Continuing economic uncertainty and cost reduction initiatives are making Canadian organizations even more cautious about budgeting for salary increases in the year to come, with projected increases of 2.6 per cent across all employee groups, according to a survey by Mercer.
When anticipated salary freezes are taken into account, overall salary increases in 2017 are expected to be even lower, at 2.3 per cent, found the survey of nearly 500 employers.
“These are some of the lowest overall salary increase projections we’ve seen since our survey began more than 20 years ago, reflecting ongoing concerns among employers about the health of the economy,” said Gordon Frost, market business leader for Mercer’s Canada Talent business. “This is also the first time our survey found the energy sector projecting salary increases below the other sectors.”
Taking into account the effects of salary freezes, increases for non-union energy workers are projected to increase by just 1.3 per cent in the coming year, compared with 2.3 per cent for non-union employees overall. Excluding salary freezes, increases in the energy sector are projected to be 2.4 per cent, still below the 2.6-per-cent national average.
Pay for performance remains important
As in previous years, organizations continue to provide higher-than-average salary increases to the highest performing employees, with the top seven per cent of employees projected to receive an average salary increase of 4.3 per cent in 2017 and the bottom nine per cent expected to receive increases of between 0.2 and 1.0 per cent.
Most organizations continue to use performance ratings when making salary adjustment decisions — only four per cent of organizations either eliminated such ratings in 2016 or plan to do so, but a further nine per cent are considering doing so, founder Mercer.
“The caution shown by employers in increasing their base salary budgets, coupled with smaller budgets for promotional and merit adjustments, means business leaders must be more strategic in how they distribute their limited funds in order to attract and retain key talent,” said Frost. “Those employers who can pay above the average for performance will enjoy a competitive advantage over those that cannot.”
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