As we step into 2025, organisations are cautiously optimistic about the new financial year. After a challenging 2024, falling interest rates may spur some growth, but the road to recovery looks to be slow and challenging.
Towards the end of last year, we surveyed HR professionals to understand their main considerations regarding staffing remuneration and rewards for the upcoming year. A couple of key themes that emerged were:
Employee Retention: Despite a slowdown in the employment market, retaining high performers and key talent remains crucial. With reduced migration levels, the skilled labour market is expected to tighten quickly, making retention strategies vital for future readiness.
Organisations recognise that holding onto key talent during tough economic times ensures they are well-positioned to respond when the market picks up again. This involves not only competitive salaries but also creating a supportive work environment that fosters employee engagement and satisfaction.
Market Pressure and Salary Adjustments: Although salary movements have slowed, there is still pressure to offer competitive packages. Our recent survey indicates a median projected salary increase of 3% for the next 12 months, though actual movements may be closer to 2% or lower in the private sector. This discrepancy highlights a disconnect between employee expectations and the reality of what organisations can afford. Companies must navigate these pressures carefully to maintain morale and retain talent without overextending their budgets.
To address these issues in 2025, organisations can:
- Understand the Competition: Regularly benchmark market rates to ensure competitive and focused salary spending. This involves staying updated with the latest remuneration data and conducting annual benchmarking exercises. By understanding the current market rates, particularly for key employees, organisations can avoid overpaying for certain skills and ensure their salary budgets are allocated effectively. Tools like RemWise or ELMO Remuneration can assist in distributing salary budgets in the most efficient way possible.
- Communicate Transparently: Clearly communicate remuneration policies and total reward packages to employees. Transparency is key in helping employees understand their total reward, including non-monetary benefits. When key staff are approached by other employers with seemingly competitive packages, they might not be aware of the full value of their current remuneration.
Organisations should be transparent about how they set salary ranges and apply increases and highlight additional benefits such as flexible working arrangements and other non-monetary perks. This can help employees see the full picture and appreciate the total value of their remuneration.
For more trends and strategies, download the full whitepaper here.