2008 salary survey roundup

A look at salary surveys from major consultancies and what they’re predicting for wage increases in 2008

Below are highlights from numerous salary surveys. Information was gleaned from press releases put out by the organizations that conducted the salary surveys. For a look at Canadian HR Reporter’s editorial coverage of the salary surveys, click on the related articles link at the bottom of this article.

Hay Group: Salary increase forecasts for 2008

Hewitt Associates: Calgary salary increases reach new heights

Mercer Human Resource Consulting: Salary increases projected at a healthy 3.9 per cent in 2008

Morneau Sobeco: More than ever, salary increases in 2008 marked by regional differences

WorldatWork: Canadian employers hold the line on planned salary increases

Watson Wyatt: With no downturn expected, actual increases expected to be higher than projections

Hay Group: Salary increase forecasts for 2008

Whether or not the economy will meet earlier expectations, and despite continued global tensions, Hay Group's projections for 2008 salary increases are as optimistic as they have been in recent years.

Planned increases for 2008

The results from a recent Hay Group survey of Canadian employers, conducted in June and July of 2007, indicate that the national average for base salary is forecast to increase by 3.8 per cent in 2008. This is about a quarter of a percentage point higher than the projections for the last few years.

More than 550 Canadian organizations in the public and private sectors provided details of their planned adjustments to base and variable pay for 2008. Participants include many of Canada's leading employers.

"Over the past year, we've been witness to many different turn of events, but on balance there is enough optimism that the forecasted salary increases are showing stronger growth than they have in the recent past", said Karl Aboud, national director, reward management, Hay Group.

Alberta leads the provincial averages with a forecast increase to base salary of 4.9 per cent for 2008, and Saskatchewan follows with a forecast of 4.6 per cent, reflecting its competition for employees with Albertan employers.

The oil and gas sector is projecting average salary increases of 5.3 per cent, which are, as expected, the highest among all sectors. The 2.6 per cent increases being projected by the Forest Products Sector are the lowest, reflecting this sector's continued difficult economic conditions. Survey results will also be presented by Job Level and by Geography. The Broader Public Sector is forecasting increases of 3.6 per cent.

Details of the survey results will be released at a series of Hay Group breakfast briefings in major cities across Canada in September.

Bonus payouts

Annual bonuses are a key part of total pay packages for an increasing number of employees. Nationally, projected bonuses for 2007 do not differ radically from last year's forecasts. For 2007, bonus targets (as a percentage of base pay) range from seven per cent for production jobs, 15 per cent for middle management, 30 per cent for senior management and 50 per cent for senior executives.

Hewitt Associates: Calgary salary increases reach new heights

The shortage of labour in Alberta has caused salary increases in Calgary to far exceed those in the rest of the country, according to new research conducted by Hewitt Associates, a global human resources services company.

As a result, many employers report that maintaining the market competitiveness of their pay levels is a challenge and they are considering more cost-effective attraction and retention solutions.

Hewitt Associates' 29th annual Canada Salary Increase Survey reveals that, across Canada, average base salary increases are projected to be 3.8 per cent in 2008. Base salary rose by the same percentage this year and by 3.6 per cent in 2006. These numbers are comparable to actual and projected salary increases for U.S. workers.

Hewitt found that virtually no Canadian companies reported freezing salaries in 2007 and none expect to do so in 2008. Salary increases for 2007 were 3.7 per cent in Vancouver, 3.4 per cent in Montreal and 3.3 per cent in the Greater Toronto Area. Increases in these cities are expected to be virtually flat in the coming year: Employers project a 2008 increase of 3.7 per cent in Vancouver, with increases of 3.5 per cent and 3.4 per cent expected for Montreal and the Greater Toronto Area, respectively.

Calgary raises the bar

In Calgary, however, employees experienced an average increase of 5.3 per cent in 2007, only slightly higher than the 5.2 per cent increase employers projected a year ago and on par with the 5.3 per cent actual increase in 2006.

Employers are forecasting an average 2008 increase of 5.2 per cent for workers
in Calgary.

"Calgary employers have focused this year on meeting their current labour demands," stated Dan Stewart, a senior consultant in Hewitt's Calgary office. "However, even with the current economic boom, it may become difficult to continue to increase salaries at these rates. Employers in Calgary are becoming more strategic both in what they offer and how they explain compensation, so they are well-positioned to win not just the battle but the war for talent. They're setting the standard for employers in the rest of Canada as the attraction and retention challenge spreads beyond Alberta."

