Canadian employers will be increasing their salaries in 2018 by approximately the same amounts as implemented in 2017. At the same time, employers are experiencing challenges in attracting and retaining employees. These are some of the findings contained in a survey completed by Western Compensation & Benefits Consultants in late 2017.

Nationally, employers expect to increase their salaries on average by 2.4% which is similar to the increases implemented in 2017. However, the magnitude of salary increases varies by geographic region, level of position and type of industry. Employees in Metro Vancouver, Edmonton, Toronto and South Western Ontario will receive higher increases, as will professional/technical employees and those employed in the finance, insurance and real estate industries. Salary increases are implemented 12 months apart and two out of three employers implements the increases in the first calendar quarter.

Annual bonus programs continue to be an integral component of total compensation, particularly in the private sector. Bonus opportunities at the executive level usually exceed 50% of annual salary, while they are typically 15% to 20% for managers/supervisors and 10% to 12% for professional/technical staff. Two-thirds of the employers surveyed paid bonuses to virtually all of their eligible employees for the last fiscal year.

The typical employer is experiencing annual voluntary employee turnover of 5% to 10%. However, in the past 12 months employers have been particularly challenged in the attraction and retention of professional/technical employees as well as management/supervisory staff. Employers believe that offering competitive salaries is the most effective strategy for addressing these attraction/retention challenges. Offering challenging work and promotion opportunities, along with having a good reputation as an organization were identified as other effective strategies.

Barry Cook, a Partner at WCBC, recommends that employers proceed as follows with respect to their compensation planning for 2018:

Ensure compensation is competitive
If the employer is confident that its overall cash compensation levels are competitive, it would be appropriate to consider an overall average salary increase of about 2.5% in 2018. On the other hand, if the employer’s compensation has not been recently benchmarked to the market this should be considered before increasing the salaries. It is conceivable that the employer’s existing compensation levels are below or above market levels and, if so, the employer’s compensation strategy for 2018 should not consist of simply increasing the salaries by 2.5%.

Determining if your compensation is at the desired market level is accomplished by obtaining and analyzing reliable up-to-date market compensation data.

Differentiate between employees
Providing the same salary increase to all employees is not an appropriate strategy. Employees who may be new in their positions and are “ramping up” to full competency in the role should be awarded higher increases to prevent them from becoming underpaid for their contribution.

High performers should receive salary increases higher than those awarded to average performers. Cook pointed out that the typical employer expects to provide high performing employees with salary increases which are nearly double those being awarded to average performers.

At the opposite end of the spectrum, any employees with job performance issues should receive lower than average increases.

Invest in good employee communications
The typical employee is not aware of the continuing investments which employers must make to plan and administer their compensation programs. Organizations can obtain good employee relations payback from educating employees on the employer’s compensation administration and current compensation changes in the market.