Employers segmenting workforce when determining pay raises
Salary budget increases for Canadian employees are improving. The average raise in base pay is expected to be 3.2 per cent in 2013, according to a survey by Mercer.
This is the same as the average actual salary increase reported for 2012 and also up slightly from the three per cent and 2.9 per cent in 2011 and 2010, respectively, found Mercer’s, 2012/2013 Canada Compensation Planning Survey, which surveyed 750 employers across the country.
For top-performing employees — seven per cent of the workforce — salary increases will remain higher as companies strive to balance compensation planning budgets with retention of critical talent, said Mercer.
“Employers continue to recognize that in order to attract and retain top-performing employees they’re going to have to reward them in line with industry dynamics — for instance, oil and gas is a much more competitive market for critical talent than other industries,” said Iain Morris, leader of Mercer's Human Capital consulting business for Canada. “And while base pay is still the most important element of the employment deal, companies are continuing to offer innovative programs beyond compensation.”
Organizations are assessing what makes employees “tick” and where top-performers are choosing to work. As they strive to balance the need to retain key talent with their financial budgets, employers are segmenting their workforce and focusing on identifying and recognizing high-performing employees, said Mercer.
As a result, companies are still rewarding top-performers with higher-than-average increases, widening the pay gap between these employees and those in the lower-performing categories. In 2012, highest-performing employees received average base pay increases of 4.9 per cent compared to 2.9 per cent for average performers and 0.1 per cent for the weakest performers.
“Differentiating salary increases based on performance is the norm and remains an effective way for employers to wisely spend their reward dollars on the most impactful employees,” said Morris. “Since many companies are still working with limited dollars, taking a holistic approach to total rewards using internal workforce analytics as well as external market data to set appropriate programs for each employee segment is the smart approach.”
Western Canada is continuing to differentiate itself with higher increases than the rest of the country. Calgary and Alberta markets forecast an average increase of 3.3 per cent for 2013, compared to 2.9 per cent for Montreal and Quebec.
The larger differentiation happens at the industry level though — oil and gas companies lead the way with a forecasted increase of 4.2 per cent for 2013 while high tech and telecommunications, and public sector/not for profit are forecasting 2.4 per cent and 2.5 per cent, respectively, when salary freezes are included, found the survey.