2025 Reward Predictions

15th January 2025

Staff member Julia

Julia Hanna

We often get asked what’s ‘hot’ in reward, so here’s our predictions on trends for 2025 and beyond:

1. Cautious pay settlements in the private and third sectors

With the economic outlook continuing to be uncertain and organisations looking to offset some of the increased National Insurance costs introduced in the October Budget, the indications are that pay budgets will be smaller than 2024.

Although we’ve had a brief period of real wage growth, that looks set to change. Those on the National Living Wage (and especially younger workers of the National Minimum Wage) will achieve real wage growth but this may not be true for everyone.

2. Pay will be increasingly transparent

With the EU Directive gradually being adopted by member states (deadline June 2026) many UK companies with operations in the Eurozone will take a consistent approach. And with UK legislation likely to follow, increasingly companies will adopt robust principles and procedures around pay and will share their approach with existing and prospective employees.

This best practice alongside employee expectations will change the culture of secrecy around pay.

3. Increased focus on pay equity

Linked to pay transparency, there’ll be more reporting (voluntary until UK legislation catches up) on pay gaps and equal pay. Many organisations will widen pay gap reporting to protected characteristics other than gender and look at socio-economic background too. There’ll be a greater focus on pay equity analysis. And, with some high-profile cases in the media, equal pay audits will likely be on the agenda.   

Employers will be keen to show that they are ready to report on, and take action to create, a more equitable workplace. We believe that this doesn’t mean regressing to a complex points-based job evaluation system, a lighter touch transparent career levels framework can instead be enabling and powerful.

4. Responding to Employment Rights changes

The Employment Rights Bill is still under consultation, but there are many points that will impact reward such as day one rights to statutory sick pay, flexible working, paternity and unpaid parental leave.  I’m hoping promises to strengthening gender pay gap reporting comes into effect, to include outsourced workers and a requirement for action plans to close the gap.

5. Rewarding home grown talent

Employment costs have increased so employers will be looking to work smarter. As well as embracing technology / AI, employers will be looking to develop talent from within focussing on skills development and creating clear career pathways. Looking to reward those who develop and grow, perhaps through skills-based pay and moving away from reward linked to performance.

6. Healthcare will have more value

Against the backdrop of challenges facing the NHS and economic inactivity, employees are increasingly valuing employer sponsored healthcare. Helping employees keep fit and healthy by providing preventive and diagnostic support as well as physical and mental healthcare services, improves wellbeing, engagement, and productivity.

7. Continued focus on responsible reward

Adopting ESG principles means corporate strategy focuses on environment, social, and governance as well as financial. This is increasingly important to both employees and investors.  As well as linking reward for executives and employees to taking measures to lower pollution, and CO2 output, and reduce waste for example, it also means having a diverse and inclusive workforce, at the entry level and the board of directors.

8. Experiential recognition

I’m also seeing movement away from material rewards (gift cards, products) to experiential ones such as team activities, events and celebrations.  These create lasting emotional connections, particularly resonating with younger employees.

9. AI-powered rewards

AI will enable in the moment, context-aware recognition. For example, systems that recognise milestones, significant contributions, or creative ideas and instantly deliver relevant rewards. Operationalising AI will evaluate the reward function’s capabilities and also enhance employee and manager self-service, directing personalised rewards to employees related to life events or lifestyle.

It’s certainly never quiet on the reward front and 2025 is no exception.  It’s our specialism and we’re here if you need us.

How we can help

We’ve helped many different organisations craft a future-focussed pay and reward strategy.  We’d love to work with you.

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