Canadian companies are projecting a 2.5 per cent increase to salary budgets in 2018, according to a new report from Accompass Inc.
However, the level of generosity depends on the size of the company. “Bigger is not better in this situation,” said Anne Peiris, vice-president of compensation at Accompass during a presentation of the survey results at the Toronto Board of Trade on Wednesday.
Companies with 1,000 or more employees are planning a 2.3 per cent increase on average. Smaller organizations, on the other hand, are hovering at up to 2.7 per cent. The increase changes by sector, too, with the lowest projected raises coming in health care (1.8 per cent) and the largest in the technology area (4.1 per cent).
The survey also indicated that roughly 25 per cent of companies segment their base salary budget by job level. “The more senior the level, the higher the salary budget,” said Peiris, calling that approach a good thing. “By organizations establishing separate budgets for the different levels, it avoids the problem of having to rob a whole bunch of people at junior levels to fund a higher-than-budgeted increase at a more senior level.”
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Location also plays a role, with about 20 per cent of survey respondents segmenting their budget increase by location. Companies in Toronto area and Ontario are planning the highest increases, at 2.6 per cent and 2.4 per cent, respectively. Vancouver was the lowest at two per cent.
In the meantime, the conversation around compensation is evolving from a focus on cost-of-living adjustments. “The days of COLA aren’t around anymore,” said Jonathan Foster, vice-president of executive compensation at Accompass. “Now, we hear pay for performance, pay for performance, pay for performance. That’s what’s coming out in base salary adjustments, in annual incentive programs. That’s what shareholders are focused on.”
And while many companies may start off with their intended salary budget increase, there are “business realities,” such as counter offers, promotions, regulatory changes and retention risk, that drive the real number up, said Peiris.
“You need to monitor these [realities] as closely as you monitor that 2.5 per cent, because this is where actual costs are going to come in.”
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Companies may be able to control some of those realities but the one they can’t determine is regulatory changes.
One change on many people’s mind this year is Bill 148, which mandates an increase to Ontario’s minimum wage. As of Oct. 1, the minimum wage will be $11.60, increasing to $14 in January 2018 and $15 in January 2019.
Over the course of 15 months, the minimum wage will be going up 32 per cent, said Peiris. “This is a huge impact for organizations that have minimum wage employees,” she said.
“The easy part is bringing people up to minimum wage,” she said, noting the challenge will be figuring out what to do with other employees already at $15.
The salary projections from Accompass are slightly below the numbers reported this week by Aon Hewitt. Based on a survey of 378 companies, it projects a 2.8 per cent increase in base pay increase in 2018. The number is up slightly from the actual increase of 2.7 per cent in 2017.