‘Employers are signalling that while the economy has cooled, the war for talent is not quite over’
Canadian employers are preparing for a modest slowdown in salary growth next year, with average base salary increases projected at 3.3% for 2026, according to a new survey.
This figure, which excludes salary freezes, is slightly below the actual increase of 3.4% seen in 2025, reflecting a more cautious approach to budget planning amid ongoing economic uncertainty.
While the Bank of Canada has begun cutting interest rates to ease borrowing costs and stimulate growth, employers remain wary, says Eckler, which did the survey. Rising unemployment and persistent uncertainty are prompting organizations to take a conservative stance on compensation, even as high housing costs and stubborn inflation continue to put upward pressure on wages.
“Employers are signalling that while the economy has cooled, the war for talent is not quite over,” said Anand Parsan, principal at Eckler.
“Only 5% of employers are considering salary freezes, and while 29% remain undecided, most are planning similar or lower salary increases compared to 2025. Trade tensions between Canada and the U.S. are also contributing to financial uncertainty, prompting employers to balance cost control with the need to reward and retain key talent.”
The total base salary budget includes merit increases, cost-of-living increases, across-the-board increases, minimum wage adjustments, market adjustments, equity adjustments, off-cycle increases, etc. Promotional increases are excluded.
A separate survey from Normandin Beaudry projected an average salary increase of 3.1% for 2026 (excluding salary freezes) — a slight decline from the 3.2% actual average in 2025.
That compares with predictions from Gallagher that the average salary bump for non-unionized employees is expected to drop to 3.1% in 2026, down from 3.5% this year and 3.8% in 2024—a return to pre-pandemic norms.
Regional, sector disparities in wage growth
The West leads in wage growth, says Eckler, while the Atlantic provinces, Quebec and the northern territories lag behind:
- Highest increases: Alberta and British Columbia (3.4%), followed by Saskatchewan (3.3%).
- Moderate increases: Ontario, Manitoba, New Brunswick, Nova Scotia, and Yukon (3.2%)
- Below average increases: Quebec, Prince Edward Island and Northwest Territories, are anticipating increases that are below the national weighted average (3.1%)
- Lowest increases: Newfoundland & Labrador (3.0%) and Nunavut (2.3%)
By sector, projected base salary increases range from 2.9% to 3.7%:
- Top sectors: Professional services (3.7%); agribusiness/agriculture and banking/insurance (3.6%)
- Mid-range sectors: Government, IT/high tech, real estate, utilities, construction, retail, manufacturing, member associations, and transportation (3.2% – 3.4%)
- Lowest increases: Charities, foundations, and energy/oil and gas (3.0%); Education and healthcare (2.9%)
Compensation practices, strategic enhancements
Canadian organizations are prioritizing foundational compensation practices alongside strategic enhancements for 2026, according to Eckler.
Key priorities include:
- Participating in salary benchmark surveys (45%)
- Updating job descriptions (45%)
- Providing compensation training and resources for people leaders (34%)
- Enhancing total rewards to be more flexible and employee-centric (34%)
- Conducting pay equity analysis (32%)
Eckler’s survey was conducted from July to August 2025, gathering responses from over 500 Canadian organizations across diverse sectors.
