New compensation data reveals inflation is putting pressure on Canadian businesses to keep up with employee expectations 

September 22, 2022

Canada, Toronto

Today Mercer released the results of its 2023 Compensation Planning Survey revealing that inflation continues to put significant pressure on the compensation budgets and salary projections of Canadian employers.

Canadian employers report they are budgeting 3.4 per cent for merit increases and 3.9 per cent for their total budget increase for 2023. Total compensation budgets include other adjustments such as promotions and cost of living adjustments in addition to merit increases. Merit and total budget increases are up from 2.6 per cent and 2.8 per cent respectively in 2022. Across Canada, the highest increases in total budgets are in Montreal (4.5 per cent), Greater Edmonton (4.3 per cent), Saskatchewan (4.2 per cent) and Greater Calgary (4.1 per cent).

The survey includes data from more than 550 organizations of varying sizes across 15 industries. You can review more of the survey findings here.

While budgets are higher than recent years, planned increases will fall short of year over year inflation which hit a 40 year high of 8.1 per cent in June 2022, moderating to 7.6 per cent in July, and 7.0 per cent in August. Historically, organizations have relied on the labour market and competition for talent - not inflation - for shaping their compensation strategies. In this high inflation environment, the survey found that more than a third (34 per cent) of organizations are considering ad-hoc, off-cycle wage reviews or adjustments to combat turnover and recruiting challenges in key roles, up from 19 per cent in March of 2022.

“High inflation is raising compensation expectations and salary projections of Canadian employees facing significant increases in their cost of living,” said Elizabeth English, Principal, COE Industry Manager in Mercer Canada’s Career Products business. “With 2023 compensation budget increases falling well short of inflation, organizations need to focus on managing employee expectations with their internal communications, planning for multiple scenarios and adopting a broader total rewards perspective to attract and retain talent, which can include investing in their benefit programs.”

Many organizations are already enhancing their benefits programs to support their employee value proposition. This includes plan sponsors adding new coverages to support diversity, equity and inclusion strategies by providing gender affirmation and fertility coverage as well as providing allocations for adoption-related costs. Plan sponsors have also continued to invest in wellness, either by providing more mental health support and, or offering new digital well-being solutions. Additionally, personal spending accounts are gaining traction as they provide employees flexibility and reimburse a wide-range of wellness-related expenses. 

To learn more about the survey results and gain insights directly from Mercer’s business leaders, register for Mercer’s signature event webinar: Reshaping the future: hot inflation or cool compensation? happening on Thursday, September 29.