As inflation continues to affect household budgets and the job market remains competitive, the big question for many is how much salary increase is expected in 2025. Based on several surveys including from Payscale and expert analyses, salary increases are expected to range from 3.5% to 3.9%.
However, with the economic landscape constantly changing, is this enough to cover the rising cost of living? More importantly, how can you position yourself for a larger raise?
Let’s explore the expected salary trends and practical steps to ensure you maximise your earning potential in 2025.
Predicted Salary Increases for 2025
According to several key reports, the average salary increases for 2025 are estimated to be modest:
- The WTW Salary Budget Planning Report projects an average salary increase of 3.9%.
- Consulting firm WorldatWork forecasts a slightly lower average increase of 3.8%.
- A PayScale survey offers a more conservative outlook, predicting an average salary increase of just 3.5%.
New Annual Salary Increase Average in the UK
The National Minimum Wage is scheduled to rise in April 2025, with anticipated rates ranging between £11.82 and £12.39 per hour for individuals aged 21 and over.
In the UK, the average salary rise for 2024 is around 4%, a slight drop from last year’s 5%. Public sector employees can expect a lower increase of around 3%, while private sector pay rises are predicted to be around 4%.
Is a 3.9% Salary Increase Enough?
While a 3.9% raise base pay might seem underwhelming when considering recent inflation, it's in line with historical trends. In the U.S., wages often struggle to keep up with inflation.
For example, in 2025, the Organization for Economic Cooperation and Development (OECD) predicts that U.S. inflation will drop to 2.2%, but whether this will stabilise workers’ purchasing power is uncertain.
Lauren Winans, CEO and principal HR Consultant at Next Level Benefits, warns that “3.9% certainly doesn’t feel like enough” considering the inflation we've faced in recent years. Brian Pulliam, founder of Refactor Coaching, adds that a 3.9% increase may not help workers in some fields reach a living wage, while others, particularly in high-paying sectors like tech, have already far surpassed it.
Ultimately, whether 3.9% is sufficient depends on your industry, role, and the cost of living in your area.
Factors Affecting Pay Raises
Although salary increase is expected to occur every year, several key factors influence the rate of the pay and benefit increase.
Inflation
Inflationary pressures usually results in larger pay raises as employers adjust to the increased cost of living. In 2025, inflation is projected to drop to around 2.2%, but it remains uncertain how this will impact wage growth.
Location
Where you live plays a significant role in salary changes. Major urban areas like Los Angeles and San Jose are known for higher pay increases, largely due to the higher cost of living in these cities.
Job Sector and Performance
Some sectors are more generous when it comes to pay raises, particularly industries that rely on highly skilled workers. For example, merit-based raises are common in industries like technology and finance, where performance can heavily impact salary increases. Valuable employees would have higher grounds for salary adjustments even beyond the industry average.
Cost of Living Crisis
The global cost of living crisis has forced some employers to cut back on pay increases, as they struggle to balance rising operational costs with wage growth.
Job Switching
Changing jobs remains one of the most effective ways to boost your salary, often resulting in a 10% to 20% increase. In a competitive market, job-hopping can offer a quicker route to a better salary than waiting for annual reviews.
With inflation still biting and the current job and market constantly evolving, it’s crucial to stay ahead of the curve when it comes to your salary. However, before making a job switch to access salary increase, it’s essential to strategise and know the right time.
How to Secure a Bigger Salary Increase in 2025
Don’t just wait for these standard salary increases to trickle down. You can actively influence your earning potential by taking the following steps:
1. Upskill and Reskill
With the job market constantly evolving, enhancing your skills is one of the best ways to position yourself for a higher salary.
Employers are increasingly looking for specialised skills, and adding certifications or expertise in high-demand areas can significantly improve your value.
For example, if you’re a marketing professional, you might identify gaps in your knowledge of data analytics or social media strategies.
Pursuing relevant courses or certifications in these areas can make yourself more competitive and indispensable to your employer.
2. Keep a Record of Your Achievements
When asking for a raise, it’s essential to have a solid list of your accomplishments ready. Quantify your contributions wherever possible. For example, you might say, “I increased sales by 20% this year, contributing an additional $500,000 in revenue.”
