Canadian employers taking ‘cautious, gradual approach’ to compensation budgets: expert
A new survey of Canadian employers looking into salary forecasts for 2026 suggests most are staying true to earlier predictions.
Nearly 400 organizations responded to the late-2025 survey, and the findings show that average salary increase budgets are projected at 3.0% for 2026, excluding salary freezes — representing a 0.1 percentage point drop from the previous survey done in the summer of 2025.
That’s in line with the gradual decline observed since 2023, according to Normandin Beaudry.
“As economic and trade uncertainty continues to shape Canada's market, organizations are taking a cautious, gradual approach to salary increase budgets,” said Darcy Clark, senior principal, compensation at Normandin Beaudry. “At the same time, heightened expectations for transparency are pushing organizations to refine and clearly articulate the holistic employee experience and total rewards they offer.”
Boosting, trimming salary budgets
Overall, close to three-quarters of employers intend to leave their initial salary increase budget forecasts unchanged from last summer, according to Normandin Beaudry.
Among the 26% of employers that do plan to modify their original projections, just over half will trim those budgets, while the remainder expect to raise them.
Earlier outlooks from 2025 surveys have included:
|
Source |
2026 Forecast |
2025 Actual |
|
3.3% |
3.4% |
|
|
3.1% |
3.2% |
|
|
3.1% |
3.5% |
|
|
2.7% |
2.8% |
|
|
3.11% |
3.3% |
|
|
3% |
4% |
“If you are going to ‘trim the fat,’ you have to be very careful because you know that this is very temporary and any cuts you have may jeopardize your footing for after it ends, said Canadian academic Sean O’Brady in an earlier interview with Canadian HR Reporter.
Beyond their core salary budgets, 42% of respondents have also set aside an additional average 0.8% of payroll for extra budget funds, found Normandin Beaudry.
Almost half of organizations (47%) expect their annual incentive plans to pay out at or above target in 2026. In addition, 35% of employers are planning to expand their workforce over the course of the year.
Total rewards move to forefront
While overall budget growth slows, many organizations are turning inward to refine total rewards strategies in 2026, according to Normandin Beaudry.
Employers’ top priorities include:
- employee engagement initiatives (58%)
- meeting legislative requirements such as pay equity and pay transparency (47%)
- improving employee communication (42%).
“With employees expecting greater levels of transparency, organizations are focused on developing and refining their broader employee experience and total reward strategies,” said the firm’s release.
