Given the ongoing challenges of 2020, with COVID-19 at the forefront, it’s no surprise that the Conference Board of Canada has identified the 2021 compensation theme as restraint. As this is the time of year when many businesses forecast their salary/total compensation budgets, the theme of uncertainty is also very much a reality.

Among many other notable statistics, 2020 saw some of the most significant salary freezes in Canada and the lowest salary increase projections since the financial crisis in 2008. Morneau Shepell reported that 36% of surveyed businesses froze salaries in 2020, compared with only 2%, prior to the pandemic. The survey also found that 13% of businesses plan to freeze salaries in 2021, while about 46% were still uncertain. This uncertainty was echoed by the Conference Board of Canada and Normandin-Beaudry, both of whom released survey data this year.

For those organizations that do intend to increase salaries, the average projection – across the three major surveys – is approximately 2%. This is slightly up from projections released earlier this year and lower than the 2.6% average projected for 2021 pre-pandemic. While the projected inflation rate for 2021 continues to fluctuate, currently that number sits at between 1.6 and 1.8%.

Where specific industries and employment categories are concerned, Morneau Shepell reported that higher than average increases of 3% were expected in the areas of administrative/support; waste management and remediation support. This is followed by utilities at 2.4% and finance and insurance; professional, scientific, and technical services; and wholesale trade at 2.2%. On the flip side, the lowest increases are expected for management at 0.6%, followed by arts, entertainment, and recreation; and educational services at 0.8%.

While many organizations want to proceed with increases/bonuses in line with their compensation philosophies and plans, it all comes down to their financial ability to do so, given current realities and future uncertainties. Where it’s not possible to do so in a meaningful way (e.g. a 1% increase or less is barely noticeable), now is an especially good time to look at your total compensation package and consider how else you can support employees, where budgets allow. Below are a number of possible alternatives to salary increases:

  • Remote work flexibility and varying hours
  • Financial support for home office spaces (e.g. chairs, desk risers, etc.) and internet/cell-phone allowances
  • Increased access to EAPs and other forms of emotional and mental health support
  • Allowances for web-based fitness, meditation, or other well-being resources
  • Performance-based pay, such as one-time bonuses
  • Professional development, such as in-house mentoring programs and/or allowing time for employees to engage in lower-cost, online training/research
  • Additional paid time off
  • Financial education and resources
  • Implementing or increasing retirement and savings plans

In addition, while you may not be in a position to make any noticeable changes to your total compensation package, be sure employees understand the value of existing components (i.e. other than salary or wage).

Regardless of what steps you do or do not take, it’s important to be honest and transparent with your employees. If changes need to be made, engage them in the conversation, help them understand your process and that you’re working hard to avoid taking more significant steps (if that is, in fact, the case). And, if your performance process is typically linked to compensation and that’s not possible this year, move forward with the process as usual, both as an opportunity to focus on the future, but also to maintain an ongoing expectation of performance. Accordingly, do your best to meet their needs and, in line with the list of suggestions above, have open discussions about what will work best for them, on an individual basis, right now.

If it’s business as usual for your organization and/or you’re doing better than ever, continue to follow your compensation philosophy and structure and ensure increases align well with your plans, going forward.

Regardless of where you find yourself in terms of financial status and uncertainty, it is important, as always, to be as prepared as possible. It’s equally important to be consistent, honest, and appropriately transparent with your employees.