SME Workforce Pulse & how to plan pay rises you can keep giving
Sage’s research reveals businesses are proving remarkably resilient, and many want to reward their teams for it. Here’s how to use the insights to plan pay rises that feel generous now—and stay affordable for years.
In partnership with Smart Data Foundry and The Centre for Economics and Business Research, Sage has published its latest SME Monthly Workforce Pulse research.
This is drawn from anonymised payroll data from approximately 200,000 small businesses and provides unheralded insight into pay across the UK.
The data is part of Data for Good, Sage’s commitment to help Small and Medium Businesses thrive using anonymised insights from our data and enabling better decision making by stakeholders.
As such, smart managers and leaders can use SME Monthly Workforce Pulse to plan their next moves—such as competitive pay offerings that help retain staff. That’s what we cover in this article, as follows:
SMEs are showing resilience
The data shows median gross pay rose 4.1% year-on-year to £2,203, with take-home pay up 3.3% to £1,804. Pay growth is easing amid increased slack in the UK labour market.
Headcount among micro businesses grew +0.4%, outpacing small and medium firms at +0.2% each. The £10,500 Employment Allowance may be shielding the smallest employers from the full impact of the NICs rise, but this protection falls away as firms scale up.
On a sectoral basis, Finance and Insurance was the strongest sector for headcount growth at +1.5%, while Wholesale and Retail Trade led on earnings growth at +4.5%.
Hiring continues to ease
Data also shows that real-terms pay growth is being squeezed, falling to 1.0% this month, as nominal wages cool and progress on reducing inflation is stalled by the conflict in the Middle East.
On regional granularity, Wales recorded the greatest headcount decline at -0.4% despite leading the UK on pay growth at 5.8%. Its heavy reliance on manufacturing and construction leaves it particularly exposed to energy price volatility from the ongoing Iran-Strait of Hormuz disruption.
Accommodation and Food shed the most staff of any sector at -1.4%. As one of the largest employers of young people, the sector’s continued job losses have wider implications for youth employment.
How do you plan pay rises you can keep giving?
With hiring steadier than it’s been, a lot of business owners are turning their attention to the team they’ve already got—and pay is a big part of looking after them.
The encouraging news in this month’s data is that wages are still rising. The clever bit is making sure the rises you give are ones you can keep giving.
Here are some suggestions for how to plan them with confidence.
1. Start with the full picture, not just the salary
It’s easy to think of a pay rise as simply the new figure shown on an employee’s payslip.
In practice, every pound you add brings a little extra with it—more employer National Insurance, higher pension contributions, and sometimes knock-on costs tied to salary.
None of that is a reason to hold back. It just means the smartest first move is to work out what a rise really costs before you promise it, so the figure in your head matches the one that leaves your business’s account.
Payroll software can calculate these costs quickly, helping you plan with confidence.
2. Check it against your cash flow before you commit
A pay rise isn’t a one-off, of course. It’s a commitment you make every month from here on.
So, it pays to see how it sits next to everything else.
Pull up your cash flow forecast and map the new wage bill across the year ahead.
Are there quieter months when it’ll feel a bit tighter? Busier spells that give you some breathing room?
Seeing the whole year in one view means you can be generous on purpose, rather than hopeful in the moment and nervous later.
And when the numbers say you can comfortably do it—wonderful. Now you know for sure.
3. There’s more than one way to say thank you
If an across-the-board percentage feels like a stretch this year, you have options.
In some cases, these alternatives can provide greater value to employees.
You might weight rises towards the roles that are hardest to replace, phase an increase across the year, or link a bump to a milestone everyone can get behind.
A one-off bonus, an extra day of annual leave, or a bit more flexibility can all say “we appreciate you” without locking in a permanent rise to the wage bill.
The real skill is matching the reward to what your people genuinely value—which, more often than not, isn’t only about the money.
4. Talk to your team like, well, your team
People are far more understanding than we sometimes expect—especially when they’re kept in the loop.
Being open about how you set pay, what’s gone well this year, and what you’re planning builds a kind of trust that a surprise figure on a payslip never can.
It’s also the perfect moment to help people see the full value of what they receive: the salary, yes, but also the pension, the benefits, and the flexibility.
A rise always feels bigger when someone can see everything that sits around it.
5. Deciding on the rise itself—and giving it well
At some point the planning has to turn into a decision, and this is the part that’s easiest to keep putting off.
Try not to.
Once you know what you can afford, settle on a figure you can stand behind—one that reflects the employee’s contribution, aligns with market rates for similar roles, and takes into account the cost of living.
You don’t need a complicated formula. You need a number you’d feel comfortable explaining out loud.
When you give it, be specific: tell them the new salary, when it takes effect, and—the bit that really lands and provides lasting value for you as employer—exactly why they’ve earned it.
Then make sure it actually happens: update their contract, log the effective date, and check it’s reflected on the very next payslip.
Nothing undoes a generous moment faster than a rise that doesn’t show up on time!
Final thoughts: Plan ahead, and you can keep saying yes
Here’s the honest secret to rewarding your team well: it’s less about any single decision and more about planning far enough ahead that good decisions stay possible.
Once you know your true costs, you’ve mapped them against your cash flow, and you’ve got a few ways to show appreciation up your sleeve, pay becomes something you can feel genuinely good about rather than something you worry about each spring.
Resilient businesses aren’t the ones that never hit a tight month. They’re the ones that saw it coming and planned around it.
Do that, while keeping an eye on data such as that from Sage’s SME Monthly Workforce Pulse, and you’ll be ready to keep saying yes for years to come.
Frequently asked questions
A pay rise costs more than the figure on the payslip. On top of the extra salary, you’ll usually pay more employer National Insurance and higher pension contributions, and any salary-linked benefits or holiday pay can creep up too. A good rule of thumb is to budget for the headline increase plus these on-costs—and check the precise figure in your payroll software before you commit, since it works it out in moments.
There’s no legal requirement to give a pay rise, although employers must ensure pay complies with National Minimum Wage regulations set by GOV.UK. Most smaller businesses review pay once a year, often at the start of the financial year or on each person’s work anniversary, which keeps things predictable for everyone. Consistency tends to matter more than frequency: a dependable annual review earns more trust than the occasional surprise.
There’s no single right number. A reasonable rise is one that’s fair to your team and affordable for your business. It helps to weigh up three things: inflation, so the rise holds its value in real terms; what similar roles pay in your sector and region; and your own cash flow. For context, median pay across UK small businesses rose by around 4% over the past year, according to Sage’s Monthly Workforce Pulse for May 2026, but the best figure for you is the one your numbers can comfortably support.
Plenty, and some of it lands better than cash. A one-off bonus rewards a strong year without raising your permanent wage bill (although bonuses can affect employee tax liabilities, for example, if they move into a higher tax bracket). Extra annual leave, flexible or compressed hours and remote-working options are highly valued and often cost very little. Investing in training, clearer progression or better everyday perks also shows you’re invested in someone. The key is asking what your people actually want, rather than guessing.
Honesty and a little context go a long way. Explain how you set pay, what’s shaped this year’s decision and what people can expect next. The reasoning matters as much as the number. It’s also a great chance to show the full value someone receives: salary, pension, benefits, and flexibility together. People respond well when they feel informed and trusted, rather than simply handed a figure.
Better outcomes with Data for Good
Sage is committed to unlocking the power of anonymised data to drive insight that supports better decisions. In partnership with Smart Data Foundry and CEBR, we translate anonymised data into independent evidence‑based insight that supports better decision‑making.
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