Salary forecasts swayed by region, sector

Average increases could range from 3.5 to 4.1 per cent
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 09/18/2008

Salary adjustments next year will largely depend on industry sector and geography, as the West continues its dominance and Central Canada succumbs to an economic downturn. Results of salary surveys for 2009, from four major consultancies, put the average range of budget increases between 3.5 per cent and 4.1 per cent. (Check out www.hrreporter.com for other survey results as they are released.)

Hay Group

A Hay Group survey of almost 600 Canadian organizations forecasts the national average for base salaries will increase by 3.7 per cent in 2009, the same forecast for 2008 (the actual increase was 3.9 per cent).

“The national overall number is the same as last year and at first blush that sounds boring,” said Karl Aboud, Toronto-based international director of reward consulting at 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 the 4.6 per cent predicted last year. 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.

“You’ve got lows for manufacturing, retail and forest products in Ontario and Quebec and highs in energy commodities in Alberta and Saskatchewan,” said Aboud.

Forecasts of 2.4 per cent for forest products, 3.1 per cent for retail and 3.3 per cent for manufacturing are the three lowest sector projections for 2009. The oil and gas sector is projecting the highest average salary increase at 5.4 per cent, with mining at 4.4 per cent.

While Saskatchewan’s increases last year were largely caused by spillover from Alberta, for 2009 “Saskatchewan is eking out Alberta for first place,” said Aboud. “It’s become a huge commodity province, potash is absolutely monstrous.”

With oil prices continuing to surge, Alberta may have peaked but it’s not faltering. With the current level of inflation, productivity and the domestic economy, five to 5.5 per cent is as high as it’s going to be, he said, and Alberta reached that very quickly and has stayed there, while Saskatchewan is on its way.

“The commodity provinces are still having the war-for-talent challenge,” he said, 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 forecasting an increase of 3.5 per cent in 2009, up from 3.1 per cent predicted for 2008. That too is influenced by a growing commodity sector, said Aboud.

“I don’t remember Ontario and Quebec ever being lower than the Maritimes,” he said.

Companies will have to focus more on the segmented data than ever before, he said.

“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 Hay Group’s 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), 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.

“Our data shows greater variation by industry than it does by geography, and that’s kind of a function of our sample (of 485) which is large, national employers, not all of which would do something different in the West than in the East,” said Toronto-based Iain Morris, principal at Mercer.

“I’ve heard from people in the West saying they think things have cooled off or stabilized a little bit compared to last year,” he said. “You would expect there would be some leveling off.”

Another big area of variation is increases based on performance. For 2008, 13 per cent are in the highest group, nine per cent in the lowest group and 40 per cent in the middle. But the average increase for top performers was 6.1 per cent while low performers saw an increase of 0.8 per cent.

“That’s quite a differentiation,” he said. “I think organizations are saying, ‘Boy, we’ve got a limited amount of money to go around, where are we going to spend it? We’d better spend it on those who are contributing the most.’”

Morneau Sobeco

Despite the credit crisis, energy cost increases and currency fluctuations, substantial salary increases are still expected for 2009 because of an aging workforce and tight labour markets, according to Morneau Sobeco.

Its compensation trends survey forecasts the average salary budget of employers for 2009 at 3.5 per cent, up from 3.3 per cent last year, or 4.1 per cent including provisions for promotional increases and special adjustments, up from 3.7 per cent last year.

Again this year the highest increases are expected in Alberta, with an average increase of 4.8 per cent or 5.6 per cent including provisions. Morneau’s survey of 282 employers predicts Ontario and Quebec will see an increase of 3.3 per cent (3.8 per cent and 4.0 per cent respectively including provisions) while the Maritimes will go up 3.2 per cent (4.3 per cent including provisions).

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).

Broken down by city, the survey predicts total salary budget increases for 2009 of 3.9 per cent for Calgary and Edmonton (compared to an actual increase of four per cent in 2008), 3.8 per cent for Vancouver (same as actual for 2008), 3.8 per cent for Winnipeg (actual was 3.9 per cent), 3.9 per cent for Hamilton (actual was 3.8 per cent), 3.8 per cent for Ottawa (same as actual), 3.7 per cent for Toronto (same as actual), 3.6 per cent for Montreal (same as actual) and 3.5 per cent for Quebec City (actual was 3.6 per cent).

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.

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