Creative compensation: How innovative benefits are shaping talent retention amid slowing wage growth

Organisations are reimagining their benefits packages with increasing creativity, crafting innovative offerings to attract and keep top talent in a competitive market. Our interim findings from Macmillan Davies 2025 HR Insights report reveal the top five benefits that HR professionals are prioritising: pensions, bonuses, flexible working arrangements, hybrid working, and private healthcare. Whilst not creative, these perks are playing a vital role in an era where salary alone may no longer be the strongest draw for employees. James Roberts discusses.

However, while benefits packages are evolving, wage growth in the UK has hit a significant slowdown. Recent data from insights provider Brightmine paints a sobering picture—UK pay rises have reached their lowest point since June 2022, with most new pay deals now falling short of those agreed in 2023.

Brightmine’s analysis shows that the median pay increase in the three months leading to August 2024 was 4%, unchanged from the previous quarter, but revised down from an earlier estimate of 4.5%. Strikingly, almost three-quarters (72.7%) of employees saw pay rises that were smaller than what they received the year before, and only 11.4% saw an increase over the previous year’s deal.

Public vs. Private sector: A growing pay gap

A notable shift in the pay landscape is the widening gap between the public and private sectors. After the Labour government took office, one of its early moves in July was to accept the recommendations of the pay review bodies, delivering above-inflation increases to millions of public sector workers. This has led to a median public sector pay rise of 6% in the year to August 2024, significantly outpacing the private sector’s median of 4.7%.

Meanwhile, the manufacturing sector continues to trail behind, with pay rises at 3.8% compared to the 4.3% seen in the services sector, underscoring the uneven distribution of wage growth across industries.

Key pay trends and stability

Brightmine's study of 67 pay agreements, covering 900,000 employees between June and August 2024, revealed that the median pay award has stabilised at 4%. Throughout the year, pay increases have typically hovered between 4% and 5%, with 20.3% of awards in the latest quarter hitting exactly 4%, and 18.6% at 5%. The data shows a more consistent pay pattern compared to the turbulent period of high inflation, with half of all awards falling between 3.3% and 5%.

The creativity imperative for HR leaders

James Roberts, Senior Consultant at Macmillan Davies' London team, highlights the growing need for HR leaders to think beyond just pay. "The slow wage growth reflects the current economic environment, but employers will have to get creative with their overall benefits packages if they want to remain competitive. It’s not just about salary anymore; it’s about crafting an employee experience that includes flexibility, meaningful bonuses, and long-term financial security through pensions. For us at Macmillan Davies, flexibility includes working a 9-day fortnight, a huge perk which isn’t offered by many other recruiters."

We are seeing companies moving beyond traditional salary increases, recognising that today’s workforce values a broader range of perks. Flexible working arrangements, enhanced pension contributions, and performance-based bonuses are just some of the creative offerings that appeal to employees seeking work-life balance and long-term financial security. By focusing on holistic compensation that goes beyond base pay, organisations can differentiate themselves in a competitive market, keeping employees engaged and satisfied even as pay awards plateau. This shift is redefining how businesses attract and retain talent in the current economic climate.

In this new landscape, HR professionals must adopt a holistic approach, offering well-rounded compensation packages that meet the evolving expectations of the workforce. By blending financial rewards with lifestyle benefits, organisations can position themselves as attractive, forward-thinking employers in an increasingly complex job market.

Get in touch

Should you wish to have a confidential chat with James Roberts to discuss the current HR market and where we can help with inclusive recruitment or your search for work/recruiting into your team, please contact him directly at jroberts@mdhr.co.uk

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