Money isn't everything

Alternatives to dramatic increases in base salary include initiatives geared to awarding higher pay for high performance as well as ensuring that employees appreciate the value of all the benefits they receive as part of their compensation package.

Variable pay plans — Performance-related rewards that must be re-earned each year and do not increase base salary are currently offered by 80 per cent of organizations. According to Hewitt's survey, awards based on corporate performance are most common (62 per cent), followed by individual performance awards (51 per cent). This is a change from last year when 67 per cent of organizations reported that their variable pay plans were based mainly on corporate performance and only 35 per cent offered individual performance awards. "Providing a variable pay plan is one thing, but ensuring that it successfully keeps employees focused on what they need to do to drive business results and achieve additional pay is the challenge," said Keri Humber, a Toronto-based senior consultant with Hewitt. "Over half of employers reported difficulty with designing pay programs that provide workers with a clear line of sight between effort and rewards."

Total compensation approach — Rather than providing salary only, organizations may want to consider also spelling out the value of benefits like health care and retirement programs. "If employees understand how much all aspects of their compensation package cost, they'll be able to make apples-to-apples comparisons with what a competitor is offering," explained Humber. "They may not be lured away by a higher salary if they appreciate the value of the orthodontia coverage and pension plan provided by their current employer."

Communication — Transparency is key when it comes to communication around salaries. It's important to share the organization's pay philosophy and how salary figures were determined. "Employees may feel as though they are being exploited if they find out a competitor is paying a much higher salary for the same position," said Stewart. "By explaining the methods used to determine pay levels, workers will know they're being treated fairly." This may be harder than it sounds, however. Almost one-half (48 per cent) of employers reported that raising the ability of managers to have effective pay conversations with their direct reports was a challenge.

Separate compensation arrangements for "hot skill/location" jobs — Employers may offer such things as additional base pay, sign-on and retention bonuses to employees who agree to work in certain locations. More than one-half (52 per cent) of organizations provide special compensation arrangements to employees who work in Calgary, while 25 per cent offer them to those in Edmonton, 23 per cent in Fort McMurray and 16 per cent in Vancouver. Special compensation arrangements for those with "hot skills" seem to be cooling off, however. While 45 per cent offered them in 2005, 39 per cent did so in 2006 and only 34 per cent in 2007.

Non-monetary benefits — Flexible work arrangements are taking the place of special compensation arrangements for "hot skill" jobs. They are currently offered by 81 per cent of organizations, up from 75 per cent in 2004, and include flexible hours, working from home all or part of the time, and compressed work weeks. The challenge is what to offer next when so many employers are already offering flexibility. "Some companies are providing employees-especially in "hot" locations - with housing allowances/subsidies/loans, COLA/living allowances, computers with Internet hook-up, assistance in locating housing, and additional vacation time," stated Stewart.

Salary increases by position and industry

In 2007, average actual salary increases across all industries ranged from 3.2 per cent for union employees to 4.1 per cent for executives. Salary increases projected for 2008 run from 3.1 per cent for union employees to 4.0 per cent for executives.

Increases are highest in the oil and gas industry, where they averaged 6.3 per cent for all positions in 2007, and are expected to be around 5.5 per cent next year. Other industries where salary increases are projected to exceed the national average in 2008 include government (5.2per cent), construction/engineering (4.7 per cent) and aerospace (4.0 per cent).

Industries with lower expectations for salary increases in 2008 include automotive (3.4 per cent), hospitality/restaurants (3.2 per cent), printing (3.0 per cent), and forest and paper (2.8 per cent).

Mercer Human Resource Consulting: Salary increases projected at a healthy 3.9 per cent in 2008

The desire to attract and retain the most productive employees, is driving employers to project a national average salary increase of 3.9 per cent for 2008, just under the 4.1 per cent average increase granted in 2007 according to results of the Mercer Human Resource Consulting 2008 Canadian Compensation Planning Survey. The findings are based on data for the non-union employees of 491 organizations with a total workforce of more than 1.5 million unionized and non-unionized employees in Canada.

“Oil and gas and petrochemical industries, mainly located in Alberta and accounting for just over 18 per cent of all respondents, are projecting a 6.2 per cent average salary increase. This projection is considerably higher than in other industries, so it exerts a strong upward pull on the national average,” said Iain Morris, principal at Mercer Human Resource Consulting. “Without Alberta, the projected national average salary increase is closer to 3.5 per cent.”

