The mean merit pay increase delivered to Canadian employees in March 2026 was three per cent, with average total increases (measuring all types of pay increases, including zeros) reaching 3.3 per cent, according to a new survey by Mercer.
The survey, which polled more than 270 Canadian employers, found the results aligned with projections made in October 2025, signalling a consistent approach to compensation planning. Only four per cent of respondents reported providing equal, across-the-board salary increases, referred to as the “peanut butter approach.”
Performance was still a key driver, with 88 per cent of employers saying they’re providing increases based on individual performance, followed by position relative to market value (80 per cent) and internal equity (71 per cent).
Read: Canadian employers project 3.11% increase to average base pay in 2026: report
The survey also found executive increases (2.5 per cent merit, 2.7 per cent total) were smaller than those for non-executives (2.9 per cent merit, 3.3 per cent total). In addition, more than half of respondents said they plan to adjust their formal salary structures in 2026, with an average adjustment of 2.7 per cent (excluding companies that responded with zero).
While overall increases were stable, the survey found differences among sectors, with life sciences (3.3 per cent merit, 3.8 per cent total increases) and retail and wholesale (3.3 per cent merit, 3.6 per cent total increases) leading the way.
Banking and financial services and non-financial services each delivered smaller average merit increases at 2.8 per cent, though banking and financial services made up for this with higher total increases (3.7 per cent), indicating other forms of base pay adjustments.
“Our latest compensation planning survey clearly shows that Canadian employers are being strategic with their compensation budgets, rather than delivering across-the-board increases,” said Elizabeth English, senior principal in Mercer’s career practice, in a press release. “Companies are prioritizing performance, market value and internal equity to differentiate pay. This approach is designed primarily to retain top talent in a competitive market.”