Salary increases of 3.1 per cent expected for 2012: Mercer

Employers project base salary budgets will increase by 3.1 per cent for next year, according to Mercer’s 2012 Compensation Planning Survey.

While this is a slight improvement over the projected compensation increases for 2011 (2.9 per cent), next year’s increases are considerably lower than increases planned before the global financial crisis, when four per cent was the 2008 base salary increase planned by Canadian employers, said Mercer.

The current market turmoil will likely negatively impact the salary plans made by Canadian employers.

“Canadian employers are starting 2012 with an increasingly disengaged workforce who are less informed about how their compensation is determined and are adding a small increase to what employees value most — pay,” said Iain Morris, leader of Mercer’s human capital business in Canada. “Add to that a healthy dose of uncertainty in the markets and we see a challenging year ahead for Canadian employers.”

Employers report they are planning for 3.1 per cent base pay increases across all employee categories: management, professional, clerical, trades and executive, found the survey of 675 Canadian employers. The spread among the categories has been shrinking for the past five years when in 2007, executive increases were 0.6 per cent more than the lowest increases budgeted for other groups of employees, said Morris.

“Over the past few years, executive pay increases have been coming into alignment with the rest of the employee population, eliminating an historical separation,” he said.

Overall, the percentage of companies planning salary freezes has plummeted since 2009 (31 per cent in 2009 down to 1.5 per cent projected for 2012). The executive employee category, however, is also projected to see a higher percentage of salary freezes than other categories of workers, found the survey.

More than five per cent of employers report they froze executive pay in 2011 (compared to 2.1 per cent who froze salaries for all employees), and only 1.8 per cent of employers project executive salary freezes in 2012, (compared to 0.9 per cent of employers who are planning to freeze salaries for all employees).

Since the recession, there has been little differentiation in base salary increase budgets from one industry to another; 2012 is no exception. Employers in the oil and gas industry are projecting the biggest increase in base salary budgets at 4.3 per cent, found the survey. Public sector and not-for-profit employers' projected base salary increases have been declining since 2009. High-tech and financial services' budgets have remained relatively low since 2009.

Toronto and Montreal employers are projecting 2012 increases that are the lowest in the country, a position they have regularly held historically in 2008, 2009 and 2011, said Mercer.