Canadian HR Reporter

CANADIAN HR REPORTER NOVEMBER 2018 20 NEWS CAREpath is the only Canadian Health Care navigation program of its kind offered in Canada. We have extensive experience in navigating Canadians through the health care system. Cancer Assistance Seniors' Care Assistance HealthCare Assist Your Wellness Partner However, Mercer Canada's Compensation Planning Survey polling 598 organizations has sal- ary increases coming in slightly lower at 2.5 per cent. And Hays Canada's Salary Guide, a survey of 4,000 employ- ers set to be released in Novem- ber, indicates that 50 per cent of employers will increase pay by less than three per cent next year. e conservative increases are a combination of competitive markets, uncertain political envi- ronments, low inflation rates and memories of a recession, accord- ing to Rowan O'Grady, president of Hays Canada in Toronto. Anything less than a three per cent pay rise is considered conser- vative, he said. "at three per cent mark is the watershed," said O'Grady. "Once you're open to three per cent-plus, now it's actually mak- ing a real difference to people and they can notice a difference in how much they're getting paid. It's going to make a significant differ- ence to the bottom line or the cost line at least on a company's P&L (profit and loss statement)." Questions remain Situations creating economic un- certainty are definitely to blame, said omson. "ere's been so many issues where organizations have kind of adopted a wait-and-see attitude," she said, noting situations such as the USMCA (United States- Mexico-Canada Agreement) trade negotiations and the Trans Mountain pipeline delays. "Right now, we're in a state of flux." "e unknown is always a high- er risk," said omson. "e more you can know and assess, the more likelihood your plans will show the results that you're hoping for." News of a deal in principle be- tween Canada, Mexico and the U.S. will help to stabilize the econ- omy, though that may not amount to a more significant increase in wages, said O'Grady. "ere is a bit of a hangover from the past," he said. "(And) who's ever heard of a trade war with the U.S.? It's just unusual, and it's uncertain. Is it just bluster and it's all going to come to nothing (and) we can all get back to normal?" "I think the confidence in the economy is just as high as it was last year. (But) we've seen a trend over the last few years, that re- gardless of how confident people feel about the economy, or how much they hire, there's been a… consistent increase in the percent- age of companies who are giving out less than three per cent." In the meantime, employers are taking "relatively small" budgets and attempting to spend more strategically, said Peiris. "ey're putting more of that budget into their top-skilled top performers, and maybe less of it into other groups," she said. Companies are also funding smaller compensatory increases throughout the year that aren't captured in a one-time merit bud- get increase, said Peiris. "ere's a lot of effort — and rightfully so — that's put into this one point in time in the year where there's a salary budget established and distributed," she said. "An equal amount of time needs to be put into the money that gets spent over and above the merit budget process, and I don't know if that's happening." Labour market tightness has employers becoming more cre- ative with compensation tactics, according to Gordon Frost, career business leader at Mercer Canada in Toronto. "People are still concerned about competitiveness… and keeping their costs under control and those kinds of things (and) we're seeing more investment in incentives or bonuses." Pay for performance Eighty-six per cent of employers continue to use individual per- formance to drive base salary ad- justments, according to Mercer's survey. "Incentive-based pay or vari- able pay continues to be a tool that organizations want to use more and more," said Frost. Pay for performance has be- come a best practice for compen- sation as employers search for ways to retain top performers, said Peiris. "It's about spending a pool of money wisely," she said. "It's about being thoughtful about the expenditure. I've seen too many organizations that give their low- est performers an increase or their lowest performers a bonus, and that's money that could probably be used elsewhere." Organizations are using tools outside of the merit budget to pay top performers, said Peiris. "If an organization has a bo- nus program, the focus is often to pay those top performers. So it really comes down to how an organization intends to use this annual salary budget versus how it intends to use a performance bonus program. And I think that's been fairly consistent for years," she said. "(Organizations) want to make sure that they have the funds avail- able to do that and the funds in terms of salary budget — it's only one piece of the puzzle. It's one piece of a total rewards offering and even beyond total