Projected increases in 2017 are 2.6 per cent, down from 2.8 per cent in 2016 and 3.0 per cent in 2015.
Continuing economic uncertainty and cost reduction initiatives are making Canadian organizations even more cautious about budgeting for salary increases in the year to come, with projected increases of 2.6 per cent across all employee groups. When anticipated salary freezes by some organizations are taken into account, overall salary increases in 2017 are expected to be even lower, at 2.3 per cent. Mercer’s 2016/2017 Canada Compensation Planning Survey also found that, while there are few regional differences among employers, organizations in Alberta are projecting salary increases below the national average, partly because 40 per cent of energy organizations say they intend to freeze salaries in 2017.
“These are some of the lowest overall salary increase projections we’ve seen since our survey began more than 20 years ago, reflecting ongoing concerns among employers about the health of the economy,” said Gordon Frost, market business leader for Mercer’s Canada Talent business. “This is also the first time our survey found the energy sector projecting salary increases below the other sectors.”
Taking into account the effects of salary freezes, increases for non-union energy workers are projected to increase by just 1.3 per cent in the coming year, compared with 2.3 per cent for non-union employees overall. Excluding salary freezes, increases in the energy sector are projected to be 2.4 per cent, still below the 2.6-per-cent national average.
Pay for Performance Remains Important
As in previous years, organizations continue to provide higher-than-average salary increases to their highest performing employees, with the top seven per cent of employees projected to receive an average salary increase of 4.3 per cent in 2017 and the bottom nine per cent expected to receive increases of between 0.2 and 1.0 per cent. Most organizations continue to use performance ratings when making salary adjustment decisions – only four per cent of organizations either eliminated such ratings in 2016 or plan to do so, but a further nine per cent are considering doing so.
“The caution shown by employers in increasing their base salary budgets, coupled with smaller budgets for promotional and merit adjustments, means business leaders must be more strategic in how they distribute their limited funds in order to attract and retain key talent,” said Frost. “Those employers who can pay above the average for performance will enjoy a competitive advantage over those that cannot.”
Few Regional Differences, with the Exception of Alberta
Excluding the impact of salary freezes, salary increases were similar across Canada in 2016, a situation that is projected to continue in 2017. Although the majority of organizations (88 per cent) do not vary their salary increase budgets by region, industry factors do create some regional differences, notably where the energy sector is an important employer such as in Greater Calgary and the rest of Alberta excluding Greater Edmonton, and, to a lesser extent, Greater Edmonton. All three regions recorded smaller increases in actual salaries from 2015 to 2016, and these differences are even more pronounced when expected salary freezes are taken into account, with Greater Calgary projecting an increase of 2.1 per cent in 2017 and Alberta excluding Greater Calgary and Edmonton projecting a 2.0-per-cent increase.
“With salary increases trending lower, it’s more important than ever for organizations to know what is happening on salary movements so they can remain competitive in the marketplace for the best talent,” said Frost. “The Mercer survey is a key part of ensuring they have the insights they need to make the best decisions possible with their salary budgets.”
About the Survey
Mercer’s Canada Compensation Planning Survey has been conducted annually for more than 20 years. The 2016/2017 survey included responses from nearly 500 organizations across Canada. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.
To purchase the survey results, visit: https://www.imercer.com/products/canadian-compensation-planning.aspx.
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Mercer is a global consulting leader in health, wealth and careers. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.ca. Follow Mercer on Twitter @MercerCanada.