This tangible evidence can make a compelling case to your HR department for why you deserve a pay increase beyond the standard budget.
Consider tracking your successes regularly, whether using a digital journal like Evernote or simply maintaining a spreadsheet of your achievements. This way, when it’s time to discuss salary increase, you’ll have clear examples of your value.
3. Understand Your Company’s Compensation Structure
Knowing how your company structures its compensation packages is crucial. Some companies offer pay-for-performance bonuses, while others provide either annual pay increases or other incentives based on productivity. Knowing how your organisation allocates salary increases can better strategise how to maximise your earnings. Additionally, you can develop a better employer-employee relationship to know the right time to showcase your hard work and make a strong business case,
Kevin Talbot, National Managing Director at Arthur J. Gallagher & Co., advises employees to fully understand short-term incentive programmes, saying they can offer significant additional income if leveraged correctly.
4. Consider Job Hopping
If your current employer isn’t offering competitive raises, consider exploring other opportunities. A recent study by ADP found that workers who changed jobs saw a 7.2% increase in their salary, compared to a 4.8% increase for those who stayed with their current employer.
Although job hopping can carry risks, it’s often a more effective way to significantly boost your earnings than waiting for incremental raises.
Calculating a Pay Raise
There are two main ways to calculate your next pay raise.
A regular pay increase or salary increment comes in two ways: the flat raise and the percentage increase.
- Flat Raise: This involves adding a fixed amount to your salary. For instance, if you receive a £3,000 raise, this is directly added to your existing annual pay.
- Percentage Increase: A percentage increase works by multiplying your current salary by the raise percentage. For example, if your salary is £50,000 and you receive a 5% raise, the calculation would be:
Percent Raise = [(New Salary – Old Salary) / Old Salary] x 100
In this case, the new salary would be £52,500.
Criteria for a Salary Increase
When hiring, requesting or receiving a salary increase, HR professionals typically consider several factors:
- Cost of Living:
Many employers offer cost-of-living raises, even for employees who aren’t performing at their best.
- Merit-Based Raises:
These are tied to your performance, the duties you perform, and the value you add to the company.
- Length of Service:
Some companies award salary increases based on tenure, such as after five or ten years with the organisation.
Asking for a Pay Raise
Timing is everything when it comes to asking for a raise. Here are some tips to maximise your chances:
- Performance Reviews:
The best time to ask for a raise is during your performance review. It’s a natural point to discuss your progress and achievements.
- Wait at Least Six Months:
If you’ve recently started a new job, it’s best to wait at least six months before asking for a raise.
- Prove Your Value:
Be ready to demonstrate your impact on the company. Compile data on your accomplishments, like exceeding sales targets or streamlining processes. You can make your salary request after performance evaluations in your firm and show your value.
- Do Your Research:
Talk to co-workers and use tools like Glassdoor and PayScale to compare your salary with those in similar roles and industries. This will give you a realistic benchmark to negotiate from and make your request more credible. It will help you set realistic expectations.
Negotiating a Salary Increase
When negotiating, be prepared to discuss specific numbers:
1. Target 10% to 20% Higher:
Ask for a pay raise between 10% and 20% above your current salary to leave room for negotiation.
2. Back It Up with Data:
Support your request for a salary increase by showing how your work has contributed to the company’s bottom line.
3. Present Clear Goals:
Outline your future contributions to the company to show that investing in you will pay off.
Timing Your Salary Negotiation
Getting the timing right is just as important as how you ask for money or a raise. Performance reviews, end-of-year evaluations, and even after a successful project are ideal times to bring up salary discussions.
However, avoid making requests when your company is going through financial difficulties or when your manager is overwhelmed with work.
Final Thoughts
While the projected salary increases for 2025 are expected to average between 3.5% and 3.9%, this doesn’t mean you have to settle for that range. By taking control of your career through upskilling, documenting your achievements, and exploring new opportunities, you can position yourself for a higher pay raise percentage.
As the job market changes, passively waiting for salary adjustments isn’t enough. Instead, make a plan to actively grow your skills and advocate for what you deserve. This way, you’ll have additional money to not only keep up with inflation but ensure your long-term financial success in 2025 and beyond.
