Employers in Canada are expecting salaries to rise by an average of 2.3 per cent in 2018, according to Morneau Shepell's annual survey of Trends in Human Resources.
This is up from the actual 2.2 per cent average increase in 2017 and includes expected salary freezes and excludes promotional or special salary adjustments.
"Employers are relatively optimistic about the coming year," said Michel Dubé, a principal in Morneau Shepell's compensation consulting practice. "Those expecting better financial performance in the coming year outnumber those expecting weaker performance by four to one. Despite this optimism, employers are still cautious about salary increases, perhaps reflecting a concern that rising interest rates may dampen economic growth next year."
The expected 2.3 per cent increase compares favourably to the current rate of inflation, which is about one per cent, said Morneau Shepell.
Industry sectors that are expecting higher than average salary increases in 2018 include utilities at 2.9 per cent, and manufacturing and wholesale trade at 2.7 per cent. These industries may be catching up after lower-than-average increases over the past few years. Expected salary increases in sectors such as finance and insurance are expected to remain strong at 2.7 per cent next year.
Lower-than-average increases are expected in certain industry groups that face more uncertain economic circumstances, said Morneau Shepell. This includes mining and oil and gas extraction where average salary increases of 0.8 per cent are expected. Salary increases in the public sector are also expected to be below average. Salary increases in public administration, health care and social assistance employers are expected to average 1.7 per cent next year, with educational services slightly higher at 1.9 per cent.
Reflecting the different mix of industries by province, Alberta and Prince Edward Island are expected to have the lowest salary increases next year, at 1.8 and 1.9 per cent respectively, found the survey. Quebec is expecting the highest salary increases next year, at 2.6 per cent. Salary increases in other provinces will be close to the norm.
The top priorities for HR professionals in 2018 will be building a high-performing workforce that adapts better to change, found Morneau Shepell.
Almost two thirds of HR leaders (65 per cent) said that improving employee engagement is a top priority for the coming year. Over half (56 per cent) said they will also be focusing on attracting and retaining employees with the right skills, and 55 per cent identified helping their organizations adapt better to ongoing change as a top priority.
Improving the physical and mental health of employees was also high on the list for HR leaders, with 47 per cent identifying this as one of their priorities for the coming year.
"HR leaders are looking for ways to build more resilient workforces – the most successful organizations will be those that can adapt best to change," said Paula Allen, vice-president of research and integrative solutions at Morneau Shepell. "To build more resilient workforces, HR leaders are implementing a range of solutions from training employees to have stronger coping skills, to providing better tools and training for managers to ensure that employees facing challenges get the help they need."
More than 90 per cent of HR leaders said they are concerned about how well employees were prepared for retirement. This is a growing concern because an increasing proportion of employees today are covered under defined contribution (DC) retirement plans that do not offer guaranteed payments after retirement, said Morneau Shepell.
HR leaders are exploring a range of solutions from providing better education to employees (58 per cent), offering them decumulation options when they retire (27 per cent), and allowing retirees to purchase insurance at discounted costs through online retiree marketplaces or other options (23 per cent).
The survey was conducted in July with input from 370 organizations employing 894,000 Canadians.
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