Canadian salary increases for 2010?

Last week, Hewitt Associates released some valuable insights for employers from their 31st annual Salary Increase survey.  The survey was conducted in June and July of this year and the results are based on responses from 387 organizations representing more than 710,000 employees in Canada.

HIGHLIGHTS FROM THE SURVEY

• The average salary increase is projected to be a “modest” 2.8 per cent nationally in 2010, up from the 2.2 per cent increase actually awarded in 2009.
• Organizations in Alberta are projecting average increases of 3.0 per cent and in Manitoba a projected 3.2 per cent increase. In Saskatchewan, companies are forecasting 4.2 per cent increases which are the highest in the country, likely drive by its broad-based economy (agriculture, mining, and oil and gas) that appears to be more recession-proof than other sectors across Canada.
• Fifty per cent of respondents indicated they will increase salary increase budgets in the coming year (in comparison to the budget for 2009) due to the more favourable outlook for 2010. The remaining respondents indicated they are expanding their salary increase budget for reasons such as an expectation of strong company performance in 2010 or believe their organizations’ pay levels are below market.
• Last summer, 1.8 per cent of employers were forecasting salary freezes for 2009. In reality, 29.2 per cent of organizations froze salaries, which is the highest amount in 10 years.
• For 2010, only 6.5 per cent of employers are planning to freeze salaries and another one-third are still undecided and taking more of a “wait and see” approach before confirming their strategy.
• With respect to variable pay (i.e. bonus), the survey shows an increasing emphasis on company performance as a factor when determining variable pay amounts. In fact, 74 per cent of companies reported that company performance will be a factor (as opposed to exclusively relying on individual performance as the sole indicator), which is up from 69 per cent in the previous year.

MANAGING EXPECTATIONS

No matter what your organization decides to do with respect to salary increases for 2010, the key to retaining and keeping your employees motivated is simply communicating with them. If you choose to remain silent on the subject, your employees will rely on gossip, speculation and wishful thinking and will formulate their own expectations. For many employees the fear of the unknown is far more frightening than being told the reality (often it is not as bad as employees think it is). Even if the news is not good, it is certainly better to prepare employees for how they will be impacted and share the business and financial reasons why these decisions were made. If your organization is still uncertain, this should also be communicated and a timeline for when the decision will be made and communicated to employees.

So what can you do to keep your employees in the loop and manage their expectations?

• Organize a town hall meeting, President’s breakfast or Lunch and Learn, to discuss this and other key organizational issues with your employees.
• Share financials to support decisions that you make. The numbers don’t lie and most employees will be more likely to understand another year of salary freezes when the numbers are down significantly.
• Be realistic! If the current picture is not positive, be careful not to make overly optimistic assumptions about the future to lessen the blow– Conversely, be careful not to be overly negative to make your point!
• Ensure your Managers and Supervisors are “singing off the same song sheet” and that they are communicating a consistent message to employees
• Share your recovery and cost containment plans with employees – show them you are actively trying to improve the situation
• Showcase other company benefits (i.e. group benefits, pension, company matched RRSP contributions, etc.). Remind employees to focus on “total compensation” not just base salary.