Despite geopolitical uncertainty, Canadian employers hold compensation budgets steady for a third consecutive year, according to Marsh Canada
TORONTO, Aug. 31, 2026 ─ Marsh (NYSE: MRSH), a leading global professional services firm, today released the results of its July 2026 Mercer QuickPulse® Canada Compensation Planning Survey. Mercer, a people and investments leader, is transitioning to the Marsh brand as of September 1. The survey found that Canadian employers are planning to keep 2027 compensation budgets steady and are taking a measured approach that balances the current economic uncertainty with talent priorities while relying on more than the annual merit cycle alone.
The survey of over 470 Canadian organizations found that employers, on average, plan to hold base salary increases for merit at 3.0%, and total increases at 3.2%, which encompasses all salary increases, including for merit, promotions, cost-of-living, and other adjustments, in 2027 – nearly the same as the actual increases employers reported in 2025 and 2026 (3.0% for merit, 3.3% for total increases).
Industry budgets vary around those national averages. High Tech leads the market (3.3% merit; 3.6% total), with Retail & Wholesale also above average (3.3% merit; 3.4% total). On the other end, Banking/Financial Services is budgeting the smallest increases so far next year (2.7% merit; 3.0% total), while Consumer Goods and Energy are also below the national merit average (2.9%).
Compensation is becoming more disciplined
Looking ahead, employers say the economy will continue to influence compensation decisions in 2027, with more than half (60%) expecting at least a moderate impact. At the same time, organizations are balancing those pressures with a focus on talent development, market competitiveness, and compensation adjustments.
However, the data suggests most employers are taking a more intentional approach to compensation, as many employers are still early in the process of turning that strategy into finalized budget decisions. As of July 2026, 89% of organizations were still collecting information for 2027 salary budgets, while 6% had proposed budgets to leadership and 5% had already secured approval.
“Most organizations are still early in the annual planning cycle, and while the current news cycle points to continuing instability, past data shows these projections are likely to be accurate,” said Elizabeth English, Senior Talent and Careers Leader at Mercer Canada. “Right now, economic uncertainty plays a huge role in employers’ compensation strategies, so organizations are planning to make the most of their spending by using data to ensure their spend goes to areas of labour need and where talent risk is high.”
Employers look to go beyond annual merit to manage pay
The data also shows that employers are using a mix of compensation levers beyond the annual merit cycle. Canadian employers expect to promote approximately 6.4% of their workforce in 2027, with promotion activity varying by level — executives see lower promotion rates (5.4%) while non-executive salaried professionals see higher rates (7.3%), reflecting typical career progression patterns. Organizations are currently planning to promote fewer employees than in past years, with 7.6% of employees promoted this year.
Approaches to managing promotions also differ across organizations. About half of employers take a continuous, “as needed” approach, promoting employees when they take on expanded responsibilities or move into higher-level roles, while others structure promotions strategically around key business moments.
Off-cycle pay is also becoming part of normal compensation management, with half of Canadian organizations saying they have or will provide off-cycle salary adjustments in 2026, with a similar pattern expected into 2027. However, governance and visibility vary widely — among organizations that provide off-cycle increases, 30% say they track and report on them regularly, while 45% track them in systems but do not monitor or report throughout the year.
From manual to automation: AI’s role in compensation
The survey also found that AI and automation is moving into compensation planning processes, but there is still a limited direct impact on operations. Nationally, 57% of organizations report at least some automation in compensation (43% some automation; 12% largely automated), yet only 2% say they’ve reached advanced modernization. Where AI is already showing up most is in annual salary increase planning (43), market pricing and benchmarking (38%) and job matching/leveling (36%), while higher-stakes decisions—like pay equity analysis (21%) and budget optimization (21%)—lag. The biggest constraints aren’t curiosity, but control: data quality (37%), system integration (36%), and limited resources (34%) top the key challenges list.
“Just over half of survey respondents are using some degree of AI automation in the compensation process,” added Elizabeth English, Senior Talent and Careers Leader, Mercer Canada. “But we are still seeing most of them limited to repeatable tasks, rather than more deep integration. The data shows, however, that the interest in doing more with AI exists, but is still constrained by both technical challenges and internal resources.”
About Mercer’s 2026 QuickPulse® Canada Compensation Planning Survey
The July 2026 Mercer Canada QuickPulse® Compensation Planning Survey includes data from over 470 organizations in Canada, from small employee bases to very large employee bases, across 15 industries. This study was fielded in July 2026. More information can be found here.