Canadian pay hikes steeper than expected

But we're still falling behind on variable pay options.
By Laura Cassiani
|Canadian HR Reporter|Last Updated: 05/30/2001

Canadian employers are paying more than they expected to attract and keep key talent, according to a recent salary survey.

When it comes to base pay, Canadian companies are surpassing the forecasts from the start of the year, while American employers are paying less than they had expected to.

“It looks like Canadian companies seem to be doing a lot better than American companies and seem more focused on retention,” said Kay Schmitke, project manager of the total rewards department of Arizona-based WorldatWork.

But Canadian employers are still lagging behind on variable pay and longer-term compensation programs.

Canadian employers will be increasing pay for management employees by 4.1 per cent, which is higher than the projected increase of 3.8 per cent, according to preliminary results of WorldatWork’s Total Salary Increase Budget survey.

Canadian officers and executives will see the highest pay increases in the country, 4.2 per cent in 2001, compared to the 3.8 per cent increase employers expected they would pay that group.

The survey, which will be released in its entirety in August, sampled more than 3,000 companies in both Canada and the U.S.

While Canadian pay increases are higher than forecasted, American employers paid less than what they expected to pay. According to the survey, executives in the U.S. will have their pay increased by 4.4 per cent this year, which is lower than the 4.7 per cent firms projected.

And, with this year’s increases, Canada has inched closer to closing the gap on base pay.

“It looks like Canadian firms are taking larger steps toward balancing out their pay budgets with American firms. It’s getting pretty close,” said Schmitke.

Canadian firms will also increase pay above projections in other employee categories, with the exception of hourly non-union employees. Salaried non-management employees will see pay increase of 3.9 per cent, 0.2 per cent higher than they had anticipated they would pay. Management employees will see pay increase of 4.1 per cent (above the 3.8 per cent projected). Hourly non-union employees will see pay increase of 3.3 per cent (slightly more than the 3.2 per cent projected but lower than the 3.5 per cent increase in 2000).

Wages in unionized workplaces are also on the rise. According to Statistics Canada’s monthly Wage Settlements Bulletin, annual wage rates were up 3.6 per cent in the first quarter of the year, compared to a 2.9-per-cent increase in the fourth quarter of 2000.

“They are moving up in almost every employee category while the American numbers remain relatively flat. The numbers look good for Canada,” said Schmitke.

While the base pay numbers are good, Schmitke said the fact that equity plans and other forms of compensation options aren’t as popular in Canada also needs to be factored into the bigger picture.

There’s no doubt that Canada is lagging behind in mixed pay structures, said Ted Emond, leader of the compensation practice in the Toronto offices of the HR consulting firm Hewitt Associates.

“Particularly at the leadership level there is pressure in Canada to bring more risk into pay. We’re a little behind in Canada in terms of pay mix,” said Emond.

Canadian employers need to bring compensation inline with what employers are doing south of the border, with longer-term incentive plan structures, he said.

“As Canada becomes more global, we have to have compensation packages that are comparative so that pay doesn’t become a reason why people leave.”

A shortage of skilled labour in Canada will also affect compensation. With demand for labour high and supply falling short, compensation could soar in the coming years, especially in the race to retain top talent.

“It will put a lot of pressure on compensation. It will be a sellers’ market. Labour will be able to write its own ticket,” said Emond.

In terms of what’s in store for 2002, preliminary survey results suggest that the rising trend in Canadian base salaries will continue, but increases will be slight. Base pay for non-management employees projections will drop for 2002.

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