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Salary growth to slow

Monday August 17, 2015 Written by  Retain Canada
Canadian employers are expecting salaries to rise by an average of 2.5 per cent in 2016.

This is down from the average 2.8 per cent salary increase expected for 2015, as reported in last year's Trends in Human Resources survey, an annual project from Morneau Shepell.

The average salary increase figures include expected salary freezes.

"With the crash in oil prices and talk of a recession in the air, employers are cautious about the coming year," said Michel Dubé, a principal in Morneau Shepell's compensation consulting practice. "Some sectors such as mining, oil and gas are expecting average salary increases of about 2.4 per cent for next year. Last year, the comparable forecast stood at 3.4 per cent. As governments focus on balancing their budgets, we're seeing signs of lower salary increases in the public sector as well. Salary increases in education are expected to be in the 1.9 per cent range, and only slightly higher at 2.1 per cent in other areas such as public administration, health care and social assistance. The highest salary increases will be in financial services at 3.0 per cent, and professional, scientific and technical services at 2.9 per cent.”

Reflecting the mix of industries in the provinces, Alberta is expected to have the lowest salary increases next year, at 2.2 per cent. This is down from the 3.4 per cent estimated in last year's survey. By contrast, other parts of Western Canada are expecting higher than average increases in the 2.7 per cent range.

Other provinces will be close to the national norm at around 2.5 per cent.

Employee health and productivity a priority

In addition to looking at expected salary increases, the survey also asked HR leaders about their priorities for 2016.

Sixty-six per cent of survey respondents said that improving the health and engagement of their employees is a top priority for 2016. This is up from 53 per cent last year.

More than 30 per cent of employers in the survey plan to have health risk appraisals in place for their employees by the end of 2016, and more than one-third of employers are planning to introduce coping skills training next year.

"Faced with uncertain economic times, organizations will be investing in more programs designed to improve productivity," said Randal Phillips, executive vice-president and chief client officer at Morneau Shepell. "Given the pace of change today, there is a strong link between the health and coping skills of employees and their engagement at work."

“We're also seeing a big shift in the way employers view their benefits and wellness programs,” Phillips added. “In the past they would introduce their programs without evaluating whether or not they were delivering results, but this is changing. More than 20 per cent of employers said they are monitoring the overall health and engagement of their organization today, and our survey suggests this will almost double by the end of 2016."

Mental health continues to be a strong area of focus. This is the leading cause of sick leave and disability and is a growing concern in many companies; the Conference Board of Canada estimates that mental illness costs employers more than $20 billion per year.

Over half of all employers surveyed expect to have mental health training for managers in place by the end of next year, and 28 per cent are developing plans to address psychological health and safety in their workplaces. 

In addition to improving health and productivity, organizations are also looking for ways to reduce costs. One of the top priorities among employers is reducing the cost of sick leave and disability, and helping people get back to work sooner. More than 40 per cent of employers in the survey said this is a key area of focus for the coming year.

Shift in employer attitudes to retirement plans

The survey also identified some important changes in employer attitudes to retirement plans.

"In the past, sponsors of defined contribution pension plans left it up to their employees to fend for themselves when they retired. Their retirees often struggled to choose amongst relatively expensive investment options, and figure out how much of their savings they could safely withdraw each year to avoid running out of income later in life,” Phillips said. “Poor decisions can have a very significant impact on retirement income, and plan sponsors are starting to take notice."

More than one-quarter of plan sponsors surveyed (27 per cent) said they are looking at providing payment options for retirees, or are already doing this.

“This is a very positive step toward income security for retiring Canadians, and we hope more plan sponsors will take action in this area in the coming years," Phillips said.

Morneau Shepell's 33rd annual Trends in Human Resources survey was conducted between mid-June and the end of July, with input from organizations employing more than 640,000 people across Canada. The benchmark organizations represent a broad cross-section of industry sectors.

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