Employers in Canada are expecting salaries to rise by an average of 2.5% in 2016, according to Morneau Shepell’s annual Trends in Human Resources survey.
This is down from the average 2.8% salary increase expected for 2015, as reported in last year’s survey. The average includes expected salary freezes.
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“With the crash in oil prices and talk of a recession in the air, employers are cautious about the coming year,” says Michel Dubé, a principal in Morneau Shepell’s compensation consulting practice.
Some sectors such as mining, oil and gas are expecting average salary increases of about 2.4% for next year. Last year, the comparable forecast stood at 3.4%.
“As governments focus on balancing their budgets, we’re seeing signs of lower salary increases in the public sector as well,” he adds. “Salary increases in education are expected to be in the 1.9% range, and only slightly higher at 2.1% in other areas such as public administration, healthcare and social assistance.”
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The highest salary increases will be in financial services at 3%, and professional, scientific and technical services at 2.9%.
Reflecting the mix of industries in the provinces, Alberta is expected to have the lowest salary increases next year, at 2.2%. This is down from the 3.4% estimated in last year’s survey.
In contrast, other parts of Western Canada are expecting higher-than-average increases in the 2.7% range. Other provinces will be close to the national norm at around 2.5%.
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The survey also identified some important changes in employer attitudes to retirement plans.
“In the past, sponsors of DC pension plans left it up to their employees to fend for themselves when they retired,” says Randal Phillips, executive vice-president and chief client officer at Morneau Shepell.
“Their retirees often struggled to choose amongst relatively expensive investment options, and figure out how much of their savings they could safely withdraw each year to avoid running out of income later in life,” he explains. “Poor decisions can have a very significant impact on retirement income, and plan sponsors are starting to take notice.”
About 27% of sponsors in the survey said they are looking at providing payment options for retirees, or are already doing this.
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“This is a very positive step toward income security for retiring Canadians, and we hope more plan sponsors will take action in this area in the coming years,” Phillips says.
Morneau Shepell’s 33rd annual survey was conducted between mid-June and the end of July 2015, with input from organizations employing 640,000 people in Canada. The benchmark organizations represent a broad cross-section of industry sectors.