Rising living costs continue to shape the lives of employees across the UK but are recent salary increases doing enough to ease the burden?
According to our 2024 UK Salary & Recruiting Trends guide, 85% of employers reported increasing staff pay over the last 12 months, a slight rise from the previous year. Notably, 40% increased pay by more than 5%. While these figures suggest progress, the reality on the ground is more complex. Despite the rise, many employees are still feeling the financial squeeze.
Are Salaries Really Matching the Cost of Living?
Encouragingly, wage growth has finally outpaced inflation for the first time in nearly two years. The Office for National Statistics reported a 7.8% annual increase in wages between June and August one of the strongest rises in over two decades. Our salary guide also found that 70% of employers cite the rising cost of living as the main reason for pay increases, a jump from 54% the year before.
But how much relief has this actually provided? Of the employees who received a cost-of-living-based pay rise in the past year, only 36% said it had a noticeable impact on their lives. This suggests that while pay increases are happening, they may not be enough or distributed fairly across sectors.
The Uneven Impact Across Sectors and Incomes
The average wage increase paints an optimistic picture, but it doesn’t tell the full story. High earners in sectors like finance and business services particularly in areas like the City of London have seen significant salary growth, in some cases reaching double digits.
In contrast, low-paid workers are still struggling. According to the Living Wage Foundation, half of low-income workers are financially worse off than they were a year ago. Rising prices in essential areas like food and energy hit these workers hardest, as a larger portion of their income goes toward basic needs.
While recent government payments and upcoming increases to the national living wage may offer some relief, many low earners are still finding it difficult to make ends meet.
Lack of Pay Transparency Adds to the Challenge
Even when salaries are rising, a lack of transparency can cloud the real value of a pay packet. While 60% of employers claim to be transparent about pay, 40% admit to inconsistencies in how they communicate pay structures and raise decisions to staff.
This lack of clarity is a major concern for professionals 44% believe their employer isn’t open about how pay is determined. Poor pay transparency can damage trust, widen pay gaps, and ultimately affect a company’s ability to attract and retain talent in a competitive market.
Cost of Living Driving Career Moves
With inflation and high living costs showing few signs of relief, employees are increasingly considering job changes to secure better pay. Our data shows that 42% of professionals are now more inclined to change jobs due to cost-of-living concerns. The main driver? Their current salary no longer covers their essential expenses.
However, not everyone can afford to make a move. Almost one in five employees say rising living costs are making them less likely to leave their job, mainly due to the perceived risk of giving up a stable role.
This marks a shift from past periods of economic uncertainty, such as the 2008 recession, where job-switching slowed. Today, the cost-of-living crisis is prompting more job movement, especially in skills-short sectors where competition for talent remains high.
Striking a Sustainable Balance
The ongoing cost-of-living crisis continues to shape the priorities of both employers and professionals. Businesses that can find a fair balance between managing costs and offering competitive pay will be better positioned to retain top talent and meet hiring goals in the months ahead.
As we move into 2025, transparency, fairness, and a deep understanding of what employees truly need will remain central to building a motivated and resilient workforce.
Explore our latest 2025 Salary & Recruiting Trends guide for actionable insights, market trends, and practical recommendations tailored to today’s evolving employment landscape.