rewards, some people will call it a total value proposition. It's one piece of it, but it's an expensive piece. So it needs to be spent wisely." Many employers remain "guarded" on compensation in an effort to put more funds into vari- able compensation, often doled out via the performance manage- ment process, said Parsons. "Instead of putting a lot of money into the fixed component of compensation — that being the base salary — if they're put- ting more emphasis on the vari- able pay, that could fluctuate over time, so you're not locking in your expense." Performance remains the key driver of pay decisions, and top employees should expect to be compensated above and beyond general salary increases in 2019, said omson. "Pay for performance… is probably the single largest factor influencing pay decisions," she said. "High performers continue to receive higher-than-average increases… ranging from about 3.3 to 4.1 per cent." Variance by region, sector e western provinces are expect- ed to see slightly higher-than-av- erage salary increases, according to Morneau Shepell, with British Columbia's average expected to come in at a high of 2.8 per cent and Alberta at 2.7. "When we look at Western Canada, they're taking the lead in terms of the growth in the coun- try," said Parsons. "Both Alberta and British Co- lumbia are posting the strongest piece in terms of GDP growth, so it makes sense that they would have the higher-than-average sal- ary increases." Meanwhile, Aon's data predicts Saskatchewan employees will receive the highest pay bumps at three per cent, while Atlantic Canada comes in lowest at 2.5 per cent. Among industries, media and non-bank financial services em- ployees are expected to pull in a 3.3. per cent increase, while bank- ing, telecom and transport work- ers could have a lower raise at 2.4 per cent, according to Aon. Morneau Shepell data indi- cates real estate, rental and leas- ing workers will receive the high- est raises at 3.8 per cent, while information and cultural workers weigh in at a low 1.5 per cent. Still, the variance in those in- creases is immaterial at this point, said Parsons. "You're kind of splitting hairs," he said. "ese increases really show that there's not a lot of large base salary increases to be had across industries. It'll vary within a percentage point here or there, but I think the real story is more around what employers are doing outside of the base pay increases." In Ontario, employers are watching legislative changes closely as the potential revamp of labour reforms could significantly alter the compensation picture, said Peiris. Many organizations will see compensation for low-wage staff rise through legislative increases, ultimately leading to more con- servative gains for salaried em- ployees, according to Frost. Implications for employers Flat salary increases are a signal that employers will need to work harder to attract and retain talent, said Parsons. "In today's tight labour market, employees have multiple oppor- tunities available to them," he said. "erefore, employers need to up their game in order to retain their top talent." e compensation package is no longer simply about base pay, but rather a total rewards package including intangibles such as flex work, benefits and coaching, said Parsons. "It's hard to look at base pay just in isolation," he said. "You really have to add everything together to get a perspective of what that employee is getting." Evolving workplaces and the pursuit of innovation are also af- fecting compensation, as employ- ers struggle to come to grips with what the future of work will look like, said Frost. "(Employers) know that the workplace is evolving; they know that it's being impacted by things like artificial intelligence and digi- tization and having a more global workforce — having a workforce that is more like the gig economy," he said. "But it's not clear to them yet what they need to do to pre- pare for it, or how it's going to im- pact their specific organizations." As a result, organizations are diverting more funds into tech- nological solutions, upskilling and job restructuring, said Frost. "While they still want to pay competitively, they're like 'We can't put all of our dollars in the pay bucket. We need to do this other stuff, too.'" Because of this, compensation conversations are shifting towards total employee value proposi- tions, with more focus on career pathing and employee develop- ment, he said. "Organizations are starting to realize that it's not just fluff — it actually is meaningful to people. And in an environment where ev- erybody's got 2.6 per cent, and ev- erybody has a group RSP (retire- ment savings plan) and everybody has the same core benefits offer- ing, how do we really differenti- ate? It's on those other elements." Political volatility keeping employers cautious SALARY < pg. 1 "You're kind of splitting hairs. ere's not a lot of large base salary increases to be had across industries."

• Cover