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Employers project base salary budgets will increase by 3.1 per cent for next year. The results of Mercer’s 2012 Compensation Planning Survey of 675 Canadian employers show they offered employees a modest salary increase, averaging 3.0 per cent in 2011. While this is a slight improvement over the projected compensation increases for 2011 (2.9%), next year’s increases are considerably lower than increases planned before the global financial crisis, when 4.0 per cent was the 2008 base salary increase planned by Canadian employers. With a projected inflation rate of 2.6 per in 2012, working Canadians will not be much further ahead.
Base pay and engagement
According to Mercer’s recent What’s Working study of employee engagement, Canadian employees cite base pay as the most valued item in their employment agreement, ahead of bonuses, flexibility, training and career opportunities. The survey also found that employees are increasingly disengaged: one in three is seriously considering leaving his or her organization and one in five is indifferent.
The same survey found that only half of employees said they were satisfied with their base pay and only 52 per cent believe that the pay in their organization is as good as or better than the pay offered by other organizations in their geographic area. In addition, far fewer employees reported understanding how their pay is determined (74% now compared to 82% in 2006).
The current market turmoil will likely negatively impact the salary plans made by Canadian employers. Equally, global employers leveraged in markets experiencing acute financial pressures may exert downward pressure on subsidiaries operating in Canada.
“We expect employers will keep their budget commitment open—delaying the final decisions on budgets until the last possible moment,” says Iain Morris, leader of Mercer’s Human Capital business in Canada.
“Canadian employers are starting 2012 with an increasingly disengaged workforce who are less informed about how their compensation is determined and are adding a small increase to what employees value most – pay,” said Morris. “Add to that a healthy dose of uncertainty in the markets and we see a challenging year ahead for Canadian employers.”
“There’s a big opportunity to improve engagement by getting salaries right, and improving performance management programs,” continued Morris.
Important compensation trends for 2012
Executive pay trends to an alignment with employees
Employers report they are planning for 3.1 per cent base pay increases across all employee categories: management, professional, clerical, trades and executive.
“Over the past few years, executive pay increases have been coming into alignment with the rest of the employee population, eliminating an historical separation,” says Iain Morris, “The spread among the categories has been shrinking for the past five years when in 2007, executive increases were 0.6 per cent more than the lowest increases budgeted for other groups of employees. For 2012 employers report they are planning no difference between base salary increases for executives and any other categories of employee.”
Salary freezes lifted
Overall, the percentage of companies planning salary freezes has plummeted since 2009 (31 per cent in 2009 down to 1.5 per cent projected for 2012). The executive employee category, however, is also projected to see a higher percentage of salary freezes than other categories of workers. Over 5 per cent of employers report they froze executive pay in 2011 (compared to 2.1 per cent who froze salaries for all employees), and only 1.8 per cent of employers project executive salary freezes in 2012, (compared to 0.9 per cent of employers are expecting to freeze salaries for all employees).
Biggest budgets are in Oil and Gas
Since the recession, there has been little differentiation in base salary increase budgets from one industry to another; 2012 is no exception. Oil & Gas employers are projecting the biggest increase in base salary budgets at 4.3 percent. Public sector/not-for-profit employers' projected base salary increases have been declining since 2009. High-tech and financial services' budgets have remained relatively low since 2009.
Toronto and Greater Montreal employers are projecting 2012 increases that are the lowest in the country, a position they have regularly held historically in the 2008, 2009 and 2011.
Mercer’s 2012 Compensation Planning Survey is available for purchase at www.imercer.ca
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges. For more information, visit www.mercer.ca.