Canadian HR Reporter

December 2020 CAN

Canadian HR Reporter is the national journal of human resource management. It features the latest workplace news, HR best practices, employment law commentary and tools and tips for employers to get the most out of their workforce.

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2 www.hrreporter.com N E W S have an engaged workforce that's fairly rewarded for what they're doing." Not a typical year Unlike previous years — where salary increases averaged anywhere from 2.5 per cent to 2.7 per cent and there was full employment and a tighter labour force — all of a sudden Canada has seen two quarters of negative growth, it's in a recession and unemployment is skyrocketing into double digits, says Anand Parsan, vice president of the compensation consulting practice at Morneau Shepell in Toronto. "A lot of organizations are really uncertain as to what the numbers should be for next year. Almost half of the [employers] haven't made a decision as yet. And 13 per cent have committed already to a freeze for 2021. So, it really shows... this is not a typical year." With the previous downturns, you could see the light at the end of the tunnel, he says. "With this pandemic, it's really hard to forecast and that's why we see the numbers how they are, in terms of so much uncertainty… It's very different than past economic events." The compensation outlook is much more conservative than what we've seen in prior years, with only the crash of 2008 coming close to this level of disruption and volatility, says Gord Frost, a partner and career business leader at Mercer Canada in Montreal. "The last time that we saw this during the financial crisis, certainly people's compensation budgets plunged, the number of salary freezes went up substantially, and there was much more variability from industry to industry and even company to company… It's even been amplified this year." pay freezes, which will bring that overall number down," she says. "Many organizations are struggling, many let us know that they're delaying their decisions around salary budgets and they're not sure what they can afford yet." Unionized wages have also been hard hit, with negotiated wages for 2020 coming in at 1.7 per cent, compared to 1.9 per cent in 2019, according to the Conference Board's survey of 335 employers released in late September. Looking to 2021, increases are expected to reach only 1.6 per cent. According to Morneau Shepell's survey, salary increases averaged 1.6 per cent in 2020, and that includes 36 per cent of organizations freezing salaries, says Parsan. "That's not counting organizations that did temporary rollbacks and furloughs and so forth. So, coming off of that, this year, the numbers show a 1.9-per-cent increase, including freezes next year. But I put a big asterisk beside that because, with so many organizations uncertain as to what they're going to do, that number could easily drop. We're looking at a second wave, we're looking at potentially moving back to phase two or partial or full lockdown [so] all bets are off, the numbers could be vastly different." More than one-third (36 per cent) of Canadian organizations froze salaries in 2020, compared to a pre-COVID forecast of just two per cent. And, for 2021, almost half (46 per cent) of employers are uncertain about whether to increase or freeze salaries while 13 per cent have already committed to freezing in 2021. The national average base salary increase projection for 2021 is at 1.9 per cent, compared to the average salary increase of 2.4 per cent in 2020, Freezes and salary increases The Conference Board of Canada found that more than a third (40 per cent) of organizations did not yet have preliminary budget recommendations and, of those that did, 14 per cent were planning a freeze on salary increases across all employee groups. One-third said they were holding their salary ranges constant, says Cowan. "The freezes are even more prevalent when you look at executive levels, as well as trades and service and production staff. Those freezes are closer to 20 per cent for those groups." The average pay increase for non- unionized employees is projected to be 2.1 per cent next year, keeping pace with the 2.1 per cent forecasted inflation rate. "As more decisions are taken, we expect downward revisions, we expect more organizations to come in with including freezes, finds Morneau Shepell in its survey of 889 employers conducted in July and August. Employers are projecting salaries to increase by 2.5 per cent in 2021 — down from the actual 2.6 per cent in 2020, excluding freezes. "A lot of organizations are in survival mode. So, they're trying to be equal in terms of how they treat everyone with respect to increases and freezes and so forth," says Parsan. Judging by Mercer's late September survey, 50 per cent of employers have set a budget, 10 per cent have said they're not making adjustments and 40 per cent still have not decided, says Frost. "That level of undecided is very exceptional." Excluding salary freezes, the average projected increase for 2021 is 2.4 per cent, he says, and including freezes, it drops to two per cent. "Even those that are budgeting like a two- to two-and-a-half-per-cent budget, they' ll probably use it differently. For instance, they may... delay when they do salary adjustments to later in the year. They may do more spot awards, for either key performers or really critical skillsets, but not do across-the-board salary adjustments. I think you' ll see a lot more creativity or creative use of the salary adjustment budget this year." Based on a survey of more than 400 participants in May and June, the Wynford Group found just four per cent of organizations experienced significant growth across Canada in 2020, compared to 57 per cent in 2019, while 38 per cent of organizations expected moderate decline in 2020 compared to just three per cent in 2019. UNIONIZED WORKERS HARD HIT BY LOWER INCREASES Source: Conference Board of Canada "Many organizations are delaying their decisions around salary budgets and they're not sure what they can afford yet." Allison Cowan, Conference Board of Canada 2.1% Average pay increase for non- unionized workers projected for 2021 1.6% Average pay increase for union- ized workers predicted for 2021 1.7% Average pay increases for unionized workers in 2020 1.9% Average pay increases for union- ized workers in 2019 Wave of uncertainty> pg. 1

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