Salary surveys predict increases from 3 to 3.5 per cent in 2003
Despite the economic upheaval of the past year, salaries should rise by at least three per cent next year.
“Companies are taking a careful business approach. They’re looking at their own organizations, looking at the Canadian economy and are reacting with a degree of cautious optimism,” said Graham Dodd, consulting firm Watson Wyatt’s practice leader for Western Canada.
Economic uncertainty is making companies more reluctant to make predictions for the year ahead, he said.
“A high percentage of people are unable to predict where salaries are going at the moment,” said Dodd, following the September release of his firm’s Canadian Salary Survey, which shows corporations are freezing wages or offering smaller pay increases to workers as well as formalizing incentive plans.
The survey of more than 500 companies, representing 870,000 workers, projects average salary increases of 3.4 per cent in 2003. The Hay Group’s 2003 Compensation Outlook, also released last month, polled close to 400 organizations, and reports base pay is expected to increase an average of 3.1 per cent.
Responding to the Watson Wyatt study, companies in the private, not-for-profit sector forecast 2003 increases of 3.2 per cent. In 2002, the sector had an average increase of 3.5 per cent.
Private, for-profit firms predict increases of 3.4 per cent. In 2002, wages increased an average of 3.5 per cent.
Public-sector organizations are expecting a 3.2 per-cent increase in 2003. The sector saw increases of three per cent in 2002.
About 36 per cent of respondents opted not to provide forecasts, compared to the 29 per cent who opted out in the previous year’s poll. There is a heightened level of uncertainty about the U.S. economy, said Dodd. If the U.S. market picks up, there will most likely be an increase in Canadian forecasts. If not, there may be pullbacks.
Incentive plans
Although employers seem tentative about salary increases, they’re continuing the trend toward formalizing incentive plans. The Watson Wyatt survey found that in 2002 more organizations (46 per cent) required quantifiable objectives be met in pay-for-performance plans (that number is up from 44 per cent last year).
Stock options are not as popular as they were in 2001. The number of respondents offering stock options dropped from 78 per cent last year to 74 per cent in 2002, however the use of stock purchase plans increased from 41 per cent to 45 per cent. Long-term incentives continue to grow at a fairly steady pace.
“Enronitis” is part of the reason why firms are looking at incentive plans, Dodd said.
“The real issue around long-term incentives is this buzzword of ‘governance,’”said Dodd. “Investors and institutions are looking for much more of it, among all incentive plans.”
The Hay Group survey noted bonus payouts are still important to employees’ total pay package. Projected bonuses do not differ substantially from last year’s forecasts and most corporations believe they’ll be able to pay out at year-end.
Next year’s bonus targets (as a percentage of base pay) range from 46 per cent for CEOs to 5.3 per cent for trade jobs.
The chill caused by Enron should not have an impact on compensation, said Karl Aboud, national director of reward management for Hay Group.
“The high profile negative events that we’ve heard so much about shouldn’t be the reason for big companies not to give (employees) fully competitive salary increases including bonuses and long-term incentive plans.”
It appears employers are already in the process of improving their compensation packages. Most companies have already implemented changes to pay programs to help respond to talent attraction and retention challenges — and that may be why projected salary increases for 2003 are maintaining respectable levels despite economic uncertainties, the Hay report states.
“Over the past year, we’ve been blind-sided by so many different turns of events, one would reasonably expect the salary increase forecasts for next year to be cautious at best. But the numbers are showing stronger-then-expected employer confidence,” said Aboud.
The numbers vary according to job level and geographic locations.
Trades job salaries are expected to rise by 2.8 per cent and the salaries of executives and senior management are expected to increase by 3.3 per cent.
Alberta has the highest predicted increase at 3.6 per cent; Manitoba projects the lowest at 2.7 per cent. Vancouver (3.1 per cent), Saskatchewan (3.3 per cent), Toronto (3.2 per cent) and Montreal (2.8 per cent) all fall in the middle range of the forecasted numbers.
