Compensation Planning Outlook 2021

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Compensation Planning Outlook 2021

Human Resources

Author: Allison Cowan, Kelsey Coburn


  • As COVID-19 spread throughout the world, many countries mandated lockdowns to slow the transmission of the disease—grinding economic activity around the globe to a halt. That narrative played out here in Canada where real GDP in 2020 is forecast to drop by 6.6 per cent.
  • As the economy starts to recover, organizations are planning to moderate their salary increases for next year. The average pay increase for non-unionized employees is forecast to be 2.1 per cent in 2021—keeping pace with the predicted 2.1 per cent inflation rate.
  • Canadian employers are showing marked restraint in planning 2021 salary budgets. More than a third (40 per cent) of organizations do not yet have preliminary budget recommendations. Of those that do, 14 per cent are planning a freeze across all employee groups.
  • Unionized wage increases negotiated for 2020 also took a hit, landing at 1.7 per cent, compared with 1.9 per cent last year. Looking to 2021, negotiated wage increases are expected to land at 1.6 per cent.
  • Short-term incentives did not pay out as planned in 2020, falling short across all employee groups for one-quarter of organizations. Short-term incentive pay cost an average of 10.3 per cent as a percentage of total base pay spending in 2020, down from the 11.3 per cent that was planned. Employers have adjusted target spending and are now planning for 10.1 per cent of base pay spending for 2021.
  • Continued uncertainty will put downward pressure on pay in 2021. Any deviation in pay increase projections is likely to be in the form of downward revisions.
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This year’s Compensation Planning Outlook is based on responses from 401 organizations with operations in Canada. This issue briefing summarizes the results of our annual compensation survey and forecast.

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