Salaries expected to increase by 2.1 per cent in 2017

by MM&D Online Staff

TORONTO, Ontario—Employers in Canada are expecting salaries to rise by an average of 2.1 per cent in 2017, according to Morneau Shepell’s annual survey of Trends in Human Resources.

This is down from the 2.5 per cent salary increase expected for 2016, as reported in last year’s survey. The average includes expected salary freezes and excludes promotional or special salary adjustments.

“With low oil prices and slow economic growth, employers continue to be cautious,” said Michel Dubé, a principal in Morneau Shepell’s Compensation Consulting Practice. “Our survey showed that actual salary increases in this year averaged just 2.1 per cent, and employers are expecting to stay at this level for 2017 as well. These are the lowest expected salary increases that we’ve seen in more than two decades.

“Some sectors such as mining, oil and gas are expecting salary increases of just 0.6 per cent, down from about 2.4 per last year,” said Dubé “The highest salary increases will be in parts of the economy that are holding up relatively well. These include professional, scientific and technical services at 2.8 per cent, and finance and insurance at 2.7 per cent. The manufacturing sector is also a bit higher than average at 2.4 per cent, reflecting an upturn in activity in that sector as a result of our lower dollar.”

Reflecting the mix of industries in the provinces, Alberta, Newfoundland and Labrador, and Saskatchewan are expected to have the lowest salary increases next year, at 1.4, 1.5 and 1.6 per cent, respectively. By contrast, other parts of Western Canada are expecting higher-than-average increases in the 2.6 per cent range. Salary increases in other provinces will be close to the norm.

Employee health, engagement and productivity are priorities for employers.

In addition to looking at expected salary increases, the survey also asked Human Resources leaders about their priorities for 2017.

The survey found that the top priorities for the coming year are to improve employee health and engagement. Three quarters of survey respondents identified improved employee engagement as a priority, and 59 per cent said that improving physical or mental health was also a priority in the coming year.

Given the pace of change in most organizations, it is no surprise that employers are looking for ways to develop better coping skills and resilience in their workforce. More than 60 per cent of employers said they were planning to increase promotion of their existing Employee Assistance Programs to improve mental health and resilience. And about a quarter of employers were planning specific mental health training for managers and training for employees to improve their coping skills.

Employers are concerned about the needs of employees after retirement, and looking at new ways to offer support.

“The survey also picked up some important changes in employer attitudes toward retirees,” said Randal Phillips, executive vice-president and chief client officer of Morneau Shepell. “As employers move away from defined benefit pension plans, and stop providing health benefits after retirement, employees are often left to fend for themselves when they retire. They struggle to choose among relatively expensive investment and health insurance options, and often make poor choices about how much of their savings they can safely withdraw to avoid running out of income later in life, or how much insurance they need for unexpected health costs.

“Employers are starting to take notice,” said Phillips. “Sixty per cent said they were concerned about the financial preparedness of their employees for retirement. About a quarter said they are looking at providing decumulation options for retirees, or are already doing this. And there is growing interest in providing competitive health insurance options for retirees through health exchanges, which have recently been introduced in Canada. These are very positive steps in providing greater security for retiring Canadians, and we hope more plan sponsors will take action in this area in the coming years.”

Morneau Shepell’s 34th annual Trends in Human Resources survey was conducted between mid-June and the end of July 2016, with input from organizations employing 840,000 people in Canada in a broad cross-section of industry sectors.