More than a third (36 per cent) of Canadian organizations froze salaries in 2020, compared to a pre-coronavirus forecast of just two per cent, according to Morneau Shepell Ltd.’s annual salary projection survey.

The trend is likely to hold true for the coming year, with almost half (46 per cent) of employers saying they’re uncertain about whether to increase or freeze salaries, while 13 per cent have already committed to doing so in 2021.

For the first time since the 2008 financial crisis, the annual survey saw the national average base salary increase projection drop below two per cent, driven by the combined impact of salary freezes and economic instability due to the pandemic.

Read: Employers using hiring, wage freezes to combat effects of coronavirus: survey

In 2019, the average salary increase, including freezes, was 2.4 per cent year-over-year, a significantly higher number when compared to the actual base salary increase of 1.6 per cent in 2020. For 2021, survey respondents said they’re anticipating a slight recovery, with base salaries expected to increase by an average of 1.9 per cent, including salary freezes. 

The survey also found that some provinces are expecting to be harder hit than others. In Alberta, 16 per cent of respondents said they’re expecting more salary freezes, driven in large part by a dramatic decline in commodity prices. Meanwhile, Atlantic Canada is expecting to remain stable next year, with eight per cent of respondents in New Brunswick expecting salary freezes, followed by Nova Scotia (nine per cent), Newfoundland and Labrador (nine per cent) and Prince Edward Island (10 per cent).

“Uncertainty has been the buzzword of 2020, however, it’s extremely important to look beyond the term itself to understand the critical implications that employers’ instability has on our economy and Canadian employees and how to seek to mitigate that where possible,” said Anand Parsan, vice-president of Morneau Shepell’s compensation consulting practice, in a press release. “This year’s results are some of the most concerning that we’ve seen since the survey’s inception in 1982. With nearly half of employers reporting uncertainty going into 2021, it’s important that Canadians recognize the impact on their financial well-being as we expect another challenging year.

Read: Financial wellness more important than ever during coronavirus

“Employers should revisit their total rewards strategy and consider what they can do to support their employees in such times, including access to financial education, access to resources and emotional support, as financial stress has a huge impact on overall well-being, resiliency and productivity of the workforce.”

The survey also highlighted the financial impact of the pandemic beyond salaries. The majority (76 per cent) of respondents reported that the pandemic is having a negative impact on their bottom-line revenue, with 22 per cent reporting a severe decline, 34 per cent reporting a moderate decline and 20 per cent citing a mild decline.

“Financial stability is an important piece of the well-being puzzle and it’s critical that employers continue to maintain open communication with employees about the pandemic’s impact to their business,” said Guylaine Béliveau, principal in Morneau Shepell’s compensation consulting practice. “Ensuring and demonstrating good governance, risk management and communication around key compensation policies and programs are effective ways to help build confidence and an improved sense of security, even while acknowledging a challenging reality.”

Read: How to talk about pensions and benefits during coronavirus

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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