From uncertainty to opportunity: the UK reward market in H1 2025 and beyond

The first half of 2025 has been a story of contrasts in the UK reward recruitment market. While there have been some exciting opportunities and moments of strong hiring activity, the overall picture has been more cautious than expected. For many HR professionals and recruiters, this period has required a more strategic approach to workforce planning and recruitment strategies.

Nick Arnold, who leads our UK reward practice at Frazer Jones, sums it up well: “There are definitely some exciting roles out there, but they’re not in abundance. The market’s been a bit stop-start: some busy periods of hiring followed by quieter spells that have been a little unexpected given reward has still been high on the agenda for people leaders. There’s been more talk of hiring plans in this space than what we’ve seen in practice.”

A market still finding its rhythm

Q1 started on a slightly surprisingly positive note, given that this time of year is typically slower due to year-end remuneration cycle commitments. However, Q2 didn’t maintain that momentum. We still experienced steady vacancy numbers in reward but it didn’t kick on as expected. According to the Office for National Statistics, UK vacancies dropped by 63,000 (7.9%) between March and May 2025. This marked the 35th consecutive quarterly decline, with total vacancies falling by an estimated 564,000 since their peak in March to May 2022, following the post-pandemic hiring boom. This steady decline reflects the ongoing economic uncertainty that continues to influence hiring decisions across the UK labour market.

Many businesses are choosing not to replace leavers, instead redistributing responsibilities across existing teams. While this can be a development opportunity to better retain talent, it often comes without the right compensation or clear career development pathways. In some cases, this restructuring is part of a broader effort to streamline operations and manage costs more effectively.

Nick Arnold notes: “We’re seeing more candidates turning down offers or dropping out of processes altogether. Clients and candidates are both being less flexible, and that’s slowing things down. Sometimes clients are being unrealistic with what can be achieved in the market and by the time they feel like they have exhausted the talent pool, the role has already been in the market for too long which can be damaging for reputation and candidate experience.”

This lack of flexibility is being driven by a few key factors. On the candidate side, many are hesitant to move roles in an uncertain market, especially if new opportunities do not offer clear progression, hybrid working, or competitive compensation. After years of salary inflation and rising expectations around flexibility, candidates are holding out for roles that align with their long-term goals. At the same time, employers are being more selective and cautious, often prolonging hiring processes or setting rigid criteria. This can lead to disengagement and dropouts.

Sector-specific shifts and hiring appetite

Despite the broader slowdown in the job market, some sectors have remained active. Consultancies, especially the Big Four, have been hiring into client-facing reward teams. This may suggest that businesses are leaning on external support rather than committing to permanent headcount, particularly as they navigate regulatory changes and the drive for increased pay equity and transparency which demands companies to have an effective job architecture and reward framework in place.

Jack Booth, who focuses on junior to mid-level reward roles, has seen a steady increase in hiring at these levels: “Clients are being strategic, focusing on business-critical roles. There’s a clear preference for candidates with strong data skills and commercial insight, and experience in excel modelling and foundational experience with compensation cycles.”

He also notes that more candidates are open to new opportunities, often because they’re not getting the progression or project exposure they want internally. This has created a more active talent pool, especially among those seeking roles that offer broader exposure to executive compensation, global mobility or benefits strategy.

The demand for hybrid working remains strong, with candidates continuing to prioritise flexible working arrangements and work-life balance. However, businesses are increasingly trying to bring people back into the office, which may require a shift in how company culture is communicated during the recruitment process.

The evolving Analyst role

The Analyst space has seen some of the most interesting changes. Leona McCarthy, who specialises in placing Reward and Benefits Analysts, has observed strong demand in sectors like financial services, professional services and retail. Much of this is being driven by structural projects such as job architecture reviews, benchmarking initiatives and pay transparency planning.

“We’re seeing employers become more selective,” says Leona. “They want Analysts who can combine technical rigour with commercial insight.”

