Leadership and Human Resources Research

Modest Increase in Pay Expected for Canadian Workers in 2010

Allison Cowan, Manager, Member Services, Leadership and Human Resources

December 21, 2009

Following a turbulent 2009, signs of life in the Canadian economy are leading to cautious optimism among pay planners. Canadian workers can expect average pay increases of 2.7 per cent next year, a slightly higher rate of growth than the actual salary increases handed out in 2009, according to the results of the Conference Board’s 28th annual Compensation Planning Outlook survey. Compensation Planning Outlook 2010: Cautious Optimism on the Road to Recovery is based on the responses of 435 Canadian employers.

Actual salary increases fell sharply as 2009 unfolded, reflecting the rapid downturn in the economy. The average actual salary increase among non-unionized employees was 2.4 per cent, down significantly from the 3.9 per cent that organizations originally projected in the fall of 2008.

Fewer Salary Freezes in 2010

Nearly one in five employers froze salary increases across all employee groups in 2009. Only 8.3 per cent of employers are planning salary freezes in 2010. One-third of these, however, expect to freeze pay across the board for the second year in a row. Most of these organizations are in sectors, such as transportation and telecommunications, that have been hit particularly hard by the recession.

Deficits, unemployment, and the capacity to pay will put downward pressure on wages in 2010.

Public sector¹ employees can expect higher wage gains than their private sector counterparts. Increases of 3.2 per cent are anticipated for non-unionized public sector employees, compared with 2.5 per cent for private sector employees. Above-average increases of 3.4 per cent are expected in government.² Increases of 3.2 per cent are expected in the following sectors:

construction;
high technology;
natural resources (excluding oil and gas); and
chemical, pharmaceutical, and allied products.

The lowest average increases (1.8 per cent) are expected in the following sectors:

wholesale trade; and
communications and telecommunications.

Deficits, unemployment, and the capacity to pay will put downward pressure on wages in 2010. Anticipated wage settlements for unionized employees for 2010 are 2.1 per cent overall—2.3 per cent in the public sector and 2 per cent in the private sector. Looking ahead to 2010, just over half (56 per cent) of employers are anticipating a cooperative bargaining climate.

Provincial Pay

Workers in Saskatchewan (4 per cent) and Manitoba (3.5 per cent) can expect the highest increases in 2010, while increases in Alberta and the Atlantic provinces are projected to be about the same as the national average. With average increases ranging from 2.4 per cent to 2.6 per cent, organizations in British Columbia, Ontario, and Quebec are expecting to pay employees increases below the national average.

A Temporary Reprieve From Labour Market Pressures

Recruitment and retention pressures eased in 2009. Just over half of survey respondents (54 per cent) reported challenges attracting and retaining the talent they need, down from nearly three-quarters (74 per cent) of organizations in 2008. Turnover rates also fell to an average rate of 8.2 per cent in 2009, down from 9.7 per cent in 2008. These conditions are, however, temporary. The structural issues in the labour force—the aging workforce, low birth rates, and declining labour participation rates—remain. By 2012–13, the labour market will tighten again.

Though the overall outlook for 2010 is more positive, the unpredictability of what businesses experienced this past year makes compensation planners acutely aware of the need to keep costs under control while balancing the need to attract, motivate, and retain workers with the right talent and skills to ensure business success.

¹The public sector includes federal and provincial government departments, agencies, and Crown corporations, as well as municipalities, hospitals, universities, and colleges.
²The government sector includes federal governments, provincial governments, and municipalities, but excludes Crown corporations.