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Cautious salary increases expected in 2018, survey says

Morneau Sheppell HR survey calls for salary increases averaging 2.3% next year.


TORONTO — Employers in Canada are expecting salaries to rise by an average of 2.3% in 2018, according to Morneau Shepell’s annual survey of Trends in Human Resources. This is up from the actual 2.2% average increase in 2017.

The forecast for 2018 includes expected salary freezes and excludes promotional or special salary adjustments.

“Employers are relatively optimistic about the coming year,” said Michel Dubé, a principal in Morneau Shepell’s compensation consulting practice. “Those expecting better financial performance in the coming year outnumber those expecting weaker performance by four to one. Despite this optimism, employers are still cautious about salary increases, perhaps reflecting a concern that rising interest rates may dampen economic growth next year.”

The expected 2.3% increase compares favourably to the current rate of inflation, which is about 1%.

The survey identified some industry sectors that are expecting higher than average salary increases in 2018. They include utilities at 2.9%, and manufacturing and wholesale trade at 2.7%. These industries may be catching up after lower than average increases over the past few years. Expected salary increases in sectors such as finance and insurance are expected to remain strong at 2.7% next year.

Lower than average increases are expected in certain industry groups that face more uncertain economic circumstances. This includes mining and oil and gas extraction where average salary increases of 0.8% are expected. Salary increases in the public sector are also expected to be below average. Salary increases in public administration, health care and social assistance employers are expected to average 1.7% next year, with educational services slightly higher at 1.9%.

Reflecting the different mix of industries by province, Alberta and Prince Edward Island are expected to have the lowest salary increases next year, at 1.8 and 1.9% respectively. Quebec is expecting the highest salary increases next year, at 2.6%. Salary increases in other provinces will be close to the norm.

Building a high-performing and resilient workforce is a priority for employers

In addition to looking at expected salary increases, the survey also asked Human Resources (HR) leaders about their priorities for 2018.

Their top priorities were on building a high-performing workforce that adapts better to change. Almost two thirds of HR leaders (65%) said that improving employee engagement was a top priority for the coming year. Over half of HR leaders (56%) said they will also be focusing on attracting and retaining employees with the right skills, and 55% identified helping their organizations adapt better to ongoing change as a top priority.

Improving the physical and mental health of employees was also high on the list for HR leaders, with 47% identifying this as one of their priorities for the coming year.

The top priorities of HR leaders align closely with the views of their employees. In a study of workplace mental health published by Morneau Shepell earlier this year, among employees who had experienced organizational change, 40 per cent said the change was negatively affecting their health, and 30 per cent indicated that it impacted their job performance.

Employers are concerned that employees are not adequately prepared for retirement

The survey also picked up some important changes in employer attitudes toward retirement. More than 90% of HR leaders said they were concerned about how well their employees were prepared for retirement. This is a growing concern because an increasing proportion of employees today are covered under defined contribution (DC) retirement plans that do not offer guaranteed payments after retirement.

HR leaders are exploring a range of solutions from providing better education for employees (58%), offering them decumulation options when they retire (27%), and allowing retirees to purchase insurance at discounted costs through online retiree marketplaces or other options (23%).

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