Salary planning survey finds employers reeling in costs

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If you were relying on a pay raise before the end of 2020, chances are that’s not happening.

According to Gallagher's 2020/2021 Salary Planning Survey – Canada Edition, 62 per cent of employers implemented pay raises before the pandemic. However, as the economic realities of COVID-19 set in toward the end of first quarter 2020, many organizations were forced to reduce employee headcounts, implement hiring freezes and decrease salary-increase budgets. As a result, 38 per cent of employers indicated that their salary-increase plans were modified for 2020 – a trend that will continue into 2021.

As Canadian employers plan for the year ahead, nearly half (43 per cent) of organizations modified salary increase plans in 2021 due to COVID-19. Among the employers expecting their 2021 salary-increase plans to be adversely affected, 45 per cent expect to reduce raises, 35 per cent plan to suspend raises and freeze salaries, while six per cent plan to reduce salaries next year.

"Market reactions to the pandemic and the economic downturn are applying downward pressure to Canadian salaries and employers tell us that these compensation-containment measures will extend into next year," said Melanie Jeannotte, CEO of Gallagher's Benefits & HR Consulting division in Canada. "The impact COVID-19 will have on costs and revenue will be unpredictable in the year ahead, which is causing many employers to reconsider salary increases in an effort to preserve jobs in 2021."

"Employers' priorities have changed as a result of the pandemic, and leaders have shifted their focus from talent acquisition and retention to financial stability and business continuity," said Jeannotte. "However, while many employers have looked to reduce expenses in response to COVID-19, it's critical to remember that employee wellbeing and engagement remain key components to business performance. As employers review total rewards cost structures to reflect new financial realities, it's imperative that they also address their employees' evolving needs."

"'Business as usual' lost all meaning in 2020. Co-existing with COVID-19 has required an unprecedented level of adaptability, however employees are looking for stability more than anything," said Jeannotte. "Employers who can strike the right balance between cutting costs and investing in their employees' financial, physical and mental health will be better positioned to retain staff and compete for new talent when the labour market picks up."