Average salary increases in the UK 2026

For much of the past three years, pay conversations were dominated by a single question: how do we keep up with inflation? Awards climbed steeply, peaking at a median of 6% in 2023 - the highest in more than 30 years - as employers scrambled to protect employees from the steepest cost-of-living squeeze in a generation [10]. That era has ended.

Inflation has eased, business costs have climbed, and the result is a more cautious, more deliberate approach to pay. The median UK pay award has settled at 3%, and most forecasts suggest it will stay there throughout 2026 [1]. For employers, this looks reassuringly simple: budget for 3%, apply it across the board, move on.

The reality is more complicated. A flat 3% award means very different things depending on where someone works, what they do, and what they could earn elsewhere. A finance specialist and a hospitality worker awarded the same percentage are not in the same position at all. The rising statutory wage floor is increasing pay for the lowest earners faster than the average, squeezing the differentials above it. And with inflation forecast to climb again later in the year, a 3% award agreed in spring could be worth less than it looks by December.

Pay rises in 2026 are less about a single number and more about where you choose to spend a constrained budget. This guide sets out what the data shows, why the averages mislead, how pay settlements vary by sector, occupation, and region, and how to turn all of it into practical pay decisions.

Summary

• The median UK pay award is forecast to hold at around 3% throughout 2026, with most pay settlements clustering between 2.5% and 3.5% [1].
• Official ONS data shows annual regular pay growth slowing to 3.4% in early 2026, down from above 4% a year earlier - the lowest rate since 2020 [2].
• Affordability has overtaken inflation as the main factor shaping pay budgets, cited by 98% of employers in one survey [3].
• Broad sectors show less variation than expected - private services, manufacturing, and not-for-profit all centre on around 3% pay increases in 2026 - but the public-private divide and role-level pressures are significant [1][4].
• The National Living Wage rose 4.1% to £12.71 an hour from April 2026, with the 18-to-20 rate up 8.5%, intensifying wage-floor pressure and pay compression [5].
• Real-terms gains are thin: with CPI inflation at 2.8% in spring 2026 and forecast to climb toward 4.1% by January 2027, a 3% award risks turning into a real-terms cut later in the cycle [6][15].
• The median full-time salary was £39,039 in April 2025, ranging from £49,692 in London to £34,403 in the North East [8][9].
• Many employers are shifting from larger across-the-board rises toward targeted increases, benefits, and recognition [1][10].

Pay awards vs wage growth

Before looking at the data, it helps to separate two figures that are routinely treated as interchangeable but measure different things.

A pay award is the increase an employer decides to apply at an annual pay review. It is a planning figure - the percentage you budget and apply to base salaries. This is the number most relevant when employers are setting next year's pay bill.

Wage growth is the official measure published by the Office for National Statistics (ONS). It tracks actual earnings paid across the economy, and it moves for reasons that have nothing to do with annual reviews: overtime, bonuses, promotions, staff joining and leaving, and shifts in the mix of jobs. A company can hold its pay award at 3% while its reported wage growth comes in higher or lower, simply because of who is working and how much.

The two measures matter for different purposes. Pay awards tell you what employers are choosing to do. Wage growth tells you what is actually happening to earnings. Both are covered below, and both currently point the same way: pay growth is moderating after an exceptional few years.

Pay growth is slowing

On the pay award measure, the median UK settlement held steady at 3% for much of 2025 and is forecast to remain there into 2026 [1]. The CIPD's Labour Market Outlook has now recorded a median expected pay award of 3% for eight consecutive quarters, with the distribution narrowing tightly around that figure - employers are converging on a similar answer rather than spreading widely [16].

Forecast distribution of UK pay awards for 2026

Source: Brightmine 2026 pay forecast, based on 141 employee groups covering just over 300,000 employees [1][10]. Around two-thirds of all awards (65%) are expected to fall in the 3%-4% band.

The practical reading is that a pay freeze is now rare, awards of 5% or more are the exception at fewer than one in ten, and the overwhelming majority of employers are landing between 3% and 4%, with exactly 3% the single most common outcome [1]. The CIPD data shows the same compression from the other direction: over the past year the share of employers expecting awards of 5% or more fell from 24% to 15%, while the share expecting 3%-3.99% rose from 25% to 40% [16]. The market is converging on 3%.

