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Normandin Beaudry

Salary Projections and Trends for 2011

LinkedIn

There, in black and white

NB Bulletin Vol. 13 N. 11, October 2010

It is once again that time of year when the results of salary projection surveys are released. These projections continue to be an important source of information for guiding employers in determining their annual salary increase budgets.

In the wake of the economic crisis of 2008-2009, projections for 2011 show that employers remain cautious when it comes to salary increases. Many of them refer to a sense of "cautious optimism" in the face of mixed messages concerning a quick economic recovery.

For 2011, organizations are forecasting an average salary increase of 2.9% compared to the 2010 projection of 2.5%. These projected increases are, however, much lower than the annual salary increases granted prior to the economic crisis, which were in the range of 3.6%.

The difference between the increase for 2010 (2.5%) and the projected increase for 2011 (2.9%) is attributable largely to the significant decline in the number of employers imposing a salary freeze. During the crisis, more than 30% of employers surveyed had imposed a salary freeze. This number has since fallen below 10% and should return to a more ­''normal'' level of around 2% for 2011.

Variability of results

Geographically, we observe little variation for 2011. Projections for all provinces range between 2.5% and 3.0%.

As regards variations by employee group, we observe little variation for 2011, with the exception of a lower forecasted increase for unionized employees of around 2.5%.

When we look at variations by sector, we find that the economic climate has not had the same impact on all sectors. Salary increase projections for the oil and gas and construction industries are above the national average increase, whereas projections for education and health sector as well as the public sector remain below the national average.

For all organizations surveyed, the average projected increase for pay structures is 2.0% for 2011. This projection reflects the expected inflation rate for the coming year.

Trends for 2011: beyond payroll costs - total compensation costs
 

Given the mixed messages concerning a quick economic recovery, cost control remains a major concern for senior officers. This reality has an impact not only on salary increase budgets, but also on the different components of total compensation offered by employers.

Efforts to control plan costs for group benefits will be met by inflation rates considerably higher than cost of living for a workforce that values these plans more and more in a context of limited salary increases. The challenge will lie in developing innovative solutions that allow for cost increases to be limited without decreasing the perceived value of the plans.

Employers should explore communication strategies that will showcase the full value of the plans offered and make employees aware of the cost of these plans. Employers need to find the balance between offering greater flexibility and value to their employees while controlling plan costs. For instance, they could examine using a Health Spending Account or increasing the portion of costs paid by employees.

The economic climate created different realties for employers based on the type of pension plan offered. The crisis had a severe impact on the funding of defined benefit pension plans. Employers offering defined benefit plans therefore need to revisit their risk management strategy to maintain these plans and ensure their long-term viability.

For defined contribution pension plans, the crisis had a greater impact on employees than employers. As a result of significant losses in the value of their savings, many participants were forced to question their planned retirement date. The challenge facing employers is to maintain the engagement of this employee group during this unwanted "extension period."

Proposed action for 2011

In Canada, unlike the situation in the United States, employee engagement rates remained relatively stable during the economic crisis, especially among best employers. This phenomenon can be explained by clear and sustained communication plans pertaining to employers' decisions and intentions. A promising strategy in periods of recovery involves taking action, upholding promises and satisfying expectations, in line with the employer's financial capacity.

Another winning strategy is to ensure that salary practices remain competitive by taking various measures, for example:

  • establishing a salary increase budget similar to that for the reference market;
  • establishing an additional budget (e.g.: 0.5% to 1.0%) to better recognize high performers and place them in a compensation zone that differentiates them from other employees; and
  • closing gaps with the market for employees who experienced a salary freeze.

A final recommendation is to optimize the non-monetary components of total compensation. In a context of reduced salary increase budgets, employers can benefit greatly from taking full advantage of their career and leadership development programs and relying on new forms of work organization and special projects that facilitate competency acquisition.

For the non-monetary components of total compensation to serve as true engagement drivers, compensation policies and practices must be perceived by employees as fair and equitable in terms of the employer's environment and financial capacity as well as the recognition of individual performance.

 

Please feel free to contact us for additional information.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6