UK Employers Take a More Targeted Approach to Pay
Employers appear likely to keep pay budgets broadly unchanged into 2027, while concentrating available increases on roles and skills that are difficult to replace.
A new report from WTW forecasts average pay budgets of 3.4%. The figures suggest that employers are responding to economic uncertainty by becoming more selective about how reward budgets are allocated rather than increasing overall spending.
In Brief
Employers are expected to keep pay budgets broadly stable into 2027 while directing available increases towards commercially important roles and scarce skills. Separately, technology professionals are increasing their focus on artificial intelligence, although core programming knowledge and sound engineering judgement remain essential.
Key Points
- Average pay budgets are forecast to remain at 3.4% into 2027.
- Employers are increasingly targeting pay at critical roles and specialist capabilities.
- Targeted pay decisions should be based on objective and consistently applied criteria.
- Pay remains only one part of an effective employee retention strategy.
- Use of generative AI learning content increased substantially between early 2025 and early 2026.
- AI capability should complement rather than replace core technical and software engineering skills.
Pay Budgets Remain Cautious
Just over half of surveyed employers reported that their actual salary budgets for 2025 were broadly consistent with their original plans.
Cost control remains a significant factor in pay decisions. Employers also identified inflation, weaker financial performance and the possibility of an economic slowdown as influences on future salary planning.
The findings indicate that many organisations are trying to maintain competitive pay without committing to substantial workforce-wide increases.
Pay Is Being Directed Towards Business Priorities
A growing number of employers are focusing additional reward on positions that are commercially important or require scarce expertise.
The survey found that 31% of organisations had already adjusted their reward arrangements to prioritise particular roles or capabilities, while a further 19% expected to make similar changes.
Employers are also responding to recruitment and retention pressures through higher starting offers, greater flexibility within salary ranges and one-off financial incentives for employees whose departure would create operational difficulties.
This suggests that pay is increasingly being used as a targeted workforce-planning tool rather than distributed uniformly across the organisation.
Retention Extends Beyond Pay
The report indicates that workforce retention remains relatively strong, with 85% of employees staying with their employer during the relevant period.
Pay nevertheless forms only part of the retention strategy. Organisations are also investing in professional development, the broader employee experience and initiatives intended to support an inclusive workplace.
For employers, this underlines the importance of considering career progression, management quality and workplace culture alongside salary when addressing retention risks.
The Outlook for Pay
Substantial increases in overall pay budgets appear unlikely in the immediate future. Employers are instead expected to continue balancing financial restraint against the need to recruit and retain people with strategically important skills.
The practical challenge will be to make defensible pay decisions, identify roles that genuinely justify additional investment and avoid creating unexplained disparities between comparable employees.
AI Skills Reshape Learning for UK Technology Professionals
Technology professionals are devoting more of their development time to artificial intelligence as AI-assisted tools become embedded in everyday software work.
Research conducted by O’Reilly of platform activity between the first quarters of 2025 and 2026 found a sharp increase in engagement with AI-related material. Use of generative AI content rose by 89%, while interest in artificial intelligence and machine learning increased by 51%.
Data and AI Dominate Learning Activity
Data-related subjects represented 31% of UK platform usage during the period, making them the largest category of learning activity.
Natural language processing recorded particularly strong growth, reflecting increased interest in systems that analyse, generate and respond to human language.
These figures indicate that technology professionals are moving beyond general awareness of AI and developing more practical knowledge of how it can be applied within products, services and software development.
Developers Are Learning Differently
Engagement with some established learning categories declined, including Programming Fundamentals, Agile and Git.
This does not necessarily mean that those capabilities are becoming less important. A more likely explanation is that experienced developers are increasingly resolving routine coding questions through tools integrated directly into their working environment.
Formal learning time may therefore be shifting towards newer subjects, while familiar technologies are reinforced through day-to-day practice.
Engineering Standards Remain Important
The growth of AI has not removed the need for reliable software engineering.
Engagement with Clean Code material increased by 19%, while interest in C# rose by 17%. React, Node.js, Java and cloud qualifications also continue to hold value in the technology market.
AI-generated output still requires informed human review, particularly where software security, testing, architecture and maintainability are concerned.
Implications for Employers
Employers should avoid treating AI capability as a substitute for core technical competence.
Training strategies should help technology professionals use AI tools productively while preserving strong foundations in coding, system design, quality assurance and problem-solving.
The most valuable future capability is likely to be found among professionals who can combine sound engineering judgement with the effective use of AI, rather than depending on automated tools without understanding the underlying technology.
Employers: What This Means
Employers should take a structured approach to allocating pay budgets and developing AI capability. Additional investment should be directed towards genuine business priorities without creating unjustified differences between comparable employees, while technology training should preserve strong technical foundations alongside the effective use of AI.
- Identify the roles and skills that genuinely justify targeted pay investment.
- Use objective criteria and review pay decisions for equal pay and discrimination risks.
- Support retention through career development, effective management and workplace culture as well as pay.
- Combine practical AI training with continued development in coding, testing, security and system design.
