rise this year is likely to be higher than that awarded in 2025 while a further 28% anticipate that it will be lower. Affordability and the path for inflation are key factors influencing employers’ pay decisions for the coming year.
Affordability and inflation are key influences on pay decisions in 2026
In total, IDR’s poll received responses from 121 organisations. Affordability is a key concern for employers, with 96% of respondents reporting that this has had, or will have, a bearing on pay outcomes this year. Inflation is also an influential factor for nearly two-thirds (65%) of respondents. This proportion is up from 60% in a similar poll IDR conducted at the end of 2024.
“Inflation is currently higher than it was a year ago and this has applied upward pressure on pay to some extent and the findings from our poll show that inflation continues to figure relatively highly in employers’ concerns,” commented Zoe Woolacott from IDR.
How much could pay increases be worth in 2026?
The largest proportion of the 89 employers yet to decide their pay award think it is likely to be worth between 3% and 3.49%, with nearly two-fifths (39%) of these respondents anticipating that they will award a pay rise at this level. Some 22% of participants forecast the pay rise for their main staff group to occur in the region of 3.5% to 3.99%. Just 11% of the sample feel that their pay award will be worth 4% or more.
A quarter of employees set for pay rise worth 4% or more in 2026
Separate analysis by IDR of 75 pay deals that have already been agreed for 2026, collected as part of the company’s ongoing monitoring of pay rises across the economy, reveals that pay awards are indeed at a similar level when compared to last year. Within this sample, the median pay award for 2026 is 3.4%, which is a little higher than that for 2025 when the median for the year as a whole was 3.3%. Just over a quarter (26%) of pay increases will be worth 4% or more this year, while around half (52%) of the awards in IDR’s sample of pay deals agreed for 2026 are worth between 3% and 3.99%.
Note for Editors
Incomes Data Research 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/.
The poll was conducted in November and December 2025 and gained 121 responses from mostly large and medium-sized private sector firms employing over 2.8 million workers in total. Of these, 89 had yet to agree their pay award for 2026. Nearly four-fifths of respondents operate in the private sector (49% in private services and 30% in the manufacturing and primary area). Some 16% are in the not-for-profit area and public sector employers constitute 5% of the sample.
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.
For any queries relating to this research please contact Zoe Woolacott on 01702 669549 or zoewoolacott@incomesdataresearch.com or Ken Mulkearn on 07392 018997 kenmulkearn@incomesdataresearch.com.