The majority of Canadian organizations are continuing to invest in salary increases, with just six per cent reporting a salary freeze for executives and 4.8 per cent reporting a salary freeze for non-executives in 2019, according to a new survey by Mercer Canada.
This year, merit budgets increased to 2.6 per cent, on average, and are projected to remain steady in 2020. Indeed, 57 per cent of survey respondents said they plan to continue with the same salary increase budget in 2020. Among the remaining organizations, 21 per cent indicated their increase budget would be lower in 2020 and 22 per cent reported it would be higher.
The top reasons for projecting a lower increase budget included economic uncertainty and a general cost reduction initiative (24 per cent) and a change in base salary strategy (19 per cent). Among survey respondents expecting a higher increase budget, the top reasons were: a greater competition for workforce or anticipated labour shortages (28 per cent); a change in base salary strategy (22 per cent); and to account for salary freeze, delayed or lower than normal increases in previous years (21 per cent).
“Getting compensation right is critical to your employee value proposition,” said Gordon Frost, partner and career business leader at Mercer Canada, in a press release. “When you have the right compensation strategy in place, you can bolster employee retention and build a thriving workforce.”
The survey also found 41 per cent of organizations said they’ve budgeted separately for promotional increases, where the average promotional budget was about 1.1 per cent of payroll in 2019. In 2019, high performers received 1.85 times the salary increase of average performers.
The top factors influencing 2020 compensation decisions are retention concerns (72 per cent), attraction concerns (70 per cent) and strengthening a performance-based culture (50 per cent).