Despite SARS, mad cow disease, forest fires, trade disputes and a generally soft economy, Canadian employers feel optimistic about 2004 and expect to give pay increases well above inflation, though slightly below raises granted this year.
Two surveys of Canadian organizations both reveal average increases for 2004 will be very close to 3.2 per cent. Actual raises for 2003 averaged 3.3 per cent.
“One might have thought the forecasts might have been a little lower given some of the dips that occurred,” said Bob Curry, a consultant with HR consulting firm Watson Wyatt, which surveyed more than 440 organizations about compensation plans for next year. Though about eight per cent of employers did not give increases in 2003, only about three per cent plan to implement a salary freeze next year.
The events of 2003 “could have put a damper on expectations, however, what we see is that they are staying the course,” said Bernadette Pettipas, a consultant with Mercer Human Resource Consulting. According to the Mercer survey of 260 Canadian employers, average increases for 2004 will be 3.25 per cent.
Some industries, like transportation and computer hardware, had a difficult year in 2003; they are looking at smaller increases, said Pettipas. Others, such as pharmaceutical firms and the petroleum industry, are more optimistic and will be giving raises slightly above average. No sectors are expecting to go much below a three-per-cent increase, according to the Mercer numbers.
The Watson Wyatt survey showed variable pay remains a critical component of compensation plans. There was almost no change in the number of organizations offering long-term incentive plans, with 33 per cent having some long-term plan in place, up from 32 per cent in 2002.
But the study revealed an increase in the use of short-term incentive plans, with 86 per cent of respondents now offering some sort of short-term plan, up from 81 per cent in 2002.
More organizations are also introducing rigour into short-term incentive programs, with 89 per cent of those with a plan in place describing it as formal program, up from 81 per cent.
“There is certainly a move in that direction. We have been seeing that for the last few years,” said Curry. It’s a product of heightened accountability and shifting expectations about the employment contract, he said.
With an increased demand for more accountability in the past couple of years, employers are being much more cautious about how money is spent. If employees are going to be rewarded from of an incentive plan, the employer needs to be able to demonstrate why. That means more structure and the use of quantifiable objectives. Today employers are less likely to say, “If we miss the sales forecast that is okay because we didn’t miss it by very much,” and still give the incentive pay out anyway.
Incentive plans also force employees to rethink how and why they are compensated. Employees were becoming accustomed to receiving a raise to cover inflation, plus something more. Variable pay helps at least temper those assumptions. “It diminishes what seems to be a growing entitlement mentality around merit,” Curry said.
Two surveys of Canadian organizations both reveal average increases for 2004 will be very close to 3.2 per cent. Actual raises for 2003 averaged 3.3 per cent.
“One might have thought the forecasts might have been a little lower given some of the dips that occurred,” said Bob Curry, a consultant with HR consulting firm Watson Wyatt, which surveyed more than 440 organizations about compensation plans for next year. Though about eight per cent of employers did not give increases in 2003, only about three per cent plan to implement a salary freeze next year.
The events of 2003 “could have put a damper on expectations, however, what we see is that they are staying the course,” said Bernadette Pettipas, a consultant with Mercer Human Resource Consulting. According to the Mercer survey of 260 Canadian employers, average increases for 2004 will be 3.25 per cent.
Some industries, like transportation and computer hardware, had a difficult year in 2003; they are looking at smaller increases, said Pettipas. Others, such as pharmaceutical firms and the petroleum industry, are more optimistic and will be giving raises slightly above average. No sectors are expecting to go much below a three-per-cent increase, according to the Mercer numbers.
The Watson Wyatt survey showed variable pay remains a critical component of compensation plans. There was almost no change in the number of organizations offering long-term incentive plans, with 33 per cent having some long-term plan in place, up from 32 per cent in 2002.
But the study revealed an increase in the use of short-term incentive plans, with 86 per cent of respondents now offering some sort of short-term plan, up from 81 per cent in 2002.
More organizations are also introducing rigour into short-term incentive programs, with 89 per cent of those with a plan in place describing it as formal program, up from 81 per cent.
“There is certainly a move in that direction. We have been seeing that for the last few years,” said Curry. It’s a product of heightened accountability and shifting expectations about the employment contract, he said.
With an increased demand for more accountability in the past couple of years, employers are being much more cautious about how money is spent. If employees are going to be rewarded from of an incentive plan, the employer needs to be able to demonstrate why. That means more structure and the use of quantifiable objectives. Today employers are less likely to say, “If we miss the sales forecast that is okay because we didn’t miss it by very much,” and still give the incentive pay out anyway.
Incentive plans also force employees to rethink how and why they are compensated. Employees were becoming accustomed to receiving a raise to cover inflation, plus something more. Variable pay helps at least temper those assumptions. “It diminishes what seems to be a growing entitlement mentality around merit,” Curry said.
