Canadian employers are not expecting to make higher pay increases for 2017, according to new research from Aon Hewitt, with surveyed companies projecting base pay to rise by 2.8 per cent next year, up slightly from 2.6 per cent in 2016.
However, employers are forecasting fewer salary freezes in 2017. In 2016, 4.5 per cent of companies froze salaries – in part due to continuing challenges in the oil and gas sector, which had the lowest total salary increase (1.2 per cent) of all surveyed industries. Next year, only 0.4 per cent of companies surveyed expect to freeze salaries.
“The Canadian companies we surveyed are clearly reluctant to earmark higher compensation increases as they prepare for a highly competitive landscape in 2017,” said Suzanne Thomson, senior consultant, global data solutions at Aon Hewitt, in a news release.
“On the plus side, fewer of them expect to freeze pay or cut salaries, and they are planning to keep already strong budgets for variable pay intact. That’s a key factor in their ability to attract and retain high performers.”
Read: Canadian salary increases to average 2.6% in 2017: survey
According to the survey, employees in the automotive and auto-supply, chemicals, consumer products and life sciences sector are forecast to see pay increases of three per cent in 2017, while high-tech and professional services organizations are expecting increases of 2.9 per cent.
Lower-than-average increases are expected in the oil and gas (2.2 per cent), banking (2.3 per cent), and transportation and logistics (2.1 per cent) sectors.
The report also found that in 2016 Canadian employers put a premium on performance, with nine out of 10 surveyed organizations reporting a variable pay plan and bonus payouts this year. This trend will continue in 2017, as the average merit increase among the top employee categories is forecast at 4.6 per cent, compared with a 2.7 per cent merit increase across all employee groups.
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The average budget for variable pay in 2017 is 15.4 per cent, unchanged from 2016. Two-thirds of organizations reported offering some form of long-term incentive plan to their employees, most often at the executive level (72 per cent). Performance-related share grants remain the most popular form of long-term incentive plan, followed by restricted stock.
“While the overall job market may be strengthening slowly, competition for high-performing employees remains high,” said Thomson. “In order to win the competition for top talent, organizations are continuing to differentiate compensation through variable pay programs.”