Canadian employers are projecting, on average, 3.3 per cent for merit increase budgets and 3.7 per cent for total increase budgets in 2024, compared to 3.6 per cent and 4.1 per cent, respectively, in 2023, according to a new survey by Mercer Canada.
“In the face of economic uncertainty and reduced labour market pressure, employer compensation budgets seem to be returning to pre-pandemic levels,” said Elizabeth English, a principal at Mercer Canada, in a press release. “If Canada’s labour market continues to cool over the next few months, it could reduce pressure on 2024 compensation budgets even further.”
The survey, which polled more than 500 employers, also found while roughly a third (30 per cent) agreed pay transparency should be part of their reward and talent philosophies, more than half (51 per cent) said they have no plans to go further with pay transparency than required by local law. However, over the last year, the percentage of companies that reported sharing salary ranges in job postings increased from eight per cent to 15 per cent.
British Columbia is the latest province to enact pay transparency legislation. Effective Nov. 1, 2023, all B.C. employers will be required to include wage or salary ranges on all publicly advertised jobs.
“Pay transparency legislation continues to push employers to fast forward their policies,” said English. “Proactive action will not only help employers get ahead of future legislation, but pay transparency promotes a culture of trust, increases employee perceptions of fair play, is critical in attracting candidates and ultimately drives higher levels of commitment and engagement.”
In a similar new survey, Telus Health found employers are projecting an average annual base salary increase of 3.64 per cent. It noted while 4.4 per cent of organizations said they froze base salaries in 2023, just 1.6 per cent plan to freeze salaries in 2024.
The survey, which polled more than 500 employers, also found 65 per cent of companies said a rise in compensation costs is a result of inflation and labour shortages and more than half (57 per cent) said they need to adjust the salaries of current employees to be equitable with new hires.
“In 2024, salary increases are slated to exceed the average for the past 20 years due to external market pressures, including increased competition for skilled talent across the country,” said Guylaine Béliveau, national leader for Telus Health’s compensation consulting practice, in a press release. “That competitive environment has added significant challenges when recruiting new employees and retaining top performers. As salaries rise, total rewards programs have gained prominence, with 33 per cent of companies enhancing benefits to help fight against inflation.”
And another new survey by Eckler Ltd. found the national average base salary increase for 2024 is projected at 3.9 per cent, slightly less than the 2023 projected increase of 4.2 per cent and the 2023 actual base salary increase of 4.4 per cent. It also found while more than half (58 per cent) of organizations remain undecided about 2024 salary budgets, fewer than one per cent reported a planned salary freeze.
While the survey noted compensation remains a significant component in an organization’s rewards strategy, employers are also focused on a more holistic talent management strategy. This approach includes initiatives such as participation in salary benchmark surveys (53 per cent); enhancing total rewards strategies to be more well-rounded, flexible and employee centric (48 per cent); conducting and/or producing more resources and education training on compensation for people leaders (46 per cent); having current job descriptions (42 per cent); and adopting measures to collect and analyze workforce demographic data to support diversity, equity and inclusion initiatives (35 per cent).
“As we head into next year, employers and employees alike have had to navigate increasing interest rates by the Bank of Canada and talks of a looming recession — it’s not surprising that nearly half of the organizations surveyed are still undecided regarding their 2024 salary planning budget,” said Anand Parsan, national compensation practice leader at Eckler, in a press release.