Mercer Canadas' 2016/2017 Compensation Planning Executive ... · 2016/2017 CANADA COMPENSATION PLANNING EXECUTIVE SUMMARY SALARY INCREASE BUDGETS BY INDUSTRY Not taking into account

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Mercer is pleased to present the results of the 2016/2017 Canada Compensation Planning Survey. Data was collected for 487 participants in June 2016. Canadian companies are being more cautious with salary increase budgets with lower increases across industries but particularly in the Energy and Public sectors where many companies have frozen salaries. Results presented reflect non-union employees.

The average base salary increase budget projected for 2017 is 2.6% (excluding zeros) and 2.3% (including zeros).

In 2016, the average base salary increase budget decreased to 2.5% (ex-cluding zeros) and 2.1% (including zeros). These numbers are generally aligned with the projections Mercer shared last fall.

With smaller budgets for promotional increases and off-cycle adjustments, Canadian companies need to be more strategic in distributing limited funds to attract and retain key talent.

INTRODUCTION

2016/2017 CANADA COMPENSATION PLANNING EXECUTIVE SUMMARY

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ORGANIZATIONS REPORTING SALARY INCREASES

Canadian organizations remain cautious about budgeting for salary increases in response to economic uncertainty and cost reduction initiatives. Salary increase budgets decreased to 2.5% (excluding zeros) and 2.1% (including zeros) in 2016, reflecting an increase in salary freezes across all employee groups (especially Executives).

Projected salary increase budgets for 2017 are 2.6% (excluding zeros) and 2.3% (including zeros) with 11% of organizations currently expecting to lower their salary increases in 2017 compared to 2016.

Coinciding with smaller overall budgets in 2016, a smaller percentage of companies held back a portion of their salary increase budget for off-cycle adjustments (14% in 2016 versus 20% in 2015). In addition, the average amount of the hold back decreased from 1% in 2015 to 0.5% in 2016. Consistent with last year, the majority of off-cycle increases (52%) are used for promotions, while 19% are used to address market competitiveness.

2015 Actual

2016 Actual

2017 Projected

BY EMPLOYEE GROUP excl. 0s incl. 0s excl. 0s incl. 0s excl. 0s incl. 0s

ALL EMPLOYEES (NON-UNION) 2.8% 2.4% 2.5% 2.1% 2.6% 2.3%EXECUTIVE 2.8% 2.3% 2.7% 2.2% 2.6% 2.4%MANAGEMENT 2.8% 2.5% 2.6% 2.4% 2.6% 2.5%PROFESSIONAL (SALES) 2.8% 2.5% 2.5% 2.4% 2.6% 2.6%PROFESSIONAL (NON-SALES) 2.8% 2.5% 2.6% 2.5% 2.6% 2.6%OFFICE/CLERICAL/TECHNICAL 2.7% 2.5% 2.5% 2.4% 2.6% 2.5%TRADES/PRODUCTION/SERVICE 2.7% 2.2% 2.4% 2.4% 2.5% 2.5%

Percentages are averages. Actual 2015 numbers from the 2015/2016 Canada Compensation Planning Survey.

SALARY INCREASES AND FREEZES

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2016 ACTUAL INCREASES (excl. 0s)

2.5%2017 PROJECTED INCREASES (excl. 0s)

2.6%

ORGANIZATIONS REPORTING SALARY FREEZESORGANIZATIONS REPORTING SALARY FREEZES

0%

5%

10%

15%

20%

25%

Trades/Production/Service

O�ce/Clerical/Technical

Professional (Sales)

Professional (Non-Sales)

Management

Executive

17.6%

24.2%

13.9%

10.8%

12.6%

10.3% 9.8%

13.0%

17.8%19.4%

15.8%

19.1%

11.8%

14.6%

10.7% 10.7%

14.2%

2017 Projected2015 Actual 2016 Actual

15.8%

ORGANIZATIONS REPORTING SALARY FREEZES

0%

5%

10%

15%

20%

25%

Trades/Production/Service

O�ce/Clerical/Technical

Professional (Sales)

Professional (Non-Sales)

Management

Executive

17.6%

24.2%

13.9%

10.8%

12.6%

10.3% 9.8%

13.0%

17.8%19.4%

15.8% 15.8%

19.1%

11.8%

14.6%

10.7% 10.7%

14.2%

2017 Projected2015 Actual 2016 Actual

SALARY INCREASES AND FREEZES

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SALARY INCREASE BUDGETS BY INDUSTRY

Not taking into account salary freezes (i.e., excluding zero increase values), nearly every industry sector saw a decline in actual 2016 salary increases versus 2015.

