Elizabeth English, a Senior Principal at Mercer, sheds light on the evolving trends in employee compensation in Canada, drawing on data from Mercer’s recent compensation planning survey in her recent interview with the CanadianSME Small Business Magazine. Despite a decrease in both merit and total increase budgets for 2024, the rates remain above inflation and are higher than pre-pandemic levels, indicating a nuanced shift rather than a drastic drop. Elizabeth explains the critical distinction between merit increases, which are performance-based, and total increases that encompass a broader range of adjustments, including promotions and cost-of-living adjustments. With 48% of Canadian employers providing off-cycle adjustments, strategies are becoming more tactical, focusing on key areas such as retention, job responsibility recognition, and internal equity. This strategic approach is essential as employers navigate a competitive job market, ensuring they effectively use their resources to reward top performers and manage pay equity, all while maintaining transparency and fairness in compensation practices.
Elizabeth English is a Principal in in the Products segment of Mercer’s Career business in Toronto. As the Product Lead for Canada, she is focused on driving the best outcomes for the Canadian survey portfolio. She works closely with clients and
internal colleagues throughout the survey process, delivers key insights and continues to evolve the surveys. Liz oversees a portfolio of Canadian surveys, including the Canadian Mercer Benchmark Database, Canadian Retail Compensation and Benefits Survey and the Compensation Planning Survey.
Liz has over fifteen years of experience in managing compensation surveys and consulting with clients on a range of compensation projects, including: organization-wide market competitive reviews, implementation of job evaluation systems,
base pay management programs, and custom survey development and delivery. She brings a thorough knowledge of the entire survey lifecycle of compensation surveys, from inception to publication.
Liz holds an Honours Bachelor of Business Administration from
Wilfrid Laurier University.
Elizabeth, could you provide an overview of the key findings from the recent compensation planning survey and what these results suggest about current trends in employee compensation?
Compensation budget increases for 2024 continue to slow. According to the March 2024 Mercer QuickPulse
Canada Compensation Planning Survey, the average national merit increase was 3.2% (projected to be 3.1% in November 2023) and the average total increase budget was 3.5% (down from the projected 3.6% in November 2023). While still above inflation and still higher than pre-pandemic times, increases are starting to show a downward trend.
You mentioned a distinction between merit increases and total increases. Could you explain the difference and its significance in compensation planning?
Salary increase budgets are based on how much a company is increasing their payroll to provide base salary increases to existing employees. Companies may set a budget for merit increases, total increases or both. Merit-based increases are generally performance-based, whereas total increases include merit, but may also include promotional increases, cost-of-living adjustments, minimum wage adjustments, off-cycle increases etc.
The majority of companies have a salary increase cycle once per year. In addition, 48% of Canadian employers provide off-cycle adjustments, where they provide base salary increases to employees outside of their annual cycle. According to the March 2024 Mercer QuickPulse Canada Compensation Planning Survey results, promotions, addressing retention concerns, recognizing increasing job responsibilities and addressing internal equity are key reasons why companies use off-cycle adjustments.
With the trend of decreases continuing in Canada, what implications might this have for Canadian employees in terms of their earnings and overall job satisfaction?
As an employee, it’s critical to consider your base salary within the context of all of the different total rewards elements that you receive. Base salary is a component of your package, but consideration must also be given to incentive programs, flexibility, paid time off, recognition programs, benefits, and pension etc. Depending on your personal situation, cash may be a priority, but for others, flexible work schedules and the ability to work remotely may be more important.
Considering the same downward trend, what challenges and opportunities does this present for Canadian employers in maintaining a competitive and motivated workforce?
Canadian employers are becoming more tactical in how they deploy their increase budget. While the spend on increases was slightly lower in 2024, it’s important that companies use their money wisely to recognize top performers and hot skills, address compression and focus on internal equity.
For example, when hiring someone new, organizations should be reviewing the base salary of the new hire against the salaries of their existing employees in the same role, and possibly make adjustments to their existing staff.
Regarding promotions, what were the notable trends in 2024, and how might these influence compensation strategies moving forward?
Employers will hand out slightly fewer promotions this year – 8.0% on average of all employees versus 8.1% the year prior. But as pay transparency trends remains top of mind for many Canadian employees and employers, there is potential there will be higher spending on promotions than in past years. When an employee is promoted up a level, organizations are focusing on making sure that the increases are meaningful and reflect the new job responsibilities.
What are key trends impacting compensation decisions this year?
Pay transparency and pay fairness are key factors as organizations review their salaries. Pay transparency is how open an employer is about what, why and how their employees are compensated. Pay transparency is addressed on two fronts – what information you may share externally with job candidates as they apply to jobs at your organizations; as well as what information you share with your current employees.
In contrast, pay fairness is ensuring that employees receive compensation that is equitable and justifiable based on factors such as their skills, experience, responsibilities, and performance. This includes looking at how employees are positioned in their salary range relative to internal peers, for example, when an employee is promoted or when new hires join in the same role.
What should Canadian employers focus on as they begin to think about 2025 salary increases?
Listen to employee needs and deliver on desired non-financial benefits, such as flexible working and well-being programs, to contribute to a competitive total rewards package that attracts, retains, and motivates your critical talent pool.
Salary increase budgets should be built from the bottom up, and reflect your company’s market competitiveness, your employees’ needs and your unique financial situation.
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