A robust Western Canadian economy - particularly in the energy sector - plus concern for attracting and retaining the most productive employees, are driving employers to project a national average salary increase of 3.7% for 2007, according to results of the Mercer Human Resource Consulting 2007 Canadian Compensation Planning Survey. The findings are based on data from 409 organizations representing over 2.1 million unionized and non-unionized employees in Canada.
"Oil and gas and petrochemical industries, mainly located in Alberta and accounting for nearly 10% of all respondents, are projecting a 5.6% average salary increase. This projection is considerably higher than in other industries, so it exerts a strong upward pull on the national average," said Iain Morris, Principal at Mercer Human Resource Consulting. "Without the Western energy industries, the projected national average salary increase would have been closer to 3.5%."
"The ´Alberta effect´ will likely have a long-term impact on compensation nationally," Morris said. "Employers also continue to look at ways other than increasing base salary to attract and retain people. Signing bonuses, spot cash awards and project milestone awards are the most heavily used."
Certain job families are recipients of particular types of attraction and retention programs. Signing bonuses are the most often used programs, and used especially for IT, sales, engineering and accounting occupations. "More aggressive pay increases and spot cash awards are also employed more frequently here because these specialized skills are harder to find, and employers are putting greater emphasis on attracting and retaining them," he said.
Projected average salary increases vary considerably across other industries, with utilities at 4.1% down to hospitality and tourism at 2.9%. The vast majority of organizations are planning increases of between 3.1% and 4.0% across all employee categories, and no one planning salary freezes for 2007.
Organizations employ a variety of other practices to reward employees. Among the most popular are competency-based performance management (used by 56.2% of respondents), individual incentives for non-management staff (49.5%), and formal career-planning (36.6%). "Especially telling is that over 31% of organizations that do not now use career planning say they are considering it. This fact, plus the growing use of competency-based programs, shows employers´ recognition of the need to make a greater investment in skills development for use within their own organizations," said Morris.
"Companies continue to expand their use of total reward approaches to compensation as performance becomes ever more important," he said. "For example, more than 30% of organizations say they have increased pay differentiation based on performance, and over 12% are considering it. As well, short-term incentive plans - awards for performance against criteria within one year - are used with over 88% of executives, 86% of management, 76.5% of sales people, and 65.6% of non-sales professionals."
Greater competition for employees due to anticipated labour shortages is the overwhelming reason given by the one-third of organizations that are budgeting pay increases larger than last year´s actual awards. Of the 19% budgeting smaller increases than 2006 awards, general cost reduction incentives and economic uncertainty are the reasons given.
In addition to salary increases across all employees´ categories, many employers are looking to boost their workforces. Over one-third of employers say they intend to increase head count over the next six months, with an average increase of 7.6%. Only 7.4% of employers say they plan to reduce staffing over the next six months; their average decrease is planned at 5.6% of workforce.
Mercer´s 2007 Compensation Planning Survey can be purchased from Mercer at www.imercer.ca/compplanningor by calling 1-800-631-9628.
Mercer Human Resource Consulting is the global leader for trusted HR and related financial advice, products and services, with more than 15,000 employees serving clients in 149 cities and 41 countries and territories worldwide. The company is a wholly-owned subsidiary of Marsh & McLennan Companies Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific and London stock exchanges. For more information visit www.mercerHR.com.