On the wage growth measure, the trend is clearly downward. The table below tracks the ONS series through the year, showing regular pay growth (excluding bonuses) easing steadily.

ONS annual earnings growth, three-month periods to early 2026

Source: ONS, Average weekly earnings in Great Britain, February-May 2026 releases [2][11].

By the three months to March 2026, regular pay growth had fallen to 3.4% - the lowest rate since late 2020 [2]. Average weekly earnings stood at around £749 for total pay and £693 for regular pay [2]. The direction is unambiguous: after several years of rapid increases, both the awards employers are choosing and the earnings growth showing up in official data are moderating.

Why affordability now drives pay decisions

The single biggest change in 2026 is the factor employers cite as most influential on their pay decisions. Through the cost-of-living crisis, inflation sat at the top of the list. It has now been overtaken by affordability.

In one survey of UK organisations, 98% reported that affordability would have a bearing on their 2026 pay outcomes, with the future business outlook influencing 86% [3]. Another, covering more than 200 organisations, found affordability and inflation to be the two leading forces behind pay budgets, with affordability now ahead [4].

Several pressures are stacking up at once: broader employer cost increases, a statutory wage floor that keeps climbing, and an uncertain economic outlook. The result is what one analysis described as strategic cost discipline - keeping increases tightly controlled while looking for other ways to stay competitive [4].

Importantly, this caution has not produced widespread pay freezes. Most employers are maintaining their normal pay review cycles rather than pausing them [1]. The retreat is from the size of awards, not the practice of awarding. Where employers have responded to cost pressure, the most common move has been targeting increases at specific roles or staff groups rather than cutting awards across the board [3].

Pay growth by sector

A single national average is convenient, but it conceals the variation that matters most when you are trying to retain people. The differences in 2026 come in two forms - between the broad sectors, and, more sharply, between the public and private sectors - and an employer who benchmarks only against the headline 3% risks misreading their own talent market.

At the level of the broad private-sector groupings, there is less divergence than you might expect. When Brightmine surveyed employers on their 2026 plans, all three broad sectors it examined - private-sector services, manufacturing and production, and not-for-profit - were forecasting awards centred on 3% [1]. The variation that matters is therefore less about which broad sector you sit in and more about specific roles within it. Settlement monitoring through early 2026 bears this out, with a modest but consistent gap opening up between manufacturing and services.

Median pay awards by sector, three months to April 2026

Source: Incomes Data Research settlement monitoring, sample of 166 awards covering over 3.3 million workers, February-April 2026 [4].

The manufacturing premium is informative. Although the National Living Wage has less direct impact in manufacturing than in services, IDR found a rising share of higher-end awards worth 4% or more among manufacturing employers - common in engineering and the energy and water sector - reflecting continued pressure to offer competitive rates to recruit and retain skilled staff [4]. In private services, by contrast, a growing proportion of awards fell below 3%, dragging the sector median down [4]. Two sectors, two different pressures, both landing near the 3% mark by different routes.

Official ONS earnings data, broken down by industry, reinforces a crucial point that the award figures alone can obscure: high pay levels and high pay growth are not the same thing.

ONS regular earnings growth by industry, three months to January 2026

Source: ONS, average earnings excluding bonuses by industry, three months to January 2026 [12].

The standout here is finance and business services: it tops the salary tables in absolute terms, yet records some of the weakest earnings growth in the economy. The explanation is straightforward - high absolute pay does not require large annual increases to retain staff. At the other end, lower-paid, higher-turnover sectors such as retail and hospitality show stronger earnings growth precisely because the wage floor is rising fastest beneath them. For an employer, this is the practical lesson: a sector that pays well is not necessarily a sector where pay is moving, and vice versa.

The clearest divide remains public versus private. ONS data showed public sector regular pay growth running at 4.8% in early 2026 against 3.0% in the private sector, though the public sector figure has been distorted by some settlements being paid earlier than in previous years [2]. Average public sector pay growth had been near 5.8% in 2025 following a series of pay review body awards [13].

The practical implication is straightforward: if your awards cluster around 3% but you compete for skilled, hard-to-fill roles - in engineering, technology, or any area where you are being actively outbid - you may already be falling behind without realising it. Sector averages beat the national headline, and live recruitment data for your own roles beats sector averages.

