Salaries predicted to rise by 2.5 to 3.1 per cent in 2022

'Many employers are more carefully weighing their approach to compensation'

Salaries predicted to rise by 2.5 to 3.1 per cent in 2022

Uncertainty about the economic environment is still top of mind for many employers when it comes to compensation planning for 2022.

Overall, employers are projecting salary increases between 2.5 per cent and 3.1 per cent, according to a survey of 371 Canadian organizations in June and July by Gallagher.

The median increase will be 2.0 per cent to 2.5 per cent.

Given the current climate, salary projections for 2022 are lower than expected, according to a separate survey by Normandin Beaudry.

Variable pay

The projected average total base pay increase is 3.1 per cent for executives, 3.0 per cent for those in management and professional levels, 2.7 per cent for administrative workers and 2.5 per cent for those paid hourly, says Gallagher.

These were similar to actual increases seen in 2021: 3.2 per cent for executives, 2.9 per cent for management and professional workers, 2.6 per cent for administrative workers and 2.4 per cent for hourly workers.

Employers are projecting an annual base salary increase average of 2.7 per cent, excluding salary freezes, in 2022, according to LifeWorks survey.

There are several factors affecting employers’ salary increase budgets, according to Gallagher, including:

  • affordability (71 per cent)
  • position of overall base salary (64 per cent)
  • previous year’s corporate performance (60 per cent)
  • attraction or retention challenges (55 per cent)

Pay for performance

With an increase in voluntary turnover and job vacancies, employers are looking to revamp their approach to compensation, according to Gallagher.

“Many employers, facing the prospect of increased competition for talent, are more carefully weighing their approach to compensation. They’re considering a more holistic strategy that centres on pay equity, cost effectiveness and cautious spending — while also connecting pay with performance.”

Three-quarters (74 per cent) of Canadians would take a new job if the salary is higher, even if they like their old one, according to a separate report from LifeWorks.

Also, more than seven in 10 (71 per cent) employers differentiate incentive payout based on individual performance, finds Gallagher.

More than nine in 10 also made changes to variable pay plan incentives for 2021 due to the pandemic. And when it comes to incentives allocation, 35 per cent will put more focus on corporate performance while 28 per cent will put more focus on individual performance for 2022.

Nearly half (46 per cent) of small employers who say hiring is difficult have increased wages while 27 per cent have increased benefits such as additional vacation time, and 19 per cent have introduced a shorter workweek, according to a separate report.

Latest stories