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Canadian employers project 2.7 per cent base salary increase in 2022: LifeWorks

LifeWorks has released its 39^th annual Salary Projection Survey, revealing that Canadian organizations are displaying a newfound sense of certainty as projected base salary increases surge past pre-pandemic levels.

Key findings of the survey include:

Salary increases (excluding salary freezes)

• Employers are projecting an annual base salary increase average of 2.7 per cent in 2022, which excludes organizations that are planning salary freezes.
• The actual base salary increase (excluding freezes) for 2021 was 2.6 per cent.
• Actual base salary increases (excluding freezes) has remained consistent at 2.6 per cent every year since 2018.
• By industry: The highest projected average salary increases for 2022 (excluding freezes) are expected to be in wholesale trade (3.1 per cent), construction (3.0 per cent), accommodation and food services (3.0 per cent) and information technology (3.0 per cent). In contrast, health care and social assistance (2.0 per cent), educational services (2.0 per cent) and information and cultural industries (1.9 per cent) are projecting the lowest salary increases.

Salary increases (including salary freezes)

• When including organizations that are planning salary freezes, employers are projecting an annual base salary increase average of 2.5 per cent in 2022.
• The actual base salary increase (including freezes) for 2021 was 2.2 per cent.
• The actual base salary increase in 2021 (including freezes) has increased significantly year-over-year, compared to 1.6 per cent in 2020.
• By industry: The highest projected average salary increases for 2022 (including freezes) are expected to be in wholesale trade (3.0 per cent), construction (2.9 per cent), and professional, scientific and technical services (2.9 per cent). In contrast, health care and social assistance (1.8 per cent), educational services (1.8 per cent) and information and cultural industries (1.5 per cent) are projecting the lowest salary increases.

Organizations regain certainty as projected salary freezes decline

• In 2020, 13 per cent of organizations forecasted that they would freeze salaries (i.e., not give salary increases) in 2021. In actuality, 12 per cent of Canadian organizations froze salaries in 2021.
• This is an improvement year-over-year, as 36 per cent of organizations froze salaries in 2020.
• Looking ahead, only 3.3 per cent of organizations are planning salary freezes for 2022, while 18.3 per cent remain undecided – a significant improvement from last year, when 46 per cent of Canadian employers expressed uncertainty.

Comments from partner and national practice leader, compensation consulting, Anand Parsan:

“Canadian employers are walking a tight line as they juggle and balance a number of factors when it comes to making decisions about their 2022 salary and workforce planning. A tight labour market has caused “the great resignation,” which is forcing organizations to adjust pay levels by the highest percentage in the last five years. Only 3.3 per cent of organizations are projecting salary freezes next year, which indicates that employers are recognizing the necessity of boosting pay and re-branding their total rewards value proposition in an effort to attract and retain key talent. With a booming job market and rising inflation, employees are seeking both higher compensation and purposeful work. Our survey results reveal an increased prioritization of HR initiatives towards creating integrated solutions for an engaged, diverse and remote workforce.”

Concerns arise as Canada’s projected salary increase remains below the current inflation rate

• In July, the Bank of Canada noted that consumer price index (CPI) inflation is expected to remain elevated in Canada throughout 2021 due to pandemic-related factors, following a CPI above three per cent from April to July.
• The rising inflation rate remains a concern for Canadian employees, with the projected salary increase for 2022 lower than the inflation benchmark. The Bank of Canada, however, has signalled a recovery in 2022, anticipating the inflation rate to ease to the two per cent mark.

Comments from principal, compensation consulting practice, Guylaine Béliveau:

“Expected salary increases and declining freezes is a positive news story and one that Canadian employees should feel confident in as we look to the new year. We cannot, however, lose sight of the impending impact of the rising inflation rate. Employee turnover needs to be a top consideration for employers, as employees may feel stretched financially. Meanwhile, employers are struggling with a shortage of qualified employees. Attraction and retention are more challenging than ever. These issues put pressure on the employer’s capacity to pay. It is a great opportunity for employers to review their offerings to ensure they are providing competitive compensation, total rewards programs and wellbeing support.”

To read the summary report, which includes regional differences across Canada, and to learn more about LifeWorks compensation consulting practice, visit: https://lifeworks.com/en/resource/2022-salary-projection-survey-report