UK employers are not planning bigger raises for 2027. They are bracing for the same pay round as 2026, even as the forces pushing costs up keep multiplying.

What happened

Incomes Data Research’s “Planning for pay in 2027” survey of 95 UK organisations, employing more than 1.1 million staff, found that almost three-quarters of employers expect their 2027 pay rise to match this year’s level, while a further 18% expect a slightly lower increase. Sixty percent of anticipated 2027 increases fall in the 3% to 3.99% bracket, half of those between 3% and 3.49%. Ninety-seven percent of respondents say affordability will shape next year’s decisions, and the share citing inflation as an influence rose to 76%, up from 69% last year.

Why it matters for the HR leader

Pay bands are flattening even as the list of pressures bearing on them grows longer: going-rate changes (74%, up from 65%), market benchmarking (77%, up from 70%) and inflation all gained weight in this year’s survey versus last. “This is likely because inflation has increased and is expected to increase further in the light of events in the Middle East, and perhaps also in response to the recent drought conditions,” said Katherine Gomez of IDR. Forty-two percent of employers point to cost-of-living pressure as the biggest factor in next year’s round, while 23% report the opposite pull, from boards pushing to cut wage costs.

The original insight

A pay budget that holds flat while its underlying cost drivers multiply is not a stable equilibrium, it is a signal that something else has to give: scope, headcount, or the promises made during hiring. That tension echoes what HRTech Edition found in Gallagher’s turnover research, where employers wanted better retention but had not converted engagement data into action. Reward teams building 2027 budgets around a flat 3% to 3.99% assumption should stress-test it against the same inflation and benchmarking pressures IDR flags, rather than treating last year’s number as this year’s default, a mistake HRTech Edition also flagged in its coverage of the UK’s mounting tribunal backlog over unresolved pay disputes.

Source: Incomes Data Research