Pay raises expected to climb slightly

Average wage increases peggedat 3.4 to 3.8 per cent for 2007

Canadian employers will have to open up their coffers to fund pay increases to the tune of about 3.4 to 3.8 per cent in 2007 and employers in the West will have to dig even deeper, according to recent salary surveys from a number of major consulting firms.

Pushed by a labour shortage, employers in the oil and gas sector are expected to lead the pack when it comes to wage increases, with Mercer Human Resource Consulting projecting average pay raises of 5.6 per cent for 2007.

The lowest estimates for Alberta, cited in Morneau Sobeco’s Compensation Trends and Projection Survey, range from 3.5 per cent for operation and production staff in all industries to 3.9 per cent for executives. In mining and oil and gas extraction, Alberta workers can expect 3.8 per cent and executives 4.7 per cent.

Hewitt’s survey has Calgary employers projecting 5.2-per-cent increases in 2007, well above the national average of 3.7 per cent.

Nationally, the average ranges from 3.4 per cent (Morneau Sobeco) to 3.8 per cent (WorldatWork). Surveys by Mercer (3.7 per cent) and Watson Wyatt (3.5 per cent) put the figure somewhere in the middle.

Actual increases could be even higher

Actual increases in 2007 may even be higher than these estimates, said Graham Dodd, Western Canada managing consultant with Watson Wyatt.

“That’s the trend we’ve seen in the last two years. People predicted 3.1 two years ago and increases came in at 3.3. Last year, they predicted 3.3 and increases came in at 3.6,” said Dodd.

“And there’s nothing telling you that this rate of acceleration is slowing down. The fundamental reasons underlying these increases are still there: record levels of people in the workforce, record levels of (low) unemployment and a relatively good economy.”

That said, organizations will keep an eye on economic conditions in the United States, where experts worry about a recession fuelled by a downturn in the housing market.

But he also noted salary increases seen in the manufacturing sector, at 3.4 per cent last year, kept pace with the rest of the country despite earlier fears of weakened exports.

Public-sector raises up

Results from several of the surveys showed public-sector salaries are also seeing slightly higher increases. The WorldatWork survey even found pay in public administration led the pack with the highest increases in 2006, at 5.3 per cent.

Watson Wyatt’s numbers saw public-sector increases nudging ahead of private-sector increases at 3.6 per cent, compared to 3.5 per cent for the latter.

“The public sector caught up. For the first time in a few years it’s forecasting higher than the private sector,” said Dodd.

“But again, it’s marginal. Rather than say the public sector is forging ahead, I’d say they’re neck and neck. The public sector is competing for the same talent pool as everybody else and is finding those same pressures.”

Other findings

Mercer’s survey finds companies using signing bonuses, spot cash awards and project milestone awards to attract and retain people. It also found more than one third (36.6 per cent) offer career planning programs. Of those that don’t, 31 per cent are considering it.

Another trend in the surveys is the widespread adoption of performance-based pay. Hewitt’s survey found variable pay plans are now offered by 83 per cent of respondents, with business incentive awards the most common (67 per cent), followed by individual performance awards (35 per cent) and special recognition awards (35 per cent).

Hewitt Associates’ salary increase budgets

Executive GroupManager/
Admin SupportHourlyUnionAll EE Groups
ActualProj. Actual Proj. Actual Proj. Actual Proj. Actual Proj. Actual Proj. Actual Proj.
Oil & Gas6.1%5.7%5.8%5.4%5.9%5.4%5.6%5.3%5.2%5.0%3.2%3.6%5.5%5.2%
All Cos3.8%3.9%3.7%3.8%3.7%3.8%3.6%3.7%3.5%3.6%3.1%3.0%3.6%3.7%
Source: Canada Salary Increase Survey, Hewitt Associates

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