Previous high salary inflation has also played a role. The post-pandemic surge in hiring led to significant salary inflation. By the end of 2024, average salaries for Reward Analysts had risen from £40-45,000 to £50-55,000, with some financial services roles exceeding this.

While this has made roles more attractive to candidates, it’s widened the gap between candidate expectations and employer budgets in the Analyst market.

Leona explains: “Salary inflation has been a blessing and a curse. It’s helped attract talent, but it’s also made it harder for mid-market firms to compete. Some Analysts are happily pricing themselves out of roles but still have a way to go to close their skill gaps to successfully secure the next grade of roles and pay. But we’re now seeing a recalibration, with employers focusing more on total reward and EVP rather than just base pay.”

Benefits roles are evolving too. Analysts are now expected to deliver strategic, data-driven insights, particularly around wellbeing, mental health and flexible benefits. These are now central to modern employee value propositions and play a key role in employee engagement and retention.

The use of automation and AI-powered tools is also growing in this space, helping to streamline processes such as compensation modelling, pay equity analysis and candidate experience tracking. As new technologies continue to shape the HR landscape, analysts with the right skillset will be in high demand.

Senior market: waiting for confidence to return

At the senior end of the market, Peter Francis has seen a slower-than-expected recovery in hiring volumes, particularly in financial services. While some senior searches have closed successfully, the market remains cautious.

“There is a definite supply and demand imbalance,” says Peter. “Businesses are still adjusting to the removal of the bonus cap and the implications for pay structures.” This shift in pay dynamics has raised complex questions for employers, especially around regulatory reporting and fairness. In April, Peter hosted a regulatory reward breakfast, bringing together senior professionals to unpack these challenges.

“We wanted to create a space to talk through the thornier issues, such as how firms are flexing their pay ratios, the impact of RBA adjustments and what this all means for managing multi-site MRT populations,” he explains.

Looking ahead, Peter believes that the rest of 2025 will depend heavily on domestic economic indicators. If growth starts to trend above the current 1 to 1.5 percent range, confidence could return and hiring volumes may follow. This would also support more confident investment in long-term recruitment strategies and talent acquisition planning.

He also notes that the removal of the bonus cap has prompted many firms to revisit their total reward frameworks, particularly in light of rising national insurance costs and increased scrutiny around fairness and transparency.

Regional and structural trends

Outside London, Stephen Menko has seen a wide variety of roles, from broad reward and benefits positions to more specialised ones. He notes a strong focus on compensation and benefits, job evaluation and job architecture.

“Q1 saw unusually high demand for permanent roles,” says Stephen. “But more recently, we’ve seen a shift towards fixed-term contracts, driven by cost constraints and the need to deliver key projects.”

This shift reflects a broader trend towards agile workforce models. Businesses are looking to balance flexibility with strategic delivery, often using fixed-term contracts to test new roles or manage short-term project needs. For HR leaders, this means adapting hiring processes and workforce planning to remain competitive in a changing UK labour market.

Stephen also highlights the growing importance of remote work and hybrid working models, which are now standard expectations for many candidates. These preferences are influencing how roles are structured and how organisations position themselves on platforms like LinkedIn to attract the right talent.

Looking ahead: cautious optimism

While the market hasn’t hit its full potential in H1, there are signs of improvement. We’re seeing a growing pool of passive candidates who are dissatisfied in their current roles but hesitant to move due to market uncertainty. If conditions improve, this could lead to a wave of movement similar to the ‘great resignation’ seen during the pandemic.

Key trends for the second half of 2025 include employee development, data and analytics and structural change. There’s also a growing emphasis on total reward and EVP, as employers look beyond base pay to attract and retain talent. Organisations that can offer clear career development, inclusive cultures and streamlined recruitment processes will be best placed to secure top talent.

Nick Arnold concludes: “Career progression remains a top priority for job seekers. There’s a real opportunity for businesses to hire on potential and offer stretching roles that keep costs down while effectively engaging talent.”