'In a short time, many organizations revised their salary projections': Conference Board
The pace of expected raises in salary has increased among Canadian organizations, according to the latest outlook from the Conference Board.
In its pulse check conducted in the fall, the average pay increase is forecast to be four per cent in 2023, which is higher than an earlier survey in the spring that pegged it at 3.4 per cent.
Forty per cent of 228 organizations surveyed between Nov. 1 and 23, said they would be revising their increases for next year.
“It’s interesting that in such a short time, many organizations revised their salary projections — and inflation did play a large part in that. Almost 80 per cent of our participants said that inflation was one of the reasons they went back to their projections,” says Tabatha Thibault, research associate at the Conference Board of Canada in Ottawa.
Employees are “feeling the squeeze” brought on by higher prices on many items, she says.
Maintaining staffing levels
However, improving attraction and retention was rated the top reason for the boost in wages, coming in at 83.1 per cent, according to the survey.
Many organizations are “realizing that if they want to attract new workers and retain the ones they have, money seems to be the biggest motivator right now,” says Thibault.
“In the past, it was the total compensation package with benefits and such but inflation has really put money even higher in the priority level.”
Rounding out the main reasons for the boost in pay were rising business costs (nine per cent), recession fears (7.9 per cent) and “other” at 15.7 per cent.
A recession is almost certainly on its way, according to the Conference Board’s chief economist but not in the same manner it has in past years.
There are also generational shifts coming that will be making these worries become more acute for employers, says Thibault making attraction and retention even more important in the future.
“A lot of our population are reaching the age that they are eligible to retire — whether or not they are retiring is a different story but eventually it’s going to have to happen. So when we talk about turnover, we’re not just going to lose the people that are unhappy, we’re going to lose those workers that have this big body of organizational knowledge, and because of their age, baby boomers aging out, they’re going to retire, and then we’re really going to feel that struggle to attract and maintain our current workforce.”
Employers are under “unprecedented financial times and difficult job market conditions” and this is leading to “high pressure” to boost wages, according to another survey.
Another area of compensation planning that is affecting some of these results is the decrease in salary freezes, says Thibault.
“Looking at our data, even if we think about what inflation is, depending on what month we’re in, is eight per cent, so if you get the typical two-per-cent salary increase, you’re still effectively getting a pay cut because your salary isn’t matching the new reality. By having a pay freeze, that makes employees feel like their salaries have been cut that much more,” she says.
In the earlier survey in the spring, 8.6 per cent of respondents said they would lock in wages for 2023 but in the current pulse check, that number has dropped to 3.1 per cent of organizations.
“Inflation really is playing into not just the projected salary increases, but also the projected salary freezes and whether or not organizations are going to choose to freeze salaries or not,” says Thibault.
“While projected salary increases have increased, which is wonderful, if inflation continues to grow, or even just stay at the roughly eight per cent that it is, these projected salary increases are still not keeping up with inflation.”