In a year marked by an ongoing trade war and threats of tariffs by U.S. President Donald Trump and against a backdrop of rising costs, Canadian employers are reconsidering their total rewards and talent management strategies.
“A lot more attention is being paid to total rewards, such as how we’re paying people,” says compensation and benefits expert Chris Lewis. “A lot of companies are thinking very strategically about the right workforce size. And then there has also been some concerns around pullback from the earlier [salary] ranges. [Employers are] being a little bit more active in how they manage those salary ranges.”
In the meantime, the impact of the rising cost of living on employees’ finances and mental health has been well documented. For example, the 2024 Benefits Canada Healthcare Survey found personal finances was plan members’ top stressor, with the share of member respondents citing it as a source of stress steadily climbing year over year, from 35 per cent in 2022 to 43 per cent in 2024. Plan members in poor financial health were also more likely to report high to extreme daily stress over the last three months.
Read: Plan members’ financial strain a call to action for plan sponsors: 2024 BCHS report launch
While employees are the most directly impacted by rising costs, the effects trickle down to employers’ benefits and retirement savings programs as workers reconsider their savings, says Lewis. “There have been cuts in the number of people who are contributing to their retirement savings plan. The downside is they’re missing the employer match when they aren’t contributing and also the growth when they pull funds to pay for day-to-day things like unexpected expenses.
“Generally speaking, there’s less interest in the saving component and more interest in accessing the existing money they already have. The other thing we’ve seen is fewer employees [taking part] in other financial programs like a [group registered education savings plan] or a [group tax-free savings account].”
Ongoing trade spat
Alongside rising costs, the ongoing U.S. trade war is impacting employers’ plans.
According to a May survey of 400 Canadian employers by Mercer Canada, half (48 per cent) of all respondents were still determining the financial impact of U.S. tariffs on their businesses. However, among manufacturing companies, a third (33 per cent) said they expect a high impact from tariffs on their financial performance and half (50 per cent) reported their employees are worried about the potential impacts on their jobs.
Read: Communication, benefits key to supporting employees in sectors hit by U.S. trade war
As a result of the current economy, many employers are rethinking their recruitment strategies. A survey by Express Services Inc. found almost 46 per cent of Canadian employers reported a negative hiring outlook for the second half of 2025 — up from 38 per cent last year — amid growing economic uncertainty.
The survey, which polled 500 Canadian hiring decision-makers across a range of industries, found just 43 per cent of employers said they plan to grow their teams in the second half of the year, down from 49 per cent in 2024.
Tariffs by the numbers
According to a 2025 survey by Mercer Canada, 48% of Canadian employers are still determining the financial impact of U.S. tariffs on their businesses.
Looking specifically at manufacturing companies that responded to the survey, 50% reported their employees are worried about the potential impacts on their jobs, while 33% expect tariffs to have a high impact on their financial performance.
While Lewis says plan sponsors are unlikely to cancel savings programs amid short-term economic turmoil, he suggests they may reconsider how they approach early withdrawals by plan members. “Savings programs will continue to exist, but what’s going to change is there might have to be some governance updates about when [members] can pull out these funds. It might be a question of companies looking at governance in terms of withdrawal and related penalties.”
Taking a measured approach
Similarly, it’s important for employers to take a measured approach to health benefits amid rising costs, says Shiranee Perera, vice-president of health and benefits consulting at Hub International Ltd.
“A lot of the challenges we’re facing right now can be addressed by taking a look at what’s working and what isn’t working within your programs. Sometimes employers think, ‘OK, I’ll just cut a bunch of costs.’ Well, you still have obligations to your employees after that, so they have to consider what that actually looks like.”
This is where benefits data can support decisions to make any changes to programs, she adds. “The best way to manage benefits costs or potentially escalating costs, reduced compensation or reduced revenue for your organization is by taking a look at it from a data-driven perspective — what’s being utilized and what isn’t being utilized. There’s no point in cutting benefits costs in one area when it’s going to end up costing you significantly in other areas.”
Most importantly, she suggests employers maintain clear channels of communication and transparency with employees during a challenging time. “Communication is key right now. As an employee, being left in the dark creates a lot of insecurity. Disconnection could potentially create some chaos.
“[Employers should] be intentional and simple [and] make sure they have frequent updates with employees about what’s going on with the business. As long as they’re being honest and empathetic, that goes a long way with building that trust with their employee population.”
Blake Wolfe is the managing editor of Benefits Canada and the Canadian Investment Review.