Mercer today released the results of its 2023 compensation planning survey. These results reveal that inflation continues to put tremendous pressure on salary envelopes and the salary forecasts of Canadian employers. Canadian employers surveyed say they plan to budget 3.4% for merit increases and 3.9% for total increases in 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 increased by 2.6% and 2.8% respectively in 2022. Across Canada, the largest increases in total budgets occurred in Montreal (4.5%), Greater Edmonton (4.3%), Saskatchewan (4.2%) and Greater Calgary (4.1%). In addition, the survey includes data from over 550 organizations of varying sizes operating in 15 industries. This link allows you to access other findings from the survey. Although budgets are higher than in recent years, the planned increases will not be enough to offset the 12-month inflation rate, which in June 2022 reached a 40-year high of 8.1%, for decline thereafter and settle at 7.6% in July and 7.0% in August. Organizations have always relied on the labor market and competition for talent acquisition, not inflation, to set their compensation strategies.
Against this backdrop of high inflation, the survey found that more than a third (34%) of organizations are considering reviewing or adjusting salaries, on an ad hoc, off-cycle basis, to combat turnover and the challenges of recruiting for key positions. This data is therefore up compared to March 2022 (19%). “High inflation is leading to higher compensation expectations and salary forecasts for Canadian employees, who are seeing the cost of living rise significantly,” said Elizabeth English, Senior Advisor – Mercer Canada. “With 2023 salary envelope increases falling far short of inflation-proofing, organizations need to focus on managing employee expectations through internal communications, scenario planning, and adoption. a more open view of total rewards to attract and retain talent, which can translate into investment in benefit programs.
Many organizations are already enhancing their benefits programs to support their employee value proposition. Plan sponsors added new gender affirmation and fertility benefits, as well as amounts to cover adoption costs, to support diversity strategies, equity and inclusion. Additionally, plan sponsors continued to invest in wellness measures, offering more mental health support or new digital solutions for employees to take control of their wellbeing. Health care accounts are also becoming increasingly popular because they offer flexibility to employees. They can thus obtain reimbursement for a wide range of expenses related to well-being.