Pulse survey: Canadian employers scale back salary increase budgets for 2025

Budgets for national average salary increases drop slightly from summer 2024 projections

Pulse survey: Canadian employers scale back salary increase budgets for 2025

Canadian employers are scaling back salary increase budgets for 2025, moving closer to pre-pandemic norms, according to findings from Normandin Beaudry’s 2025 Salary Increase Pulse Survey.

The survey, which gathered input from nearly 400 organizations in late 2024, highlights a continued cooling in salary budgets as inflationary pressures ease and the labour market stabilizes.

About 68% of organizations reported no change to their initial salary increase budgets for 2025, while 32% indicated adjustments.

Among those making changes, more than half are reducing their budgets, while the remainder are increasing them, finds the survey. Overall, the national average salary increase budget has dropped slightly from the summer projection of 3.4% to 3.3%, excluding wage freezes.

Regional trends in salary increase budgets

While salary increase budgets are stabilizing nationwide, forecasts vary by sector; for example, the high-tech sector is projected to see higher increases than the national average, with B.C. at the top of the list at 4.3%.

Notably, all regional forecasts for 2025 remain above historical averages and current inflation rates, underscoring the lingering impact of pandemic-related economic shifts says Normandin Beaudry.

The survey also highlights stability in salary structure adjustments, with an average forecast of 2.6% for 2025, excluding organizations planning freezes. This figure aligns closely with the findings reported in the summer.

“The purpose of the additional budgets aligns with our findings in previous years,” the report notes, “highlighting that organizations are still making planned investments in their employees’ compensation package to remain competitive in the job market.”

Additional budgets for strategic adjustments

In addition to the standard salary increases, 42% of organizations have set aside an average of 0.9% of payroll for supplemental budgets. These funds are earmarked primarily for targeted adjustments and strategic needs, with 68% of respondents using them for ad hoc market corrections.

Other key purposes include differentiating pay for high performers (51%) and retaining “mission-critical employees” (48%).

“While these additional budgets support adjustments to employee compensation, most organizations are looking beyond monetary rewards to help support their total rewards portfolio,” the report states.

Despite these adjustments, many organizations are broadening their focus beyond monetary compensation. The survey revealed that 58% of respondents aim to enhance the competitiveness of their total rewards programs, while 57% are emphasizing employee engagement and communication.

“With employees expecting greater levels of employer transparency, organizations are focused on developing and refining their broader employment experience,” notes the report.

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