Salary increases for 2025: Budgets slowly declining

This summer, more than 750 organizations across Canada participated in the 14th edition of Normandin Beaudry’s Salary Increase Survey. The detailed analysis conducted by our compensation specialists provides insights and trends that can be used to inform internal compensation decisions.

COMING SOON: Normandin Beaudry’s “In the spotlight”, a one-page summary of the key topical questions, will be shared with all participating organizations in a separate bulletin. This year’s special themes will cover:

• Work schedule policies
• Pay transparency
• Managing compensation against market conditions
• Diversity, equity and inclusion

More comprehensive information is available in our interactive tool.

As the labour market continues to balance out and inflationary pressures ease, salary increase budgets are continuing to trend towards pre-pandemic market norms.

Canadian organizations are taking a more conservative approach to salary increases for their workforce. Average salary increase forecasts in Canada have gradually lowered over the past two years, with an average forecasted increase of 3.4% for 2025 excluding salary freezes.

Only 3% of respondents reported freezing salaries in 2024, as compared to the initial forecasting of 2%. In 2025, another 3% of respondents forecast freezing salaries.

While the results indicate that organizations are planning for lower salary increases, overall changes remain measured in order to compete for talent and continue to adjust to external market pressures. Actual salary increases in 2024 averaged 3.6%, aligning with initial projections published in February 2024.

2025 salary increase budget forecasts show minimal differentiation across different ownership structures:

• Privately-held (not listed on the stock market): 3.5%
• Not-for-profit organizations: 3.4%
• Publicly-traded: 3.4%
• Public and parapublic sectors: 3.3%

In Canada, organizations in the high-tech and professional, scientific and technical services sectors reported the highest actual salary increase budget of 4.7% and 4.0% for 2024.

For 2025, the following sectors reported forecasted increases above the national average of 3.4%:

• High-tech: 4.3%
• Telecommunications, data processing, data warehousing and related services: 3.9%
• Professional, scientific and technical services: 3.7%
• Construction: 3.6%
• Computer design, security, IT services and AI: 3.6%
• IT consulting services: 3.5%
• Energy, mining and metals: 3.5%
• Foundations, community assistance and health care: 3.5%

Actual increases granted in 2024 (excluding salary freezes) align with initial forecasts, with the average increase in Canada coming in at 3.6%. These figures may indicate that organizations are working towards a more conservative approach to their compensation spend.

Most provincial projections report 2025 increases lower than the national average of 3.4%, with Ontario, Quebec, Nunavut and Northwest Territories reporting the highest of the provinces and territories.

Nearly half of responding organizations allocated an average additional budget of 1.0% in 2024, which is slightly higher than the initial forecast of 0.9%. For 2025, forecasts show that 44% of respondents plan to secure additional budgets, maintaining an average of 1.0%. Organizations expecting to have additional increase budgets are planning to allocate them to:

• Support market adjustments to salaries (65%)
• Retain employees in strategic/critical roles (51%)
• Differentiate compensation for high performers (49%)
• Retain employees with a perceived retention risk (40%)
• Address compression and internal equity challenges (37%)
• Accelerate progression for employees lower in their pay range (38%)
• Provide for off-cycle salary increases (25%)

When accounting for reported additional budgets planned for 2025, average total salary increases reached a Canadian average of 3.7%

The average salary structure increase in 2024 in Canada sits at 2.8%,
excluding organizations reporting a structure freeze, and 2.1% when including companies reporting a structure freeze.

Actual 2024 salary structure increases (excluding freezes) are beginning to decrease after a dramatic two-year high increase:

• 2023: 3.4%
• 2022: 3.0%

2025 forecasts signal more modest salary structure increases, with an average of 2.6% (excluding freezes).

Salary structure increases reported serve as anecdotal evidence of a more balanced market, with organizations focusing on affordability to ensure they can maintain their cost structures while managing annual salary increases.

As economic pressures and the labour market continue to ease, forecasted salary increases budgets are slowly declining. With salary increases representing a permanent increase in fixed operating budgets, organizations must consider affordability and long-term effectiveness when implementing these budgets.

Organizations hoping to set themselves apart may benefit from adopting more creative approaches in finding the right mix of monetary and non-monetary components as part of their total rewards offering. Normandin Beaudry’s experts believe that striking the right balance is what can help organizations stand out from the competition.

Contact our specialists ignited by total rewards to learn more about the results of this survey.