The wage floor is rising faster than the average

For employers of lower-paid staff, the most consequential pay change of 2026 is not the annual review at all. It is the statutory minimum wage.

National Minimum Wage and National Living Wage rates from 1 April 2026

Source: GOV.UK / Low Pay Commission, April 2026 [5][14].

These figures matter for two reasons. First, the headline 4.1% rise sits well above the 3% median award, and the younger-worker rates rose faster still - meaning the lowest-paid employees are receiving larger percentage increases than much of the rest of the workforce. Around three-quarters of organisations in one survey expected the rising wage floor to affect their pay decisions [3].

Second, increases at the bottom of a pay structure create pressure all the way up it. When the minimum rate climbs faster than awards for supervisors and team leaders, the gaps between grades compress. An employee newly promoted to team leader may find themselves earning barely more than the staff they manage. This is one of the most common and most expensive pay problems of 2026, and it does not fix itself - it has to be deliberately managed.

For accredited employers, the voluntary Real Living Wage has also risen, reaching £13.45 across the UK and £14.80 in London [14]. While voluntary rather than statutory, it shapes expectations in sectors where accreditation is common.

The sectors most exposed to all of this are retail, hospitality, social care, and cleaning and facilities management, where a large share of roles sit at or near the wage floor [9]. For employers in these areas, pay is increasingly driven less by what they choose and more by external benchmarks moving upward.

What 3% really means once inflation is counted

A pay award only improves an employee's position if it outpaces the rising cost of living. This is where the 2026 picture becomes genuinely awkward for employers.

CPI inflation stood at 2.8% in the twelve months to May 2026, having eased from a peak far higher during the cost-of-living crisis [6]. On the face of it, a 3% award therefore delivers a small real-terms improvement. But ONS figures put real-terms regular pay growth at just 0.1% in early 2026 once adjusted for CPIH [2]. After several years in which pay struggled to keep up with prices, employees are now treading water rather than getting ahead.

The outlook makes this harder. While inflation eased in spring 2026, forecasters expect it to climb again. The National Institute of Economic and Social Research projects CPI inflation rising across the remainder of the year to peak at 4.1% in January 2027, driven primarily by rising energy prices [15]. Independent forecasters surveyed by HM Treasury similarly expect inflation around 3.5% by the final quarter of 2026 [15]. The table below illustrates what that range means for the real value of a typical award.

Real value of a 3% pay award at different inflation rates

Illustrative, based on ONS inflation data, HM Treasury forecaster averages, and NIESR projections [6][15]. Figures are approximate and assume the same nominal award across each scenario.

The implication is significant. A 3% award agreed early in the year, when inflation was 2.8%, looks like a small real-terms rise. If inflation climbs toward 3.5% or higher in the months that follow, as forecasters expect, that same award quietly becomes a real-terms pay cut. Employees will feel this even if the headline number looked reasonable when it was set - and the gap is widest in the very period, late 2026 into early 2027, when many pay decisions will be under review.

This is the conversation many employers will need to navigate carefully. A 3% increase can feel generous to a finance director managing a tight budget and underwhelming to an employee watching grocery and energy bills climb. The gap between those two perspectives is where dissatisfaction and retention risk build.

Where UK salaries actually sit - the benchmarks

It helps to ground these percentages in real figures. The most authoritative source on UK earnings is the ONS Annual Survey of Hours and Earnings (ASHE), which surveys around 174,000 employee jobs [8].

The most recent ASHE data put the median gross annual salary for full-time employees at £39,039 in April 2025, up 4.3% from £37,439 the previous year [8]. The median is the midpoint - half of full-time employees earn more, half earn less - and is a far more reliable guide than the mean, which is pulled upward by a small number of very high earners (the mean sits closer to £44,000).

On a weekly basis, median full-time earnings reached £766.60 in April 2025, a 5.3% nominal increase or around 1.1% in real terms [8]. Median hourly earnings, excluding overtime, were £19.67 [8].

By region

Regional variation is one of the widest sources of difference in UK pay. A London salary and a North East salary for the same role can differ by thousands of pounds.

Median annual full-time earnings by region, April 2025

Source: ONS ASHE 2025; only London, the South East, and Scotland sat above the UK average [9].

