Six per cent of employers planning pay cuts for 2021

One-third expect to suspend raises or freeze salaries: Survey

Six per cent of employers planning pay cuts for 2021
Nearly half (43 per cent) of Canadian employers are modifying their salary increase plans for 2021 due to COVID-19, finds a survey.

Nearly half (43 per cent) of Canadian employers are modifying their salary increase plans for 2021 due to COVID-19.

Among these, 45 per cent expect to reduce raises, 35 per cent plan to suspend raises and freeze salaries, while six per cent plan to reduce salaries next year, according to a survey by Gallagher, an insurance brokerage, risk management and consulting services firm.

That’s in contrast to earlier in the year, before the pandemic, when 62 per cent of employers implemented pay raises.

However, with the economic downturn, many organizations reduced employee headcounts, implemented hiring freezes and decreased salary-increase budgets. As a result, 38 per cent of employers say that their salary-increase plans were modified for 2020, finds the survey of 226 employers.

 "Market reactions to the pandemic and the economic downturn are applying downward pressure to Canadian salaries and employers tell us that these compensation-containment measures will extend into next year," says Melanie Jeannotte, CEO of Gallagher's Benefits & HR Consulting division in Canada. "The impact COVID-19 will have on costs and revenue will be unpredictable in the year ahead, which is causing many employers to reconsider salary increases in an effort to preserve jobs in 2021."

The Conference Board of Canada has predicted modest salary increases for 2021 while a separate survey by Hays found that for 2021, only 19 per cent of Canadian employers plan to boost pay greater than an annual cost-of-living adjustment, while 29 per cent are not planning on salary increases.

Benefit costs

The findings of Gallagher’s salary planning survey align with its recent benefits strategy and benchmarking survey which found that Canadian employers are shifting priorities towards reducing expenses and focusing on financial stability. The top benefits-related challenge? Controlling costs (55 per cent), finds the survey of 681 employers.

"Employers' priorities have changed as a result of the pandemic, and leaders have shifted their focus from talent acquisition and retention to financial stability and business continuity," said Jeannotte. "However, while many employers have looked to reduce expenses in response to COVID-19, it's critical to remember that employee wellbeing and engagement remain key components to business performance. As employers review total rewards cost structures to reflect new financial realities, it's imperative that they also address their employees' evolving needs."

On that note, more than half (56 per cent) of employers have increased overall employee-wellbeing initiatives during the pandemic by offering new resources and tools (37 per cent) or expanded programs (19 per cent), finds Gallagher. Additionally, nearly one-in-five employers (19 per cent) have increased support for their employees' financial wellbeing.

Employer-provided medical benefit costs in Canada are forecast to rise six per cent in 2020, outpacing general inflation by 1.9 per cent, according to a report by Aon.

Overall, benefit plans are in the spotlight with the new normal, say experts.

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