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Some positive news prevails despite continued mixed economic signals salary budget increases for Canadian employees are improving
New survey results reveal the average raise in base pay is expected to be 3.2% in 2013, the same as the average actual salary increase reported for 2012 and also up slightly from the 3.0% and 2.9% in 2011 and 2010 respectively. These results are indicative of a steadily increasing trend. Moreover, for top-performing employees – 7% of the workforce – salary increases will remain higher as companies strive to balance compensation planning budgets with retention of critical talent. See Figures 1 and 2.
The survey shows similar trends in the United States with the average increase in base pay expected to be 2.9%.
Mercer’s, 2012/2013 Canada Compensation Planning Survey, which has been conducted annually for more than 20 years, includes responses from more than 750 employers across Canada and reflects pay practices for approximately two million non- union workers. The survey results are captured for five categories of employees: executive, management, professional (sales and non-sales), office/clerical/technician, and trades/production/service.
“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.”
Workforce segmentation and analytics
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. 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. Mercer’s survey shows that in 2012 highest-performing employees (6% of the workforce) received average base pay increases of 4.9% compared to 2.9% for average performers (60% of the workforce) and 0.1% for the weakest performers (2% of the workforce).
“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 Iain 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.”
According to Mercer’s survey, 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% for 2013, compared to 2.9% 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% for 2013 while “High Tech/Telecommunications“and “Public Sector/Not for Profit” are forecasting 2.4% and 2.5% respectively when salary freezes are included.
For more information about Mercer’s 2012/2013 Canadian Compensation Planning Survey, visit www.imercer.ca/cps or call 800 333 3070.
Figure 1: Five-year trend of average base pay increases
Figure 2: Average base pay increases by employee group