Real pay is up less than 1%: What the September ONS numbers mean for your salary in 2027

On 15 September the Office for National Statistics published its monthly labour market overview, and the number that mattered was a small one. Regular pay grew 3.5% over the year to July, and once inflation is taken out, real regular pay grew by between 0.6% and 0.8% depending on which price index you use. That is the figure every pay review in the country will be negotiated against between now and Christmas, and most employees will walk into the conversation without having seen it.

This post reads the September release the way an employee should: what the headline numbers say, what the split between public and private sector pay means for anyone in a company, why the vacancy and payroll figures matter more than the unemployment rate, and what to do with all of it before your own pay review. The next release is on 20 October, eight days before the Budget, and this post will hold for both.

What the September release actually says

The ONS reports three sets of numbers each month: the labour force survey (employment, unemployment and inactivity), the payroll data from HMRC (how many people are on company payrolls), and the earnings figures. In the three months to July 2026 the employment rate for 16 to 64 year olds was 75.1%, the unemployment rate was 4.9%, and the economic inactivity rate was 20.9%. None of those is dramatic on its own. The movement is in the other two sets.

The payroll figure is the one to watch. The number of payrolled employees fell by 101,000 in the year to July, to 30.2 million, and the early estimate for August shows a further fall to 145,000 below the year before. The vacancy count of 702,000 is down again on the quarter and sits below its pre-pandemic level. Put those two together and the picture is an employment market that is not collapsing but is quietly shrinking: fewer jobs on payroll, fewer openings, and therefore less pressure on employers to pay more to keep people.

The split that matters if you work for a company

The headline 3.5% regular pay growth hides a gap. Public sector regular pay grew 6.3% over the year, still working through the settlements agreed for doctors, teachers and civil servants. Private sector regular pay grew 2.9%. If you work for a company rather than the state, the relevant benchmark is the second number, and once inflation is removed it is close to zero. A private sector employee whose pay rose by 2.9% this year has, in real terms, stood still.

That matters for the conversation you are about to have, because your employer's HR team reads the same release and will anchor on 2.9%. An offer of "3%, in line with the market" is not generous. It is the market average for a sector in which real pay is flat, and it is the number you should expect to be shown as a ceiling. The salary negotiation post covers how to move an anchor; this post is about knowing where the anchor will be set.

Why the switcher premium has gone

For most of 2022 and 2023 the reliable way to beat the market was to move: job switchers earned a premium over stayers that at times reached double digits. That premium narrowed sharply through 2026 as vacancies fell, and the September figures explain why. With 702,000 openings against a labour force where 4.9% are unemployed and payrolls are contracting, employers no longer need to overpay to fill roles, and the candidates who move are increasingly moving sideways on pay. The moving jobs post tracked the premium as it shrank.

There is a second-order effect for anyone who stays. When the premium for moving is large, employers pay retention rises to stop people leaving. When it is small, they do not need to, and the pay review budget shrinks accordingly. A flat switcher premium is therefore bad news for stayers as well as movers, and it is why this year's reviews are likely to cluster tightly around the sector average rather than rewarding the people the company would most hate to lose.

Two other things arrive with the January job-move season this year. From 1 January 2027 the unfair dismissal qualifying period drops from two years to six months, which the commencement papers themselves expect to make some employers more cautious about hiring and stricter on probation. And the Autumn Budget on 28 October may change the tax on the pay rise you do get. Neither is a reason not to move. Both are reasons to move for a specific, written reason rather than on the assumption that moving pays.

Three positions, and what the data says to each

How to read the release yourself in ten minutes

The ONS publishes the labour market overview at seven in the morning on a Tuesday, roughly mid-month, and the whole bulletin is free on its website. You do not need to read it all. Four figures answer the questions an employee has, and they are always in the same places: the regular pay growth figure and its real-terms equivalent in the earnings section, the private sector pay figure in the same section a paragraph further down, the payrolled employees change in the HMRC section, and the vacancies level in its own section. Ten minutes on the day of release is enough to know more than the person on the other side of the pay review table usually does.

Two cautions when you quote it. The pay figures are three-month averages compared with the same three months a year earlier, so "3.5% in July" means May to July 2026 against May to July 2025, and they are revised in later releases. And the survey-based figures, employment and unemployment in particular, have had well-publicised sample problems since the pandemic, which is why the ONS asks readers to treat them with caution and why the payroll count, which comes from HMRC records rather than a survey, is the more reliable guide to whether jobs are being created or lost.

The figure to quote in a pay review is the one your employer's sector is measured against. For a company, that is private sector regular pay, 2.9% in this release. Quote it before they do, and the conversation starts from a shared fact rather than from their framing of it. Then move the discussion to the only ground where you have an advantage, which is what you specifically delivered, because the sector average is an argument the employer will always win.

What a flat year of real pay means over ten years

The point of the example is not the £57,600. It is that the salary line is the same for both people, because the salary line is set by a market you do not control, and this year that market is paying 2.9%. The only line on the household balance sheet an employee can move on their own is the one that does not come from the employer. The post on salary risk makes the same argument from the other direction.

What I did with a number like this

In 2023, at Jaguar Land Rover, I had a pay review that told me what the data above tells everyone: the market rate for staying was small, and the decision about whether I stayed was not really mine. I spent a year being annoyed about it, which achieved nothing. In 2024 I started using the evenings instead, compared the options, chose one and built it. By August 2025 the business covered my family's number and I left a £60,000 job on my own date. The salary never did rise much. It just stopped being the only line.

Read the 20 October release when it lands, read the Budget on 28 October, and take both into your pay review. Then read them a second time as an operator rather than an employee. A market paying 2.9% to stay is a market telling you where the ceiling is. The floor and the ceiling of the other income are still yours to set.

This is general information, not financial advice. All labour market figures are from the ONS labour market overview published on 15 September 2026 and are subject to revision; the next release is on 20 October 2026. Your own pay, tax and prospects depend on your circumstances.

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