For many businesses, this is the time of year when conversations about 2027 start becoming more serious.
Headcount plans are taking shape. Budgets are being discussed. Salary increases are being considered. Teams are beginning to identify where they may need additional skills or capacity next year.
One of the easiest things to do during that process is take this year’s salary budget, apply an increase and assume you are ready to recruit.
But there is an important difference between deciding how much your business plans to increase pay by and understanding what you may actually need to pay to attract somebody from the external market.
Those two numbers are not always the same.
A 3% increase does not automatically make a salary competitive
Latest ONS figures show annual regular pay growth of 3.5% across Great Britain in the three months to July 2026, with private sector regular earnings growing by 2.9%. Office for National Statistics
It would therefore be tempting to take an existing £40,000 salary, add a similar percentage and consider the role appropriately benchmarked for next year.
But averages can only tell you so much.
Different roles, sectors, locations and skillsets move at different speeds. A salary that remains perfectly competitive for one position could be struggling to attract people in another.
This is particularly important when the skills required are difficult to find.
The latest KPMG and REC Report on Jobs found that starting salaries for permanent hires increased at their strongest rate since January, with recruiters reporting that some employers were increasing offers specifically to secure highly skilled and niche candidates. The REC
The wider market may be relatively cautious, but that does not mean every candidate has become cheaper or easier to attract.
Your internal salary and the external market are different things
Imagine you have an employee earning £42,000.
They receive a reasonable annual increase and move to £43,500.
Internally, that may feel appropriate.
But if you needed to replace that person tomorrow, what would somebody with the same skills and experience expect to move employers?
That could be a very different number.
Existing employees make salary decisions in a different context. They already know the business, their colleagues, their role and what flexibility or benefits they receive.
An external candidate is deciding whether leaving all of that behind is worth it.
They may expect a meaningful increase to move. They may already have a pay review approaching. They might receive a counteroffer. And if their skills are in demand, they may have several opportunities to choose from.
That is why retention salary and recruitment salary should not automatically be treated as the same thing.
Start with the role, not the percentage
There is already evidence that employers are approaching 2027 pay cautiously.
In a recent survey of 95 organisations by Incomes Data Research, 72% expected their 2027 pay award to be around the same level as in 2026, while only 10% expected it to be higher. Incomes Data Research
That may make complete sense at an organisation-wide level.
But when planning recruitment, it is worth looking beneath the overall percentage.
For every role you expect to hire, ask a slightly different set of questions.
What would somebody with the skills we need currently earn elsewhere?
How difficult is that experience likely to be to find?
What would persuade someone already employed to move?
Are we looking for a relatively common skillset, or a very specific combination of experience?
And if we cannot attract the person we want at the planned salary, where would we realistically compromise?
Those conversations are much more useful before a vacancy goes live than six weeks into an unsuccessful search.
Look particularly closely at your harder-to-replace roles
Not every salary needs intensive benchmarking.
You probably do not need to analyse every position in the business individually before completing your budget.
Start with the roles where getting the number wrong would cause the most pain.
Perhaps you know you need an experienced marketer with a particular specialism.
Maybe there is somebody in your team whose combination of skills would be difficult to replace.
You might be planning a senior hire where the difference between £65,000 and £70,000 gives you access to a noticeably different candidate pool.
Or you may be looking for the type of midweight talent that is currently particularly difficult to find.
Those are the roles where a broad market percentage can become misleading.
Salary is only one part of competitiveness
Of course, being competitive does not mean simply paying more than everybody else.
Candidates consider the whole opportunity.
Flexibility, progression, responsibility, leadership, benefits, location, culture and the quality of the work can all influence whether somebody wants to join.
But salary can still determine whether you get the opportunity to have that conversation in the first place.
If somebody earning £50,000 is approached about a £48,000 role, an excellent culture and exciting progression plan may never get the chance to influence them.
The strongest hiring proposition therefore combines a competitive salary with a compelling reason to join.
Neither should be expected to compensate entirely for the absence of the other.
Build some flexibility into your 2027 plan
One of the most useful things businesses can do when budgeting is avoid treating every salary as an immovable number.
A range gives you room to respond to the candidate market.
If you discover that the right people consistently sit slightly above your original budget, you can decide whether the additional experience justifies the investment.
Alternatively, market feedback might show that the original brief is unrealistic for the budget.
Perhaps you recruit someone with slightly less experience and give them room to develop.
Perhaps one requirement is not as essential as originally thought.
Or perhaps the role genuinely needs somebody more senior and the budget needs to reflect that.
The important thing is making those decisions with market information rather than finding out after months of searching.
Use salary data as a starting point, not the answer
Salary guides are useful because they provide context.
They can tell you broadly where a role sits and help identify whether your expectations are in the right area.
But there will always be variables that a national salary range cannot completely capture.
A Marketing Manager for one business may have a completely different remit from a Marketing Manager somewhere else.
The same title can cover different responsibilities, team sizes, technical requirements and levels of commercial accountability.
So, as you start planning your 2027 headcount, use the data to start the conversation.
Then look at the specific role, the skills required and what candidates with that experience are actually expecting.
Planning your 2027 hiring budget? Our Salary Guide is a useful place to start. If you need something more specific, you can also request salary insight from our team and we can share what we are seeing across the candidates, roles and businesses we speak to every day.