The gap between London and the North East exceeds £15,000 a year for the median worker [9]. Notably, the South East saw the smallest growth in median earnings over the year (2.9%), so even high-paying regions are not always the fastest-moving [8].

By occupation

Occupation drives even larger differences than region. The spread between the highest- and lowest-paid roles runs to tens of thousands of pounds.

Examples of median full-time pay by occupation, April 2025

Source: ONS, ASHE Table 14 (occupation by four-digit SOC), April 2025 data; national median from ASHE 2025 headline [8][17].

The largest growth in median weekly earnings between April 2024 and April 2025 was in caring, leisure and other service occupations, at 7.1% - directly reflecting the rising wage floor lifting pay at the lower end fastest [8].

By age

Earnings typically build through a career and peak in the forties. Median weekly pay was highest for employees in their 40s and lowest for the youngest workers in April 2025 [18]. For employers, this matters for fairness and progression: pay structures that do not reward growing experience tend to lose people in their thirties to organisations that do.

Three factors therefore shape where any individual sits relative to the national midpoint: occupation, region, and age and experience. A salary that looks competitive against the national median may be uncompetitive within a specific sector, region, or occupation - which is why role-level benchmarking matters far more than the headline figure.

Beyond the pay packet: How employers are responding

With awards constrained and affordability dominant, many employers are looking beyond the basic pay rise to stay competitive. This shift is a defining feature of the 2026 landscape.

Rather than fund larger across-the-board increases, organisations are increasingly directing resources toward:

• Targeted increases for hard-to-fill or business-critical roles where market rates are moving fastest. This was among the most common responses to pay pressure, alongside increases aimed at specific staff groups [3].
• Recruitment-salary uplifts for roles that are difficult to attract, separate from the general review [3].
• Benefits and recognition, including enhanced packages and non-cash rewards, to improve the overall offer without permanently inflating the salary bill [1].
• Skills-based pay, rewarding the capabilities an organisation most needs rather than applying uniform rises [1].

The logic is sound. A blanket increase spreads a limited budget thinly across everyone, including employees who are not at flight risk and would stay regardless. Targeting that same budget at the roles where you are genuinely being outbid - and supplementing it with benefits that improve the wider experience of working for you - tends to deliver better retention for the same cost.

This approach demands more from employers. It requires knowing which roles are vulnerable, where pay compression is building between grades, and what competitors are actually paying. It is more work than applying a flat percentage, but in a year of constrained budgets it is also where the difference between a smooth pay round and a painful one is made.

A practical framework for 2026 pay decisions

The data above is only useful if it changes what you do. The following framework turns it into a sequence of practical steps for planning or reviewing pay this year.

1. Benchmark at role level, not headline level

Start with the roles that carry the most risk rather than the organisation as a whole. For each, compare your salaries against sector and regional data, using live recruitment information where you can. The national 3% average is a poor guide for any individual role - a developer in London and a retail assistant in the North East cannot be benchmarked against the same number.

2. Map your exposure to the wage floor

Count how many employees sit at or near the National Living Wage, and model the knock-on effect of the April increase on the grades immediately above them. Where the gap between a supervisor and the staff they manage has narrowed to almost nothing, decide deliberately whether to restore the differential - and budget for it. Do not let compression happen by accident.

3. Model the real-terms position across the year

Set your award against where inflation is forecast to go, not only where it is today. With CPI projected to climb through late 2026 and into 2027, a 3% award will feel different in December than it did in March. Decide whether you are comfortable with that, and whether a mid-year review or a one-off payment might be warranted for the most affected groups.

4. Decide where to concentrate the budget

Rather than spreading a constrained budget evenly, identify the roles where you are most likely to lose people or struggle to recruit, and weight your awards toward them. Be explicit about the trade-off: a larger share for critical roles means a smaller share elsewhere, and that needs a clear rationale you can stand behind.

5. Be transparent about how the number was reached

Employees increasingly understand the difference between a nominal rise and a real one. A clear, honest explanation of how an award compares with inflation, what the business could afford, and why it landed where it did builds more trust than a number presented without context. Silence invites people to assume the worst.

