Salary/wage increase projections for 2024 and the important factors to consider in total compensation planning
As we near the end of the 2023, for many employers, it’s time to think about wage increases and/or other rewards for the upcoming year. While we’re beginning to see a slowdown in inflation, a factor which has played a major role over the last year, compensation and increase decisions can still be a daunting task. The information in this post will help guide and provide structure to this important process.
Salary/wage increase projections for 2024
While it shouldn’t be the only consideration, knowing what other organizations are doing with respect to wage increases can be a helpful place to start and/or factor in your overall process.
Based on the average of the primary firms collecting compensation data (Eckler, Mercer, Normandin Beaudry, and Telus Health), who altogether surveyed over 1,600 firms across Canada, the projected average increase to Canadian salaries in 2024 is expected to be 3.7%.
While highest and lowest projections by province varied by survey, BC and Alberta trended on the higher end of projections, whereas Northwest Territories, Newfoundland, Labrador, and New Brunswick trended lower.
Where industry is concerned, the highest projected increases across all surveys are within the following sectors: high tech (up to 4.7%); business, professional, scientific & tech services (up to 4.4%); life sciences (4%); real estate, rental & leasing (3.9%).
The lowest anticipated increases are within farming, fishing & forestry (2.7%); healthcare (2.9%); not for profit (3.1 to 3.6%); education, oil & gas, and other public sectors (3.25%).
Of note by Mercer, although pay transparency is increasingly becoming legislated and more of a priority overall, many employers aren’t being proactive and only 30% agree with the approach. While only 15% were transparent with pay in 2023, this was double the amount in 2022.
Define and communicate your compensation philosophy
While increase projection research provides a reasonable and effective baseline for what other organizations and industries are doing, we encourage you to base wage increase decisions, first and foremost, on your overall compensation philosophy. Before moving forward with a raise percentage that works for other organizations, clarify the guiding principles that drive compensation decisions and what works for yours:
- What’s driving the need for an increase? Is it retention, merit, or your annual process?
- What’s happening in the market? i.e., the competition, economy, inflation, industry overall
- Where do you want to target in the market? At, above, or below the median? Are your salaries currently below where you want to target? Are they internally equitable?
- Under what circumstances do you wish to provide increases? i.e., COLA, tenure, performance, promotions, and/or “just because”
- What makes up your total compensation package? i.e., benefits, vacation, incentives, perks, RRSP, etc.
- Can your organization afford it?
A solid compensation philosophy will support your decisions about increases going forward and provide you with a consistent and transparent platform to communicate to your employees – not just this year, but for subsequent years as well.
Alternatives to salary increases
While increases may be necessary to retain employees, whether or not your organization will proceed with them (and/or an alternative), it’s important to do so in a meaningful way. A 1% increase (for example) will be barely noticeable, but there are other ways you can reward employees that align with their personal preferences and needs. Below are a number of possible alternatives to salary increases:
- More flexibility and remote work; according to Robert Half, for 75% of workers this is the top wished for perk, with nearly half preferring a hybrid work arrangement, and most favouring lower pay and flexible work over higher pay and a fixed requirement to be in the office
- More time off (e.g., an extra week of vacation, unlimited PTO, moving to a 4-day work week)
- Flexible health and wellness benefits that also focus on lifestyle
- Allowances and stipends for remote offices and/or childcare
- Education support (funding and time off)
- Implementing or increasing retirement and savings plans
- One-time bonuses, including signing and “stay” bonuses
While you can consider the total compensation package and look at alternatives to salaries where possible, Robert Half noted that 35% of workers said they’ll look elsewhere if they don’t get a raise. In addition, 35% of hiring managers said compensation negotiations have increased which has, in part, led to 40% of employers increasing starting salaries.
Regardless of whether you plan to implement increases, how much, and/or whether you look at alternatives, start with ‘why’; i.e., why you want to do so, and what you hope to achieve. From there, you can tackle the ‘what’ and ‘how’.
Jouta’s HR Consultants can help you develop your total compensation structure, including your compensation philosophy, to get clear on the why, what, and how of compensation planning.