One-third of employers revise salary budgets

Current economic conditions have employers in many parts of Canada reconsidering the salary increase budgets they formulated only a few months ago, according to a survey by Hewitt Associates. Even organizations in Alberta's competitive labour market are thinking of cutting back.

The results of Hewitt's online survey conducted in October 2008 reveal that 36% of the 411 companies that responded to the survey will decrease their earlier salary increase budget for 2009. On average, these organizations had intended to provide salary increases of 3.8% in the coming year. They have now dropped their projections a full percentage point to 2.8%.

British Columbia and Quebec employees are looking at the highest reductions in salary increases, in excess of the national average. The BC respondents had intended to increase salaries by an average of 3.63% in 2009 and have now lowered that projection to 2.25%. In Quebec, the average increase has gone down to 2.2% from 3.5%.

The same holds true for 2009 increases for Alberta employees. The average increase projected earlier this year by respondents in that province was 5.13%; increases are now down to 3.96%. "Alberta salary increases for 2009 are still expected to be well above the national average," said Jeff Vathje, a senior compensation consultant in Hewitt's Calgary office. "Employers in Alberta are not acting rashly. They are well aware that they still need to offer competitive salaries in order to attract and retain employees in a labour market that continues to be fairly tight."

In Ontario, however, for those employers planning to cut back on their original salary increase forecasts, the drop will be less than the national average. The initial forecast of an average 3.54% increase in 2009 is now 2.69%. "The likely reason is that Ontario had been experiencing economic slowdowns prior to the recent crisis and employers modified their forecasts accordingly," stated Vathje.

When respondents that are planning more modest salary increases over the coming year were asked to provide reasons for the reduction, almost three-quarters responded that it was due to market conditions in general. Others highlighted conditions in their industry and/or at their particular organization.

Hewitt conducted a similar survey in the US and found 42% of American employers are revising their 2009 salary increase forecasts. On average, salary increases at these organizations are expected to drop to 3.1% from 4.1%.

"It is important to note that the majority of Canadian employers are planning to stick to their original forecasts," said Vathje. "In addition, the results of Hewitt's 2008-2009 Canada Salary Increase Survey show that 86% of Canadian employers have variable compensation programs in place. High performers still have opportunities to be well compensated in the coming year."