The Energy sector (which includes Oil & Gas and Utilities), recorded the largest year-over-year decrease, with actual salary increases (excluding zeros) decreasing from 3.1% in 2015 to 2.4% in 2016, followed by Mining & Metals (from 2.9% to 2.4%). Approximately 60% of Energy companies froze salaries in 2016 and 40% are projecting to freeze salaries in 2017. Taking into account the organizations that froze salaries, the overall average increase for the Energy sector in 2016 was 1.0% and is projected to be 1.3% in 2017.

n/a = data not available for 2015 “- -“ = insufficient data

2015 Actual

2016 Actual

2017 Projected

excl. 0s excl. 0s excl. 0s

TRANSPORTATION EQUIPMENT -- 2.9% 2.8%LIFE SCIENCES 2.8% 2.8% 2.9%CONSUMER GOODS 2.9% 2.7% 2.8%CHEMICALS n/a 2.7% 2.5%OTHER MANUFACTURING n/a 2.6% 2.6%HIGH TECH 2.8% 2.6% 2.5%SERVICES (NON-FINANCIAL) 2.6% 2.5% 2.6%BANKING/FINANCIAL SERVICES 2.7% 2.4% 2.6%INSURANCE/REINSURANCE 2.7% 2.4% 2.5%MINING & METALS 2.9% 2.4% 2.6%RETAIL & WHOLESALE 2.5% 2.4% 2.4%ENERGY 3.1% 2.4% 2.4%OTHER NON-MANUFACTURING 2.7% 2.3% 2.7%LOGISTICS n/a 2.1% 2.3%

SALARY INCREASES BY INDUSTRY

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2015 Actual

2016 Actual

2017 Projected

excl. 0s excl. 0s excl. 0s

ALL LOCATIONS / REGIONS 2.8% 2.5% 2.6%ATLANTIC CANADA 2.6% 2.4% 2.5%GREATER MONTREAL 2.7% 2.5% 2.6%OTHER QUEBEC 2.6% 2.4% 2.6%NATIONAL CAPITAL REGION n/a 2.5% 2.6%GREATER TORONTO 2.7% 2.5% 2.6%OTHER ONTARIO 2.6% 2.4% 2.5%MANITOBA 2.6% 2.4% 2.5%SASKATCHEWAN 2.6% 2.5% 2.5%GREATER CALGARY 2.8% 2.3% 2.5%GREATER EDMONTON 2.6% 2.4% 2.7%OTHER ALBERTA 2.7% 2.3% 2.5%GREATER VANCOUVER 2.7% 2.4% 2.5%OTHER BRITISH COLUMBIA 2.6% 2.4% 2.5%TERRITORIES 2.5% 1.9% 2.5%

SALARY INCREASES BY REGION

n/a = data not available for 2015Actual 2015 numbers are from the 2015/2016 Canada Compensation Planning Survey.

Regional differences in salary increases are driven by industry factors as the majority of organizations (88%) do not vary salary increase budgets by region.

Excluding the impact of salary freezes, salary increases were similar across Canada in 2016. Not surprisingly, Greater Calgary, Other Alberta and, to a lesser extent, Greater Edmonton, recorded smaller increases in actual salaries from 2015 to 2016.

These differences are further accentuated when taking into account salary freezes with Greater Calgary projecting an increase of 2.1% and Other Alberta projecting an increase of 2.0%.

SALARY INCREASES BY REGION

PAY FOR PERFORMANCERating systems

DIFFERENTIATING SALARY INCREASES BY PERFORMANCE RATING Participating organizations continue to differentiate salary increases based on performance, with the highest ratings given to 7% of the workforce, on average. Given smaller budgets overall, actual increases were slightly lower in 2016 for all performance groups, except the low and lowest performance categories.

Performance ratings continue to be widely used for salary increase decisions with only 4% of companies eliminating formal performance ratings in 2016 or later. Another 9% of companies are considering removing performance ratings in the future.

