Canadian organizations to keep pay raises minimal as they conserve spending: Conference Board of Canada

THE Conference Board of Canada’s “Compensation Planning Outlook 2021” survey has found that organizations are planning modest salary increases for next year in the wake of the global pandemic.

 The theme for employers planning salary budgets for 2021 is: restraint. The average pay increase for non-unionized employees is projected to be 2.1 per cent next year, keeping pace with the 2.1 per cent forecasted inflation rate. In recent years, Canadian organizations have provided pay increases that have been among the lowest of the past 25 years. That trend is set to continue in 2021.

“There is no doubt that COVID-19 continues to impact Canadian organizations large and small,” says Allison Cowan, Director, Human Capital Research. “As the initial pandemic wave arrived in Canada, mandated lockdowns designed to slow transmission of the disease also halted economic activity and wiped out three million jobs.” The impact from this, and possible future pandemic waves, will be felt by employers for a while, explains Cowan.

With a tepid economic recovery ahead, Canadian employers are beginning to assess potential salary increases for next year. The Conference Board of Canada’s Compensation Planning Survey found that more than a third (40 per cent) of organizations do not yet have preliminary budget recommendations; of those that do, 14 per cent are planning a freeze on salary increases across all employee groups.

“Employers will face significant cost pressures and may have difficulty maintaining their budgets as the economy slowly recovers,” says Cowan. “Downward revisions to pay increases in the coming months should be expected.”

Additionally, short-term incentive payouts that were planned for 2020 fell short across all employee groups for a quarter of Canadian organizations surveyed. Unionized wages have also been hard hit by the global pandemic. Negotiated wages for 2020 came in at 1.7 per cent, compared to 1.9 per cent in 2019. Looking to 2021, negotiated wage increases are expected to fall further to 1.6 per cent.

By sector, salary projections for 2021 are highest among Crown corporations at 2.5 per cent, followed by public and private sector organizations, both projecting increases of 2.2 per cent. At 1.7 per cent, salary projections in Alberta are the lowest among Canadian provinces and territories.

The recovery will be uneven among industries. Industries that lend themselves well to remote work, or that were shut down for only short periods, will recover quickly. Other industries, such as recreation, accommodation and food services will recover slowly, with employment levels not returning to their pre-pandemic levels until a vaccine is available and Canadians begin to feel comfortable again in large crowds.

The full Compensation Planning Outlook is available to existing subscribers and for individual purchase.