Salaries are expected to increase in 2012, but it will take more than that to recruit and retain top talent.
Aon Hewitt’s Canada Salary Increase Survey projects an average salary increase of 3.1% next year, a slight improvement over 2011’s actual increases, which averaged 2.9%.
The increase is good news for Canadians who may have struggled this year with wage increases that barely kept up with inflation.
“The Consumer Price Index (CPI) is expected to average 2.9% this year,” says Suzanne Thomson, a senior associate with Aon Hewitt in Toronto. “Next year, Statistics Canada is projecting a 2% increase in the CPI, so employees should feel less of a pinch if salaries increase by 3.1%.”
Saskatchewan is expected to lead the way in salary increases, with a projected average increase of 4.4%. Atlantic Canada is expected to have the smallest increase, estimated at 2.6%.
However, while the projected increases are positive, they might not be enough to help employers attract talent as we move into a shrinking labour pool.
“Employee attraction and retention will become more pressing issues as the supply of workers decreases with baby boomer retirements,” says Susan Hunter, national leader of Aon Hewitt’s Rewards group. “If base salary increases are modest, employers have to find ways to hang on to their high performers.”
Hunter suggests organizations consider the following approaches in order to engage key employees:
- Hold some part of the compensation budget in reserve to provide greater base pay increases for employees who surpass established performance objectives.
- Revisit variable compensation programs—programs that enable high performers to earn additional compensation on the basis of corporate or individual performance—to ensure they continue to help achieve business objectives. If programs need to be revised, communicate with employees and ensure they understand any modifications and know exactly what to do in order to earn additional compensation.
- Ensure that employees understand all that they’re receiving for their efforts—the employee side of the employment value proposition. Consider perks beyond just pay, such as training and development opportunities, career advancement, and workplace flexibility.
- Give high performers opportunities to take on new tasks that new and interesting. According to Hunter, “If additional financial compensation is not possible, it’s especially important to make sure high performers are continually challenged and recognized for their achievements.”
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