Aver

age

Incr

ease

Aver

age

Incr

ease

4.2

3.2

2.3

1.0

0.2 22

7 7

59 59

27 24

7 7

0.2

1.0

2.4

3.3

4.3

60 50 40 30 20 20 4030 50 6010 100 0% of Workforce % of Workforce

HIGHEST

A C T U A L 2 0 1 6 P R O J E C T E D 2 0 1 7

NEXT HIGHEST

MIDDLE

LOW

LOWEST

SALARY INCREASES BY PERFORMANCE RATING (INCLUDING ZEROS)

THREE LEVEL RATING SYSTEM

10% 18%FOUR LEVEL RATING SYSTEM

56%FIVE LEVEL RATING SYSTEM

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PROMOTIONAL INCREASE BUDGETS


FIVE YEAR TREND – PROMOTIONAL INCREASES AS A PERCENT OF BASE SALARY

0123

4%

5

5%6%

5

7%8%9%

10%11%12%

Trades/Production/ServiceO�ce/Clerical/TechnicalProfessional (Non-Sales)Professional (Sales)ManagementExecutive

20162015201420132012

EXECUTIVE MANAGEMENT OFFICE/CLERICAL/TECHNICAL

PROFESSIONAL(SALES)

PROFESSIONAL(NON-SALES)

TRADES/PRODUCTION/SERVICE

Excludes 0s

0123

4%

5

5%6%

5

7%8%9%

10%11%12%

Trades/Production/ServiceO�ce/Clerical/TechnicalProfessional (Non-Sales)Professional (Sales)ManagementExecutive

20162015201420132012

EXECUTIVE MANAGEMENT OFFICE/CLERICAL/TECHNICAL

PROFESSIONAL(SALES)

PROFESSIONAL(NON-SALES)

TRADES/PRODUCTION/SERVICE

Excludes 0sExcludes zeros

Thirty-nine percent of organizations budget separately for promotional increases with the average promotional budget representing 1% of payroll (excluding zeros) in 2016. Average promotional increases (as a percent of base) were similar across employee groups in 2016, ranging from 5.7% (Professional – Sales) to 7.1% (Professional – Non-Sales and Office/Clerical/Technical), averaging 6.8%.

Compared to 2015, promotional increases in 2016 were lower for most employee groups. This was especially true for Executives with average increases decreasing from 11% to 7%.

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STRUCTURE ADJUSTMENTS

73%OF PARTICIPATING

ORGANIZATIONS PLAN TO ADJUST THEIR SALARY

STRUCTURE IN 2017


The majority of participating organizations (82%) reported having a formal salary structure. Among these companies, 74% indicated their structure uses traditional grades.

The average actual salary adjustment in 2016 was 2.1% and is projected to be consistent in 2017 at 2.1%.

2015 Actual

2016 Actual

2017 Projectedd

EMPLOYEE GROUP excl. 0s excl. 0s excl. 0s

ALL EMPLOYEES (NON-UNION) 2.1% 2.1% 2.1%EXECUTIVE 2.1% 2.5% 2.1%MANAGEMENT 2.1% 2.2% 2.0%PROFESSIONAL (SALES) 2.2% 2.1% 2.1%PROFESSIONAL (NON-SALES) 2.2% 2.1% 2.0%OFFICE/CLERICAL/TECHNICAL 2.1% 2.0% 2.0%TRADES/PRODUCTION/SERVICE 2.1% 1.9% 2.0%

STRUCTURE ADJUSTMENTS

Argentina

Australia

Austria

Belgium

Brazil

Canada

Chile

China

Colombia

Denmark

Finland

France

Germany

Hong Kong

India

Indonesia

Ireland

Italy

Japan

Malaysia

Mexico

Netherlands

New Zealand

Norway

Peru

Philippines

Poland

Portugal

Saudi Arabia

Singapore

South Africa

South Korea

Spain

Sweden

Switzerland

Taiwan

Thailand

Turkey

United Arab Emirates

United Kingdom

United States

Venezuela

For further information, please contact Your local Mercer office or visit our website at: www.mercer.ca

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Documents

Mercer Canadas' 2016/2017 Compensation Planning Executive ... · 2016/2017 CANADA COMPENSATION PLANNING EXECUTIVE SUMMARY SALARY INCREASE BUDGETS BY INDUSTRY Not taking into account