Global consultancy finds that Canadian employers have increased their merit budgets to 2.6% in 2019 – an increase of 0.1% from the year before – as employers seek to define their employee value proposition
- Merit budgets increased to 2.6% (excluding zeroes) in 2019 – projected to remain steady in 2020
- The national numbers show considerable sector-by-sector variation, with ‘hot’ sectors like technology outpacing the national increase by over half a percentage point
Leading global consultancy Mercer today announced the findings of its 2019/2020 Canadian Compensation Planning Survey, which include the finding that merit increase budgets have increased slightly in 2019, to a level of 2.6%, excluding those organizations which have implemented salary freezes. Merit increase budgets are projected to remain at this level in 2020.
“Getting compensation right is critical to your employee value proposition,” says Gordon Frost, Partner and Career Business Leader at Mercer Canada. “When you have the right compensation strategy in place, you can bolster employee retention, and build a thriving workforce.”
Prior to 2019, merit increase budgets had held steady at 2.5% for the preceding three years. However, this year’s topline numbers belie considerable variation sector-by-sector, with ‘hot’ sectors, like technology, choosing to allocate half a percentage point more (3.2%) to merit increases, reflecting a more robust competition for talent.
Additional survey findings include:
- 41% of organizations budget separately for promotional increases, consistent with last year. The average promotional budget represented 1.1% of payroll in 2019.
- In 2019, high performers received 1.85 times the salary increase of average performers.
- The vast majority of organizations are continuing to invest in salary increases, with only 6.0% reporting a salary freeze for executives in 2019 (vs 6.6% of survey participants in 2018) – and only 4.8% reporting a 2019 salary freeze for non-executives (vs 4.6% in 2018).
- Nearly six in 10 (57%) of participating organizations plan to continue with the same salary increase budget in 2020.
- Of the remaining organizations, 21% indicated that their increase budget would be lower in 2020, with 22% reporting that it would be higher
- Top reasons for projecting a lower merit increase budget:
- Economic uncertainty and general cost reduction initiative (24%)
- Change in base salary strategy (19%)
- Top reasons for projecting a higher merit increase budget:
- Greater competition for workforce or anticipated labour shortages (28%)
- Change in base salary strategy (22%)
- Account for salary freeze, delayed or lower than normal increases in previous years (21%)
- The top factors influencing 2020 compensation decisions are:
- Retention concerns (72%)
- Attraction concerns (70%)
- Strengthen a performance-based culture (50%)
652 organizations participated in Mercer’s 2019/2020 Canadian Compensation Planning Survey, representing the breadth of the Canadian economy.
To provide further insights into how compensation can elevate the employee experience and improve your employee value proposition, Mercer is holding Compensation 2020: Elevating the Employee Experience events across the country. Register today on mercer.ca.
Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.ca. Follow Mercer on Twitter @MercerCanada.