Average increases could range from 3.5 per cent to 3.9 per cent
Salary adjustments next year will largely depend on industry sector and geography, as the West continues its dominance while Central Canada succumbs to an economic downturn.
The results from a Hay Group survey of almost 600 Canadian organizations forecast the national average for base salaries will increase by 3.7 per cent in 2009, the same forecast for 2008 (though the actual increase in 2008 was 3.9 per cent).
“The national overall number is the same as last year and at first blush that sounds boring,” says Karl Aboud, Toronto-based international director of reward consulting at the Hay Group. “But the more interesting story is there’s such a divergence, as you segment the data around the average, that it’s more important than ever to focus on your particular business sector and particular geography to determine what the market is.”
Alberta is projected to see a 4.9-per-cent increase, the same as last year, and Saskatchewan is predicted to see a 5.1-per-cent gain, a considerable jump from 4.6 per cent predicted last year, according to Hay’s Compensation Trends and Strategies for 2009.
On the other hand, Ontario should see a 3.3-per-cent increase in 2009, compared to 3.4 per cent predicted for 2008, and Quebec could see a 3.2-per-cent gain, compared to 3.3 per cent last year.
“If you look at the numbers, you’ve got lows for manufacturing, retail and forest products in Ontario and Quebec and highs in energy commodities in Alberta and Saskatchewan,” says Aboud.
Forecasts of 2.4 per cent by forest products, 3.1 per cent by retail and 3.3 per cent by manufacturing are the three lowest sector projections for 2009. The oil and gas sector is projecting the highest average salary increase of 5.4 per cent, while mining is at 4.5 per cent.
Saskatchewan takes first place
While Saskatchewan’s increases last year were largely caused by spillover from Alberta, for 2009, “Saskatchewan is eking out Alberta for first place,” says Aboud. “It’s become a huge commodity province, potash is absolutely monstrous.”
Oil prices continue to surge, Alberta may have peaked but it’s not faltering. With the current level of inflation and productivity and the domestic economy, five to 5.5 per cent is as high as it’s going to be, he says, and Alberta got there very quickly and has stayed there, while Saskatchewan is on its way.
“The commodity provinces are still having the war-for-talent challenge,” he says, and will do anything to attract and retain workers, while Central Canada has the highest proportion of freeze observations, with no adjustments to the salary structure. “There are two dramatically opposite factors in play.”
Even the Maritimes are forecast to see a salary budget increase of 3.5 per cent in 2009, a major increase from 3.1 per cent predicted for 2008. That too is influenced by a growing commodity sector, says Aboud. “I don’t remember Ontario and Quebec ever being lower than the Maritimes,” he says.
Companies will have to focus much more on the segmented data than ever before, he said, because “when you go to the board and there’s data out there that could support a number that’s half or double the national average, you’ve got to be very careful you can rationalize it. And given payroll is the biggest item on any company’s profit-loss statement, you’ve got to be very diligent about defending why the number is what it is.”
Mercer
Echoing these findings is Mercer’s 2009 Canadian Compensation Planning Survey which predicts pay raises will be significantly higher for employees in regions with high-performing industries.
Compared to the expected average national pay increase of 3.8 percent in 2009 (slightly less than the four-per-cent increase granted in 2008), Canadian employers in high-performing industries plan to grant salary increases that are about 40-per-cent higher, according to Mercer’s survey. Oil and gas and natural resources are the highest, with projected pay increases of 5.4 and 4.2 per cent respectively for 2009. In contrast, durable manufacturing and transportation are expected to award less-than-average pay raises in 2009 at 3.4 per cent.
“Clearly the uneven economy is having an impact on human capital and compensation strategies,” said Iain Morris, principal at Mercer. “Alberta’s economy, led primarily by the energy and natural resources sectors, continues to boom and employers are granting higher pay increases to reflect this growth. Organizations in other areas, such as Ontario where the manufacturing sector is struggling, are facing the challenges of a tightening economy.”
Regardless of whether organizations are experiencing talent shortages or job losses, employees are recognized as the best competitive advantage and, according to Mercer, organizations are utilizing cash-based approaches, such as signing bonuses, spot cash awards and retention bonuses to hire and retain key talent.
“Although these cash-based strategies are quite effective in solving immediate needs, a more holistic approach to total rewards — one that considers base pay, variable pay, benefits and career development — is critical for maintaining a competitive advantage in the marketplace,” said Morris.
WorldatWork
A slightly higher national budget increase of 3.9 per cent is predicted for non-management, salaried employees in Canada in 2009 by WorldatWork in Scottsdale, Ariz. That is up slightly from an actual increase of 3.8 per cent for 2008 (compared to a predicted 3.9 per cent for this year).
Broken down by city, the survey predicts total salary budget rises for 2009 of: Calgary 3.9 per cent, Edmonton 3.9 per cent, Vancouver 3.8 per cent, Winnipeg 3.8 per cent, Hamilton 3.9 per cent, Ottawa 3.8 per cent, Toronto 3.7 per cent, Montreal 3.6 per cent and Quebec 3.5 per cent.
Management on salary should expect the same increases while officers and executives should see a gain of four per cent (compared to an actual rise of 3.9 per cent in 2008).
The survey also finds 68.3 per cent of employees rated as middle performers in 2007, compared to 21.4 per cent of high performers, 7.7 per cent of low performers (who received a merit increase) and 2.7 per cent of low performers (who received no merit increase).
For 2008, the percentage of high performers is expected to fall to 19.5 per cent, for middle performers to rise slightly to 69.8 per cent and for low performers to remain the same.
In 2007, the average merit increase was 5.2 per cent for high performers, 3.8 per cent for middle performers and two per cent for low performers.
