Compensation planning for the year ahead
As we near the end of 2024, for many employers, it’s time to think about wage increases and/or other rewards for the upcoming year. The information in this post will help guide and provide structure to this important process.
Salary/wage increase projections for 2025
While not 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 compensation planning process.
Based on the average of the primary firms collecting compensation data (Eckler, Telus Health, Western Compensation & Benefits Consultants, Normandin Beaudry, and Mercer) who altogether surveyed just under 3,000 firms across Canada, the projected average increase to Canadian salaries/wages in 2025 is expected to be around 3.5%.
While the surveys show variance, most showed the Western provinces anticipating the highest increases, whereas the lowest anticipated increases are in the Yukon and PEI.
Where industry is concerned, the highest projected increases are within the following sectors: technology, high-technology and telecommunications (up to 4.3%); real estate (up to 4.2%); construction (up to 4.1%); mining, oil, and gas (up to 4%).
The lowest anticipated increases are within healthcare (up to 2.8%); education/educational services (up to 2.9%); and public administration (up to 2.8%).
Start by defining your compensation philosophy
While increase projections provide a reasonable and effective baseline for what other organizations and industries are doing, increase decisions are ideally based 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 increases? 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”)? Will you differentiate high performers, and if so, how?
- What makes up your total compensation package (i.e., benefits, vacation, incentives, perks, RRSP, pension, etc.)?
- Can your organization afford it?
- How are you ensuring wholistic compensation equity across your organization, teams and people (e.g., in terms of qualifications, including such valued realities as traditional knowledge, lived/living experience, etc.)? *Look for a future post about our wholistic equitable pay approach
A well-thought-out and comprehensive 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 provide them this year, it’s important to do so in a meaningful way. A 1% increase (for example) will be barely noticeable and may even serve to demotivate. However, 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:
- Greater flexibility and remote work
- Additional time off
- Flexible health, wellness, and lifestyle benefits
- Allowances and stipends for remote offices and/or childcare
- Education and professional development support (funding and time off)
- Implementing or increasing retirement and savings plans
- One-time bonuses, including signing and “stay” bonuses
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’.
Our 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.