Salary Increases 2017
Should employer increase salaries in 2017?
Nine out of ten Canadian employers review salaries and implement any appropriate adjustments on an annual basis. A majority of these employers administer the reviews and make adjustments in the first three months of the calendar year. These are some of the findings contained Western Compensation & Benefits Consultants Salary Increases Survey. Barry Cook, a partner with the Firm, provided some insight regarding the survey findings, along with some suggestions for employers.
Nationally, employers are planning to increase their salaries by 2.0% to 2.5%, but Cook advised that “the increase varies by employee level/type of position, geographic region and industry. Management/Supervisory and Professional/Technical positions continue to pose the biggest attraction and retention challenges and hence, will be receiving larger increases. Employees in some industries such as professional services, finance and insurance will be receiving higher raises while increases in the public sector will be lower.”
Employers need to retain their existing employees and be capable of recruiting new talent. At the same time, employees are pre-conditioned to the notion of annual salary increases. Recognizing these important realities, employers are challenged with taking the most appropriate initiatives. A small minority of employers annually implement “cost-of-living” increases, which may result in all employees receiving a raise which is tied to the increase in the Consumer Price Index. Although this approach is simple and may seem “fair”, Cook cautions that it may not be appropriate for the following reasons:
Salaries at Wrong Level – The employer’s salaries may have not been at the right level (i.e.: too low or too high) compared to the market before the increase was awarded. Providing egalitarian salary increases will not solve this problem.
Using the Wrong Ruler – From a competitive perspective, employers should be basing their salary increases on what other relevant employers are doing with their salaries. The CPI increases do not provide this needed information.
Increases Should Be Tailored to Individual – Some employees should receive increases which are higher than those awarded to the typical employee. This could include:
- employees recently promoted into his or her position and who are “ramping up” towards full competency and the corresponding fully competitive market salary for the position; and
- employees who have outstanding performance.
By the same token, there could be employees who should receive increases less than the typical employee because of job performance issues.
So what should an employer do? Cook advises that employers which are following good compensation governance practices periodically obtain compensation surveys and compare their salary levels (as well as other components of compensation) to that paid to comparable positions by employers which compete with them for employees. This may reveal that the employer’s salary levels for some positions are competitive while other salaries are less competitive. Whatever the outcome of the market comparisons, the data will provide the employer with the information needed to make appropriate salary decisions.
In the case of employers which have very recently compared their salary levels to the market as described above it may only be necessary to obtain information regarding the magnitude of salary changes planned or already implemented by competing employers. This data should allow an employer to keep its salaries at a relatively competitive position in those years when compensation surveys are not used to evaluate market competitiveness.
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