“Saskatchewan is higher than one might have thought,” Aboud said. “They have to compete with Alberta for talent so they have to compete with a higher paying region.”
“Companies are taking a careful business approach. They’re looking at their own organizations, looking at the Canadian economy and are reacting with a degree of cautious optimism,” said Graham Dodd, consulting firm Watson Wyatt’s practice leader for Western Canada.
Economic uncertainty is making companies more reluctant to make predictions for the year ahead, he said.
“A high percentage of people are unable to predict where salaries are going at the moment,” said Dodd, following the September release of his firm’s Canadian Salary Survey, which shows corporations are freezing wages or offering smaller pay increases to workers as well as formalizing incentive plans.
The survey of more than 500 companies, representing 870,000 workers, projects average salary increases of 3.4 per cent in 2003. The Hay Group’s 2003 Compensation Outlook, also released last month, polled close to 400 organizations, and reports base pay is expected to increase an average of 3.1 per cent.
Responding to the Watson Wyatt study, companies in the private, not-for-profit sector forecast 2003 increases of 3.2 per cent. In 2002, the sector had an average increase of 3.5 per cent.
Private, for-profit firms predict increases of 3.4 per cent. In 2002, wages increased an average of 3.5 per cent.
Public-sector organizations are expecting a 3.2 per-cent increase in 2003. The sector saw increases of three per cent in 2002.
About 36 per cent of respondents opted not to provide forecasts, compared to the 29 per cent who opted out in the previous year’s poll. There is a heightened level of uncertainty about the U.S. economy, said Dodd. If the U.S. market picks up, there will most likely be an increase in Canadian forecasts. If not, there may be pullbacks.
Incentive plans
Although employers seem tentative about salary increases, they’re continuing the trend toward formalizing incentive plans. The Watson Wyatt survey found that in 2002 more organizations (46 per cent) required quantifiable objectives be met in pay-for-performance plans (that number is up from 44 per cent last year).
Stock options are not as popular as they were in 2001. The number of respondents offering stock options dropped from 78 per cent last year to 74 per cent in 2002, however the use of stock purchase plans increased from 41 per cent to 45 per cent. Long-term incentives continue to grow at a fairly steady pace.
“Enronitis” is part of the reason why firms are looking at incentive plans, Dodd said.
“The real issue around long-term incentives is this buzzword of ‘governance,’”said Dodd. “Investors and institutions are looking for much more of it, among all incentive plans.”
The Hay Group survey noted bonus payouts are still important to employees’ total pay package. Projected bonuses do not differ substantially from last year’s forecasts and most corporations believe they’ll be able to pay out at year-end.
Next year’s bonus targets (as a percentage of base pay) range from 46 per cent for CEOs to 5.3 per cent for trade jobs.
The chill caused by Enron should not have an impact on compensation, said Karl Aboud, national director of reward management for Hay Group.
“The high profile negative events that we’ve heard so much about shouldn’t be the reason for big companies not to give (employees) fully competitive salary increases including bonuses and long-term incentive plans.”
It appears employers are already in the process of improving their compensation packages. Most companies have already implemented changes to pay programs to help respond to talent attraction and retention challenges — and that may be why projected salary increases for 2003 are maintaining respectable levels despite economic uncertainties, the Hay report states.
“Over the past year, we’ve been blind-sided by so many different turns of events, one would reasonably expect the salary increase forecasts for next year to be cautious at best. But the numbers are showing stronger-then-expected employer confidence,” said Aboud.
The numbers vary according to job level and geographic locations.
Trades job salaries are expected to rise by 2.8 per cent and the salaries of executives and senior management are expected to increase by 3.3 per cent.
Alberta has the highest predicted increase at 3.6 per cent; Manitoba projects the lowest at 2.7 per cent. Vancouver (3.1 per cent), Saskatchewan (3.3 per cent), Toronto (3.2 per cent) and Montreal (2.8 per cent) all fall in the middle range of the forecasted numbers.
“Saskatchewan is higher than one might have thought,” Aboud said. “They have to compete with Alberta for talent so they have to compete with a higher paying region.”
