Salary outlooks for 2003

Some firms reluctant to make predictions for the upcoming year

Employers are uncertain about salary increases for 2003 after the economic chaos of the past year, according to two reports released this week.

“It is apparent that many organizations are being cautious given the current economic conditions and are unwilling to commit to salary increases at this point,” said Jan Grude, Watson Wyatt’s national practice director, human capital group.

The Canadian Salary Survey, conducted by consulting firm Watson Wyatt, shows corporations are freezing wages or offering smaller pay increases to workers as well as formalizing incentive plans. More than 500 companies participated.

Eleven per cent of respondents reported no salary increase this year. Among organizations that did provide salary increases, the average increase for all employees was 3.4 per cent, down from 4.1 per cent the year before.

For 2003, average salary increases are projected at 3.4 per cent and around 36 per cent of respondents opted not to provide forecasts, compared to 29 per cent who opted out in the previous year.

Although employers seem tentative about salary increases, they’re continuing the trend toward formalizing incentive plans. More organizations (46 per cent) are requiring 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 last year. The number of respondents offering stock options dropped from 78 per cent in 2001 to 74 per cent this year, however the use of stock purchase plans increased from 41 per cent in 2001 to 45 per cent. Long term incentives continue to grow at a fairly steady pace.

Hay Group, an HR consulting firm, also released the results of its compensation survey detailing slightly different projections than Watson Wyatt. The study, which polled close to 400 organizations, indicates base pay is projected to increase in 2003 by a 3.1 per cent average.

“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 Karl Aboud, National Director of Reward Management for Hay Group.

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 is expected to increase by 3.3 per cent. Alberta predicts the highest increase at 3.6 per cent; Manitoba projects the lowest at 2.7 per cent.

And bonus payouts are still important to employee’s 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.

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