2017 SALARY BUDGET REPORT - Home - ACCOMPASS · No 86% 14% Yes IS YOUR 2017 SALARY BUDGET FINALIZED? 1 ACCOMPASS 2017 SALARY BUDGET REPORT If you are finalizing your budget, the Accompass

2017 SALARY BUDGET REPORTMAKING SENSE OF THE MARKET

OCTOBER 2016

No Yes86% 14%

IS YOUR 2017 SALARY BUDGET FINALIZED?

1 ACCOMPASS 2017 SALARY BUDGET REPORT

If you are finalizing your budget, the Accompass 2017 Salary Budget Report provides a strategic and systematic approach to helping you determine your budget, starting from examining your organization’s priorities, to the actual increase itself.

Congratulations on finalizing your budget. The following insights will provide you with great data to help you validate your assumptions.

YESNO

MAKING SENSE OF THE MARKET

1

2

3

4

5

6

7

8

9

TOP COMPENSATION PRIORITIES IN 2017 2

WHAT’S CONSIDERED WHEN FINALIZING THE ANNUAL MERIT BUDGET 3

IT’S ALL RELATIVE: DO YOU PAY ABOVE OR BELOW MARKET? 4

DO EXECUTIVES GET A HIGHER MERIT INCREASE THAN ADMINISTRATORS? 5

ARE COMMISSIONED SALESPEOPLE ELIGIBLE FOR AN INCREASE? 6

ANNUAL BONUSES: WILL YOU PAY AT, MORE, OR LESS THAN TARGET IN 2017? 7

HOW MUCH ARE YOUR GROUP BENEFITS INCREASING BY? 8

SALARY BUDGET: 2%, 2.5%, OR 3%? 9

YOUR SALARY BUDGET TREND: IT’S ALL ABOUT SUPPLY AND DEMAND 10

THE DETAILS: FOR YOUR REFERENCE 11

ABOUT ACCOMPASS 13

PAGE

Retain employees (e.g. competitive compensation package, succession planning, positive work environment, employee communication) 45%

Motivate employees (e.g. performance management, annual bonus/incentive, absence management, strong management) 43%

Attract new employees (e.g. recruitment, growth mode, hiring strategies) 12%

2ACCOMPASS 2017 SALARY BUDGET REPORT

TOP COMPENSATION PRIORITIES IN 2017

1

Most employers surveyed continue to indicate retention and motivating employees as their top priorities for 2017, suggesting that organizations are recognizing the value of developing and fostering talent from within their current employee base. Companies that are focusing on attracting and recruiting new employees will want to ensure that they are managing the risk of a less motivated employee base, and the potential impact on performance and turnover.

1 2 3 4 5 6 7 8 9

Internal budget constraints 38%

Economy and market conditions 23%

Your organization’s pay position against market 17%

External compensation survey results 15%

Employee activity (e.g. terminations etc.) 6%

WHAT’S CONSIDERED WHEN FINALIZING THE ANNUAL MERIT BUDGET

1 2 3 4 5 6 7 8 9

2Internal budget constraints continues to impact annual merit budget decisions. Dialogue with management and finance should factor in the key role of market-competitive pay, along with the costs of employee turnover and productivity implications.


EMPLOYEE TURNOVER RATES

0% - 2.5% 2.5% - 5% 5% - 10% 15% - 20% 20%+10% - 15%0%

10%

20%

30%

40%

50%

46%

16%10% 8%

16% 4%

0% 10%

Significantly higher

Significantly lower

Slightly lower overall

Slightly higher overall

At par with market

14%

1%

17%

3%

65%

20% 30% 40% 50% 60% 70% 80%

IT’S ALL RELATIVE: DO YOU PAY ABOVE OR BELOW MARKET?

321 4 5 6 7 8 9

3

1 in 5 organizations believe they are paying higher than market. If this is true, there is pressure on 80% of companies to compete for talent with strong total compensation packages. Market surveys such as the Toronto Region Board of Trade Big Bench report provide assistance in understanding your relative pay position. Benchmarking also informs your merit increase strategy.


WHO PAYS AT PAR WITH MARKET

2014

70%

60%

50%2015 2016 2017

56%

64%69%

65%

SALARY INCREASE DIFFERENTIATED BY LEVEL

YesNo

80% 20%

DO EXECUTIVES GET A HIGHER MERIT INCREASE THAN ADMINISTRATORS?

42 31 5 6 7 8 9

4Down from 45% in 2016, 20% of organizations set different salary increases according to job levels. Given a choice, performance and market-based adjustments are a better way to manage increases across levels.


ARE COMMISSIONED SALESPEOPLE ELIGIBLE FOR AN INCREASE?

5

It’s important to make sure that your desired ratio between base salary and commissioned earnings does not “drift” towards commissions. Communications can help to address a desire that some commissioned employees might have to participate in organization-wide programs such as the merit increase process.

