Research Project: Compensation Planning In A Soft Labour Market
How Canadian Employers Are Adjusting Pay Strategies, Budgets & Retention Approaches
Canada’s labour market entered 2026 showing clear signs of softening and rebalancing. Recent national labour market data shows modest declines in the unemployment rate driven, in part, by fewer individuals actively seeking work. These indicators suggest that labour demand is cooling, rather than signalling renewed hiring strength. Wage growth has moderated, job vacancies have declined and employers appear cautious in their workforce and compensation decisions.
WCBC’s Compensation Planning in a Soft Labour Market Survey provides an employer-side perspective on how organizations are responding to these shifting conditions. Conducted in January 2026, the survey gathered responses from 198 organizations across the private, public, and not-for-profit sectors, consisting of a range of organization sizes and businesses.
Employers indicate stable workforce expectations, easing hiring conditions, and moderating salary increase levels. At the same time, most organizations continue to experience pressure to increase pay, particularly for specific roles and skill sets, highlighting that the labour market softening is uneven rather than universal.
The survey results suggest that organizations are moving away from reactive responses to labour scarcity and toward more measured, selective approaches to compensation and talent management. The findings highlight both the practices organizations are adopting and the broader implications emerging as employers navigate a more balanced, although still complex, labour market environment.
Here are some of the highlights:
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- Workforce expectations are stable. Most organizations expect no change in staffing levels for 2026, with limited anticipated contraction.
- Hiring conditions are easing. A majority report hiring has become easier or remained unchanged over the past six months.
- Salary increases are moderating. Most 2025 actual and 2026 budgeted increases remain in the 2%-4% range, with fewer extremes.
- Pay pressure persists. Despite moderation in increases, most organizations report continued pressure to raise pay in 2026.
- Pay differentiation is selective. Higher increases are more often directed to professional, management, and executive roles.
- Off-cycle increases are tactical. Used by many organizations, but most do not expect greater reliance on them in 2026.
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- Retention focuses beyond pay. Development, internal mobility, and flexibility are the most common retention tolls.
- Voluntary turnover has eased. More organizations report stable or declining voluntary turnover as opposed to increases.
- Governance maturity varies. Formal processes for equity, compression, transparency, and manager training remain uneven.
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