Key Considerations for Pay Reviews in 2025 – Recruitment Agencies 

As we approach the 2025 pay review season, it is crucial for recruitment agencies like Best in Jobs to strike a balance between financial sustainability and employee retention. With the rising cost of living, changes in National Insurance (NI), and evolving employee expectations, pay strategies need to be carefully planned.

Key Influences on 2025 Pay Decisions 

To make well-informed decisions, Best in Jobs must evaluate key economic factors, salary benchmarks, and alternative reward strategies. The following factors will play a significant role in shaping pay reviews for 2025: 

1. Cost of Living and Inflation 

The increasing cost of living directly impacts employee salary expectations. Two primary inflation indicators are essential to consider: 

• Retail Price Index (RPI): Remaining around 5% in early 2025, traditionally higher than other measures. 

• Consumer Price Index (CPI): Though lower than RPI, CPI significantly affects employees’ purchasing power. 

While inflation is expected to stabilize, employees will likely seek salary adjustments to reflect recent cost increases. Best in Jobs must assess its financial capacity to meet these demands while maintaining stability. 

2. National Insurance Contribution (NIC) Changes  

The UK government has introduced substantial changes to NIC in 2025, impacting both employers and employees. Key updates include: 

• Employer NIC Rate Increase: From 13.8% to 15%, leading to higher payroll expenses. 

• Secondary Threshold Reduction: Decrease from £9,100 to £5,000 per year, subjecting more employees to NIC contributions. 

• Employment Allowance Increase: Rising from £5,000 to £10,500, offering some relief for eligible businesses. 

• Removal of Employment Allowance Threshold: The previous £100,000 NIC bill threshold for eligibility is eliminated. 

• Class 1A and 1B NIC Rate Increases: Rising from 13.8% to 15%, impacting costs related to employee benefits and expenses. 

These changes require Best in Jobs to reassess payroll budgets and factor in rising NIC costs when planning pay reviews. While reductions in employee NICs may slightly boost take-home pay, employer contributions will remain a significant financial consideration. 

3. Alternative Reward Strategies  

In addition to salary adjustments, Best in Jobs can consider alternative strategies to enhance employee satisfaction, such as: 

• Flexible working arrangements 

• Professional development opportunities 

• Performance-based bonuses 

• Enhanced employee benefits and wellness programs 

Conclusion