YesNo 53%47%


52 3 41 6 7 8 9

0%10%20%30%40%50%60%70%

Bonus paid belowtarget

Bonus paid attarget

Bonus paid abovetarget

10%

68%

23%

EXPECTED BONUS PAYMENT

ANNUAL BONUSES: WILL YOU PAY AT, MORE, OR LESS THAN TARGET IN 2017?

6

7 in 10 employers with a bonus plan expect to pay at target, which is good news, but it doesn’t explain whether it’s an appropriate bonus plan. To be truly valued, your incentives strategy should ensure that the outcomes (i.e., payouts, performance, fairness, etc.) match your employees’ expectations and perceptions.

62 3 4 51 7 8 9


AVERAGE BUDGET INCREASE

7.8%

HOW MUCH ARE YOUR GROUP BENEFITS INCREASING BY?

72 3 4 5 61 8 9

14% 46% 24% 11%

11% - 15%Over 16%

5%

6% - 10%1% - 5%0%

GROUP BENEFITS EXPECTED BUDGET INCREASE

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60% or survey respondents believe that their group benefits will increase by less than 5% in 2017. But the average survey response was 7.8%. This suggests that some organizations may be faced with a more substantial increase in the cost of their benefits than they might be anticipating.


2017 VS 2016 AVERAGE SALARY INCREASE

5%

0%

10%

15%

20%

3%

16%

2010 2011 2012 2013 2014 2015 2016 2017

SALARY FREEZES ARE A THING OF THE PAST

SALARY BUDGET: 2%, 2.5%, OR 3%? %

of O

rgan

izat

ions

5%

0%

10%

15%

20%

25%

30%

35%

40%

2.0%

1.0%1.5%

2.5%

3.0%

3.5%

20172016

92 3 4 5 6 7 81


8

The vast majority of organizations set their salary increase budget at one of three numbers: 2%, 2.5%, or 3%. Any recommendations within these ranges are considered “within market”. When establishing your own increase, it’s important to keep in mind the impact of past lower budget increases, relative market position for pay within your specific industry, and your organization’s priorities and compensation philosophy. This should factor in to your ultimate decision about your 2017 increase.

92 3 4 5 6 7 81

AVERAGE

2.52%MODE

2.75%MEDIAN

2.50%

20086%

7%

8%

9%

2009 2010

UN

EMPLO

YMEN

TA

VERA

GE

SALA

RY /

INFL

ATIO

N

2011 2012 2013 2014 2015 2016 2017

2.52%

UNEMPLOYMENT

SALARY BUDGET INCREASE

INFLATION

2%

1%

0%

3%

SALARY BUDGET PROJECTION AVERAGE INCREASE

YOUR SALARY BUDGET TREND: IT’S ALL ABOUT SUPPLY AND DEMAND


9

A common assumption is to relate salary budgets to inflation. While it’s true that the budget is underpinned by inflation, with higher inflation rates resulting in higher wage increases, unemployment rates play a more substantial factor in salary budget increases. When many people are seeking employment, there is less pressure on businesses to give greater increases to retain or attract talent. In a tight labour market featuring a lower supply of talent, the pressure mounts to offer greater salaries to compete.

THE NUMBERS:

BY ORGANIZATION SIZE EMPLOYEE LOWER 1ST MEDIAN 3RD UPPER AVERAGE SIZE LIMIT QUARTILE QUARTILE LIMIT

1-100 1.5% 2.0% 2.5% 3.0% 5.0% 2.6%

101-500 1.0% 2.0% 2.5% 3.0% 4.0% 2.5%

501-1,000 1.0% 2.2% 2.7% 3.0% 5.0% 2.6%

1,000+ 1.0% 2.0% 2.5% 3.0% 4.0% 2.4%

Same as 2016, employers with 501 to 1,000 employees will be providing the highest average overall increases than those with fewer than 100 employees.

Excluding zero increases

BY INDUSTRY INDUSTRY LOWER MEDIAN UPPER AVERAGE LIMIT LIMIT

Associations & Foundations 2.0% 2.8% 3.0% 2.6%

Engineering 2.5% 2.5% 3.0% 2.6%

Financial Services 1.5% 3.0% 3.0% 2.6%

Healthcare 1.0% 2.0% 5.0% 2.2%

High Technology 2.0% 3.0% 5.0% 3.2%

Manufacturing - Durable 1.7% 2.5% 3.0% 2.4%

Manufacturing - Non-Durable 1.7% 2.5% 3.0% 2.5%

Professional Services 2.0% 2.5% 5.0% 2.5%

Real Estate Management 1.8% 2.8% 5.0% 2.7%

Retail/Wholesale 2.0% 2.5% 3.0% 2.5%

Other 1.0% 2.5% 7.0% 2.5%

The range of salary increase projections in 2017 by industry are from a low median of 2.0 per cent in the Healthcare industry, to as much as 3.0 per cent for High Technology and Financial Services.

