Pay pressures mount

Over half of UK employers are experiencing significant wage cost increases, according to a new survey by SD Worx, highlighting the increasing complexities around employee compensation in 2024 and mounting pressure for employees.

The report found that 53% of employers report rising wage costs in the past 12 months. 44% cite upward wage pressure as their most urgent payroll challenge, while only 47% of employees feel satisfied with their current pay.

Despite financial pressures, a critical communication gap exists between employers and employees. The research indicates only 50% of employees receive sufficient pay communication and 42% of businesses struggle with pay transparency.

Businesses are staying buoyant by taking proactive steps with 65.7% investing more in rewards communications and 38% planning to make communication investment a long-term priority.

Laura Miller, UK People Country Leader at SD Worx, emphasises the need for strategic, personalised communication: “The research highlights the very real impact that financial strain is having on businesses. However, the strain is shared by employees who too often feel poorly informed, ignored or just not in control of their own pay and benefits package.

She added, "employers must align benefits with employee interests and provide a voice in decision-making to build trust and retention."

Meanwhile HMRC’s latest data reveals further financial challenge for employers, with National Insurance Contributions reaching a record £66.8 billion in the first seven months of 2024/25. The upcoming NICs changes – including a rise to 15% employer rate and a reduced employee earnings threshold to £5,000 – will significantly increase payroll costs.

These developments compound the existing pay pressures of rising wage costs. HR departments face escalating financial obligations, requiring strategic approaches to compensation, benefit design, and workforce management to balance increased costs with employee retention and productivity.