Highlights of the first Quebec specific survey on salary increase budgets for 2011-2012LinkedIn
There, in black and white
NB Bulletin Vol. 14 N. 10, October 2011
Over this past summer, the Ordre des conseillers en ressources humaines agréés and Normandin Beaudry invited organizations with operations in Quebec to participate in the first Quebec specific survey on salary increases for 2011–2012.
Our call was answered by 175 organizations with a combined workforce of over 73,000 employees, enabling us to build a reliable, rich database representing Quebec. The data gathered was analyzed by compensation consultants at Normandin Beaudry, whose observations as to current market trends in salary increases are presented in this document, along with forecasts for 2012 in light of the specific realities of Quebec.
Caution and performance in a fragile economy
Due to the fragility of the economic recovery, fluctuations in the Consumer Price Index and a stable but high unemployment rate, actual salary increases in 2011 and the forecasts for 2012 show that employers in Quebec remain cautious, although concerned about the need to recognize individual performance.
Organizations in Quebec project salary increase budgets of 2.7% on average, including salary freezes, for 2011–2012. The planned budgets are thus slightly higher than in 2009 and 2010 (2.2% and 2.5% respectively) and reflects the cautious attitude adopted by employers over the past two years. They remain well below the salary increase budgets of around 3.6% observed before the economic crisis.
The increase in salary structures follows the main economic indicators, more specially, the CPI of the past 12 months, and should be around 1.9% for 2012. This is a slight increase over the actual increase in 2011, which was 1.7%.
According to Philip Longpré, CHRP, Senior Consultant, Compensation and Performance at Normandin Beaudry, "Employers in Quebec seem more confident about the economy and want to continue raising salaries as they have in the past few years. However, the main economic indicators are showing contradictory trends, namely persistently high unemployment combined with inflationary pressures that are difficult to anticipate that force decision-makers to exercise caution. Depending on when the salary increases are actually implemented by the various employers in Quebec, we may see variations between what was projected initially this summer and what is actually approved for 2012 as a result of changing economic conditions."
Pay for performance: An essential component of good salary management
Although compensation is not the sole factor in motivating workers, employers in Quebec are aware of the importance of linking employees' salary increases to their individual performance.
In 2011, 61% of organizations varied the percentage of salary increases on the basis of performance. More and more managers are demonstrating the courage necessary to grant a higher increase to an employee who exceeds expectations than to the one who merely meets them. And the differences are becoming more and more significant!
The table below shows that in spite of salary increase budgets marked by caution, salary increases vary considerably according to individual performance. Employees who exceeded expectations received on average a raise of 5.7%, 2.8% more than their co-workers whose performance simply met expectations. Employers are able to fund this practice by granting significantly lower increases to employees who fail to meet expectations.
This result shows the importance of monetary rewards linked to an individuals’ contribution. According to Geneviève Cloutier, M.Sc. CHRP, Senior Consultant, Compensation and Performance at Normandin Beaudry, "It's essential that managers have tangible means of ensuring a balance between contribution and reward for each team member to encourage and recognize individual and group performance within the organization."
The management of promotion costs is generally excluded from the annual salary review process for more than 55% of the Quebec organizations surveyed.
Different practices according to region
Although the results of this first Quebec survey on salary increases for 2011–2012 must be interpreted with some caution due to certain regional sample sizes, the high participation rate overall, testifies to the importance attributed by compensation specialists to the quality and representativity of salary forecasting data in their specific market.
This survey reveals interesting variations between certain regions of Quebec as well as between the salary increase budgets of small business versus large.
The table below confirms what many compensation and staffing experts have been predicting for several years: salary increase budgets in Quebec City are higher than in Montreal and the rest of the province. We suspect that within a few years we will see a convergence between salaries in Quebec City and those of Montreal. Historically, we’ve observed a differential of approximately 5% between the two cities.
Similarly, there are differences between employers located within Montreal and those that chose to setup in the south shore and north shore suburbs.
As illustrated in the table below, employers in the periphery of Montreal have slightly lower salary increase budgets for professionals and technical or administrative personnel, whereas they seem to be obliged to follow the trend set by Montreal in order to attract and retain at the executive level as well as operations personnel.
It will be interesting to track the differences in compensation practices between Montreal and its periphery in the coming years. With increasing challenges arising from the brain drain toward the suburbs, combined with transportation difficulties and a growing desire for more work / life balance, we anticipate the gap between Montreal and its periphery deepening. Despite possibly lower salaries, the periphery will have the advantage of being able to offer its employees "something else", including a better quality of life. We’ll have to wait and see…
Small business appears to be more generous than mid-sized business
Another noteworthy observation from the survey results: small organizations have significantly larger salary increase budgets than mid-sized organizations, as shown in the table below.
This variation is very specific to Quebec, and the reasons for it have not yet been analyzed qualitatively. Several explanations are possible: salary increase budgets designed to catch up with the market, greater versatility of employees, faster growth and higher profit margins… In any case, the second edition of this survey should provide us with more details.
On the other hand, the higher the sales revenue / operating budget, the higher the salary increase budget, confirming a trend that compensation experts have been observing for several years.
Lastly, private-sector, publicly traded and not for profit organizations have the highest salary increase budgets in the province, while on average, the public and parapublic sectors have the lowest.
What influences decision-makers
Regardless of the size or sector of Quebec organizations, the decision-making process around salary increase budgets is an important time for management, since it has a significant impact on the economic engine of an organization. It also impacts employees in the form of recognition and a return for their contribution to the organization.
When compensation experts present their recommendations, they know that decision-makers, in determining the salary increase budget, will most often consider the CPI of the past 12 months as well as their organization's financial capacity to pay. Of these indicators, over half of the organizations surveyed said that they use this budget to adjust to market or redirect their business strategy.
Market practices and, as a result, projected salary budgets are essential tools for decision-makers. That is why the Ordre des conseillers en ressources humaines agréés and Normandin Beaudry worked together to provide Quebec organizations with a detailed picture of the trends in Quebec, analyzed by size and type of organization.
For more information about this survey, please contact Philip Longpré, Senior Consultant, Compensation and Performance at Normandin Beaudry, 514 285-1122 ext. 240, firstname.lastname@example.org.
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