There are a number of industries with high Upper Limit increases projected, in particular the Real Estate Management industries. These high increases are interpreted as one-off exceptions, given the closeness in value between the median and the average. That is, there is very limited upwards skew in the data observed.

Excluding zero increases

THE DETAILS: FOR YOUR REFERENCE


In addition to internal business conditions and competitive market data, current and forecasted economic indicators should be considered when determining salary increases for the coming year. The primary economic indicators include Consumer Price Index, Unemployment Rate, and Employment Growth Rate. The following tables provide a forecast for 2016 as of July 22, 2016.1

2014 2015 2016F 2017F

Canada 1.9% 1.1% 1.6% 2.0%

ON 2.3% 1.2% 1.8% 2.1%

QC 1.4% 1.1% 1.4% 1.9%

AB 2.6% 1.2% 1.4% 1.6%

BC 1.0% 1.1% 1.8% 2.0%

2014 2015 2016F 2017F

Canada 6.9% 6.9% 7.0% 6.9%

ON 7.2% 6.8% 6.6% 6.5%

QC 7.8% 7.6% 7.3% 7.1%

AB 4.7% 6.0% 7.5% 7.5%

BC 6.1% 6.2% 6.0% 5.9%

2014 2015 2016F 2017F

Canada 0.6% 0.9% 0.6% 0.8%

ON 0.8% 0.7% 1.2% 1.0%

QC -0.1% 1.0% 0.4% 0.6%

AB 2.2% 1.2% -1.7% 0.0%

BC 0.6% 1.3% 2.8% 1.3%

1 Source: BMO Capital Markets: Provincial Economic Outlook July 22, 2016

CPI (Consumer Price Index) measures the average change in prices paid for a market basket of goods and services. This indicator is used as the primary measure of inflation and a gauge to ensure wages keep up with changing prices.

The unemployment rate impacts base salaries by either pressuring employers to pay at, above, or below market rates. The lower the unemployment rate, the greater the competition is to pay for talent above market wages. High unemployment saturates the market and reduces the pressure to pay higher wages.

The employment growth rate is the year-over-year percentage increase in the number of persons employed. For 2015, a small positive employment rate is forecast for Canada as well as for several specific provinces.

CPI RATE (% CHANGE)

UNEMPLOYMENT RATE (%)

EMPLOYMENT GROWTH (%)

2017 ECONOMIC FORECAST


Accompass is a leading independent benefits, investment and compensation firm that designs and manages its clients’ programs from the biggest picture to the smallest detail. Our clients expect more than periodic meetings and fair value from their plans. They expect a level of attention, proactive preparation, and expertise that is all-encompassing.

Founded as Pal Benefits in 1997, Accompass brings its personal, hands-on approach to clients ranging from smaller companies to global enterprises with thousands employees. Our work spans industries including retail, manufacturing, public sector, and pharmaceuticals. We’re proud to be considered an extension of many of North America’s most respected corporate teams.

For more information, visit us at accompass.com or call us at 416.969.8588.

ABOUT ACCOMPASS


• Traditional & flexible benefits

• Health & wellness solutions

• Short-term & long-term disability management

• Financial management, incl. renewals, marketings, funding arrangements, & risk management

• Employee Assistance Programs (EAP)

• Claims & audits

• Preferred provider arrangements

• Mergers & acquisitions

• International operations

• Employee communications & support

• Day-to-day service

• Defined Contribution plan design

• Defined Benefit investment consulting

• RRSPs & DPSPs

• Executive retirement needs

• Financial reporting & monitoring

• Investment research & management, incl. menu design, manager search, selection, & management

• Retirement committee support





• Board and Compensation Committee advisory services

• Compensation philosophy and principles

• Market pricing and competitive pay benchmarking

• Short- and long-term incentive plans

• Supplemental executive retirement plans and benefits

• CD&A and proxy disclosure

• Executive employment, severance and change of control agreements

• Special situations (i.e. M&A, executive succession, IPOs, etc.)

• Board of directors compensation plan review and design

• Education and training services

• Governance best practices

• Executive pay-for-performance analysis


• Total compensation statements

• Compensation philosophy and principles

• Custom & in-depth market benchmarking

• Performance-based compensation plans

• Pay equity review & compliance

• Competency-based plans

• Sales incentive & commission programs

• Total compensation statements

• Job evaluation & pay administration





BHBENEFITS & HEALTH

IRINVESTMENT & RETIREMENT

ECEXECUTIVE COMPENSATION

BCBROAD-BASED COMPENSATION


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T 416 969 8588F 416 962 1711

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2017 SALARY BUDGET REPORT - Home - ACCOMPASS · No 86% 14% Yes IS YOUR 2017 SALARY BUDGET FINALIZED? 1 ACCOMPASS 2017 SALARY BUDGET REPORT If you are finalizing your budget, the Accompass