Inflation putting pressure on Canadian employers’ compensation budgets: Survey

As Canadians face higher living expenses, employers plan to put aside more budget for salary increases in 2023

Many Canadian employers are planning to increase their compensation budgets next year, but as employees feel the pinch of higher living expenses, those increases still fall short of inflation. 

Asset management firm Mercer found that more than one third (34%) of businesses are considering ad-hoc, off-cycle wage reviews or adjustments to combat turnover and recruiting challenges in key roles, up from 19% in March 2022. 

The firm’s 2023 Compensation Planning Survey – including data from more than 550 organizations across 15 industries – revealed that Canadian employers are budgeting 3.4% for merit increases and 3.9% for their total budget increase for 2023, up from 2.6% and 2.8% respectively in 2022.

Across Canada, the highest increases in total budgets are in Montreal (4.5%), Greater Edmonton (4.3%), Saskatchewan (4.2%) and Greater Calgary (4.1%).

While budgets are higher than in recent years, planned increases will fall short of year-over-year inflation.

"High inflation is raising compensation expectations and salary projections of Canadian employees facing significant increases in their cost of living," said Elizabeth English, principal, COE industry manager, for Mercer Canada's Career Products business, in a statement. "Organizations need to focus on managing employee expectations with their internal communications, planning for multiple scenarios and adopting a broader total rewards perspective to attract and retain talent, which can include investing in their benefit programs."

Many organizations are already enhancing their benefits programs. This includes plan sponsors adding new coverages to support diversity, equity and inclusion strategies by providing gender affirmation and fertility coverage as well as providing allocations for adoption-related costs. 

In the wellness category, benefits include more mental health support and/or offering new digital well-being solutions. Additionally, Mercer reported personal spending accounts are gaining traction.  

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