Most Canadian employers plan to keep salaries flat in 2026 and report minimal impact of AI on headcount, according to Mercer  

December 9, 2025

Mercer, a business of Marsh McLennan (NYSE: MMC) and a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people, today released its October 2025 Mercer QuickPulse^® CA Compensation Planning Survey. 

The survey of more than 460 Canadian employers revealed that they plan to hold base salary increases for merit at 3.0%, and total increases at 3.3%, which encompasses all salary increases, including for merit, promotions, cost-of-living, and other adjustments, in 2026. These average salary increase projections are the same as what Canadian employers delivered in 2025. 

Compensation trends vary across industries. Consumer goods, non-manufacturing and energy project  average total increase all below the national average. In contrast, the chemicals and high-tech sectors are projected to deliver higher average total increases at 4.0% and 3.8% respectively.  

Looking ahead, 66% of Canadian organizations anticipate that the economy will have a moderate to significant impact on compensation decisions in 2026. Nevertheless, employers remain committed to prioritizing skill and talent development (31%), market competitiveness (28%), and compensation adjustments (22%) next year.

However, the data suggests a disconnect between these priorities and how budgets are allocated. 80% of employers indicated they would distribute their salary increase budgets equally across the organization, rather than directing more resources towards high-demand areas or sectors with critical market gaps. Further, employers plan to promote less in 2026 – around 8.7% of their workforce, down from 9.8% in 2025, with an average promotional pay increase of 9%. 

“Despite lingering uncertainty in the Canadian economy, companies are still spending money to attract and retain employees,” said Elizabeth English, Senior Principal in Mercer Canada’s career products business. “Companies should consider allocating a higher percentage of their compensation budget increases to areas with skills that are in high demand to help address talent needs.” “With pay transparency legislation coming into effect in Ontario next month, companies based in that province need to allocate part of their compensation budget to address any internal equity concerns, as well as to prioritize skills that are in high demand.” 

The survey found that AI and automation have a limited impact on hiring and compensation decisions. Only 1% of respondents cited AI and automation as a reason for reduced hiring, and 62% reported no significant change to hiring volumes despite AI adoption over the past 12 months. Additionally, only 3% of organizations said they are proactively planning headcount changes related to AI.

“While AI is changing the way many employees and companies work, there is still a critical need for human beings to use the tools and provide their judgment,” said Teresa Palandra, Mercer President. “Most companies are using AI to help employees be more productive, rather than replace people all together, which explains the limited impact of AI on compensation and hiring decisions so far.”

The October 2025 Mercer QuickPulse® CA Compensation Planning Survey includes data from 462 organizations in Canada, from small employee bases (less than 500 employees) to very large employee bases (over 20,000 employees) across 15 industries. This study was fielded between October 20-31. More information can be found here.

Mercer, a business of Marsh McLennan (NYSE: MMC), is a global leader in helping clients realize their investment objectives, shape the future of work and enhance health and retirement outcomes for their people. Marsh McLennan is a global leader in risk, strategy and people, advising clients in 130 countries across four businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. With annual revenue of over $24 billion and more than 90,000 colleagues, Marsh McLennan helps build the confidence to thrive through the power of perspective. For more information, visit mercer.com, or follow on LinkedIn and X.