Projected average salary increases vary considerably across other industries, with utilities at 4.8 per cent and hospitality, entertainment and media at 3.2 per cent. The vast majority of organizations are planning increases of between 3.1 per cent and 4.0 per cent across all employee categories.

Citing greater competition for employees, 36.1 per cent of respondents say they will budget pay increases larger than 2007’s actual awards. At the same time, 33.6 per cent of respondents are budgeting somewhat smaller increases than 2007 awards (up from 19 per cent that budgeted smaller increases for 2007), due to economic uncertainty and general cost reduction.

“Employers also continue to look at ways other than increasing base salary to attract and retain people. Organizations are putting more emphasis on pay for performance, increasing both the participation in and target levels in annual incentive plans. The career component of the total rewards offer is also getting more attention with more than a quarter of survey participants planning on implementing formal career planning processes,” commented Morris.

Certain job families are recipients of particular types of attraction and retention programs. Signing bonuses are the most often used programs, and used especially for IT, sales, engineering and accounting occupations. “More aggressive pay increases and spot cash awards are also employed more frequently here because these specialized skills are harder to find, and employers are putting greater emphasis on attracting and retaining them,” he said.

Organizations employ a variety of other practices to engage and reward employees. Among the most popular are defined contribution retirement benefits (used by 64.5 per cent of respondents), competency-based performance management (used by 60.2 per cent), defined benefit retirement plans (56.9 per cent), individual incentives for non-management staff (50.7 per cent), and formal career-planning (40.7 per cent).

Regional variations exist across the country, for example:

•greater Calgary has the highest average projected increase of 4.2 per cent;
•the rest of Alberta is also higher than the national average with a 4.1 per cent projected increase;
•employers in Greater Vancouver are reporting a projected 3.7 per cent increase;
•the remainder of British Columbia is forecasting a 3.9 per cent increase;
•the Maritime region is estimating 3.6 per cent increase;
•Montreal is budgeting for a 3.6 per cent increase and the rest of Quebec is estimating 3.7 per cent;
•greater Toronto and the rest of Ontario is forecasting 3.6 per cent increase, on par with Montreal and the Maritimes.

Morneau Sobeco: More than ever, salary increases in 2008 marked by regional differences

Your salary increase for 2008 will depend more than ever on your province of residence, according to Morneau Sobeco’s annual survey on compensation trends and projections.

The average salary increase budget of Canadian employers for 2008 is 3.7 per cent, including a provision for promotional increases.

After reaching a five-year high last year, salary increases are projected to stabilize across most of Canada. Nationally, the average salary increase expectations vary from 3.1 per cent for operation and production staff to 3.4 per cent for executives before promotional increases.

The highest salary increase expectations are reported in Alberta with average expected increases ranging from 4.3 per cent for operation and production staff to 5.6 per cent for executives before promotional increases.

The salary increases in Western Canada are being driven by a demand for staff. One-third of the survey participants in Western Canada are looking to significantly boost their staff levels in 2008. In contrast, fewer than 10 per cent of participants in Central Canada are planning to significantly ramp up their staff levels.

Almost three quarter of respondents in Western Canada (and about one-half of those in Central Canada) reported that hot skills recruitment is one of their key HR issues.

“People with specialized skills or in trades are in high demand,” says Gord Simle, a Partner in Morneau Sobeco’s Calgary office.

The highest salary increase expectations in Canada are reported by companies in mining and gas extraction, with average expected increases of 4.3 per cent for all job categories excluding promotional increases. Companies that fabricate paper or wood products reported the lowest salary increases with average increases ranging from 1.7 per cent for operation and production staff to 2.1 per cent for executives.

The top benefit issues for employers in 2008 continue to be health care costs and disability management, even though the proportion of employers reporting health care costs as a key benefit issue has dropped to approximately 45 per cent from almost 60 per cent two years ago as health care cost increases have generally trended lower.

“The reason for the lower cost increases,” says Keith Morrallee, a Partner in Morneau Sobeco’s Toronto office, “is the result of less downloading of costs from public plans, as well as a reduction in the releases of new break-through drugs. But that may well be temporary since there are a significant number of new medications on the horizon.”

Nearly 10 percent of participating employers with defined benefit (DB) pension plans indicated that their pension plans have been closed to new employees in the past two years and a similar proportion indicated that their plan will likely be closed to new employees next year.

“The continued shift is attributable to the increased volatility in pension investment returns and employer pension costs over the last several years,” says Jean Bergeron, a Director in Morneau Sobeco’s Montreal office. “Although investment returns were better in 2006, the recent market turmoil due to the credit crisis reminds us that investment risks and volatility exist and must be managed.”