6. Strengthen the total reward offer

Where cash is constrained, look hard at what else shapes the employee experience: benefits, flexibility, recognition, career development, and progression. These rarely substitute fully for pay, but they strengthen the overall proposition and can be decisive in retention - particularly for employees who value predictability and growth over a marginally larger headline figure.

7. Review, don't set and forget

Treat the pay round as the start of a cycle, not a one-off event. Track turnover and recruitment difficulty through the year by role, and be ready to make targeted in-year adjustments where the market moves faster than you expected. The organisations that handle 2026 well will be the ones watching the data, not the ones who applied a number in spring and looked away.

Common pitfalls

The framework above describes what to do. The failures below are the ways well-intentioned employers undo it - the traps that catch organisations even when they know the steps:

• Confusing the two pay measures. Reassuring leadership that "wages are only growing 3%" using the ONS figure, then discovering your actual settlement bill is higher once promotions, the wage floor, and market adjustments are added in. Budget from your own award plan, not the national wage-growth headline.
• Letting compression resolve itself through quiet attrition. When supervisors earn barely more than their teams, the people who leave are often the ones you promoted and trained. The cost of replacing them dwarfs the cost of protecting the differential.
• Anchoring on the spring inflation figure. A 3% award negotiated when CPI was 2.8% can look ungenerous by the time inflation has climbed - and pay decisions made early in the cycle are the ones most exposed to this.
• Mistaking "high-paying" for "fast-moving". Finance pays well but shows some of the slowest earnings growth; some lower-paid sectors are moving fastest. Benchmark against where your roles are heading, not where they currently sit.

Looking ahead

The defining feature of UK pay in 2026 is not the 3% figure itself but what sits beneath it. After years in which inflation forced employers' hands, pay decisions have become a matter of choice again - and choice means strategy.

The employers who navigate this year well will be those who look past the comfortable simplicity of a single average. They will recognise that a finance specialist and a care worker awarded the same percentage are in entirely different positions, that the rising wage floor reshapes pay structures from the bottom up, and that a budget spent evenly is rarely a budget spent well.

A modest, well-targeted pay round, communicated honestly and supported by a strong wider offer, will do more for retention and engagement than a larger one applied without thought. In a year of constraint, the headline number is the easy part. Where you direct it, and how you explain it, is what counts.

This article is intended for informational purposes only and does not constitute legal advice. The information is accurate at the time of writing but may be subject to change. For advice specific to your situation, please consult a qualified professional.

[1] Personnel Today / Brightmine, Pay awards to remain stagnant at 3% in 2026, October 2025.

[2] Office for National Statistics, Average weekly earnings in Great Britain: May 2026, May 2026.

[3] Incomes Data Research, Pay rises set to remain steady in 2026, 2025.

[4] Incomes Data Research / Employee Benefits, Private sector median pay award holds steady at 3.5%, June 2026.

[5] GOV.UK, National Living Wage increases to £12.71 per hour, April 2026.

[6] Office for National Statistics, Consumer price inflation, UK: May 2026, June 2026.

[7] Office for National Statistics, Average weekly earnings in Great Britain (real terms series), 2026.

[8] Office for National Statistics, Employee earnings in the UK: 2025 (Annual Survey of Hours and Earnings, methodology and sample), October 2025.

[9] Statista / ONS ASHE, UK full-time annual salary by region 2025, October 2025.

[10] Brightmine, Pay trends 2026 and Reward priorities in 2026, December 2025-January 2026.

[11] Office for National Statistics, Average weekly earnings in Great Britain: March and April 2026, 2026.

[12] Office for National Statistics / Trading Economics, UK average earnings excluding bonus, by industry, three months to January 2026, March 2026.

[13] House of Commons Library, Public sector pay, 2026.

[14] Low Pay Commission / Real Living Wage Foundation, Minimum wage rates for 2026 and Real Living Wage rates, 2025-2026.

[15] CIPD, Labour Market Outlook, Spring 2026 (citing NIESR inflation projections); House of Commons Library, Inflation in the UK: Economic indicators, May 2026.

[16] CIPD, Labour Market Outlook, Spring 2026, May 2026.

[17] Office for National Statistics, Earnings and hours worked, occupation by four-digit SOC: ASHE Table 14, October 2025.

[18] House of Commons Library, Average earnings by age and region, 2026.