The aging workforce is a key HR issue for almost half of Canadian employers. As a result, approximately one-third of all respondents want to offer retirement planning education to their employees, up from a quarter last year.

Finally, more than 30 per cent are planning to provide total compensation statements to their employees next year. The survey conducted across Canada between June and August covered 335 organizations serving over 900,000 employees. This is Morneau Sobeco’s 25th annual Compensation and Trends Projections Survey.

WorldatWork: Canadian employers hold the line on planned salary increases

The WorldatWork Salary Budget Survey finds that Canadian companies are planning an overall salary budget increase of four per cent in 2007, up from 3.8 percent last year.

The 34th annual survey finds that, on average, organizations in Canada are awarding a base pay increase to 91 per cent of all employees this year. WorldatWork, an international association of human resource professionals and business leaders focused on attracting, motivating and retaining employees, conducts the largest and most comprehensive salary budget survey in the industry.

Total salary budget increases for Canada are projected to decline to 3.9 per cent next year. Employers in Hamilton, Montreal, Ottawa and Toronto already report a decline in salary budget increases this year.

Salary budgets — the total amount of money allocated by an organization for all employee salaries — do not include other employment hard costs such as medical/dental insurance, and payroll taxes. Base pay increases may come from merit increases, cost of living increases and general increases (promotional increases are excluded).

"In this era of four-per-cent increases, managers will have to think more holistically in order to produce meaningful rewards," said Anne C. Ruddy, CCP, president of WorldatWork. "HR practitioners need to learn the art and science of 'total rewards' to attract, motivate and retain talent. Compensation is one of the elements, but so are benefits, work-life, recognition, and career development."

WorldatWork Salary Budget Survey data includes results for the United States and Canada, major metropolitan areas and provinces in Canada, major industries as well as data by organization size.

2008 salary budget projections by major metropolitan area

Calgary: 3.9 per cent
Edmonton: 3.9 per cent
Hamilton: 3.6 per cent
Montreal: 3.6 per cent
Ottawa: 3.6 per cent
Quebec: 3.7 per cent
Toronto: 3.6 per cent
Vancouver: 3.7 per cent
Winnipeg: 3.6 per cent

Watson Wyatt: With no downturn expected, actual increases expected to be higher than projections

Alberta’s booming economy continues to impact employers across all regions of Canada and increasing base salaries is just one piece of the total compensation puzzle employers are drawing upon to attract and retain employees, as organizations continue to grapple with staffing shortages.

According to the 2007/2008 Annual Canadian Salary Survey by Watson Wyatt Data Services, Calgary employers are leading the way with anticipated base salary increases of 3.80 per cent for 2008. Employers in other parts of Alberta and neighbouring Saskatchewan are projecting base salary increases of 3.68 per cent and 3.58 per cent respectively. While projections in these regions are lower than increases actually received in 2007, it’s likely that 2008 increases will exceed predictions.

The overall Canadian base salary increase for 2008 is projected at 3.50 per cent. In a healthy economy, salary increase projections tend to be somewhat conservative — actual increases are typically higher than those forecast the year previous. If the Canadian economy continues to thrive — and there are no imminent signs of a dramatic downturn — then actual 2008 increases are expected to be higher than projections provided during the survey collection period.

In 2007, base salary increases across all of Canada averaged 3.61 per cent (compared to the previous year’s projection of 3.46 per cent). Moderate differences existed among the geographic regions with Calgary reporting the highest 2007 salary increase at 3.95 per cent. Quebec (excluding Greater Montreal) reported the lowest average salary increase at 3.06 per cent. Employees in Saskatchewan received increases averaging 3.75 per cent.

Within the industry sectors, the largest overall salary increase occurred in the banking/finance sector, where employees averaged a 4.18-per-cent increase, followed by professional/business services at 4.09 per cent. Interestingly, these two industry sectors had predicted the highest increases in the previous year’s survey and both exceeded the prediction. Heading into 2008, these sectors are again projecting solid increases at 3.99 per cent and 3.67 per cent respectively.

Not to be left behind, the public sector is projecting an overall base salary increase of 3.59 per cent in 2008. In the “war” for talent, public sector employers do not have an arsenal of short- and long-term incentives to reward employees and so must ensure their base compensation is competitive, reflected by average increases in 2007 of 3.84 per cent.

The survey reflects responses from 360 organizations reporting data on more than 110,000 incumbents and was conducted in May-July 2007.

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