Have you determined your 2021 budget?

July 28, 2020

Findings of Mercer’s Canadian Compensation Planning Survey – July edition. . Questions and findings change with each survey edition so be sure to check out the full series of articles.

Compensation planners remain uncertain about 2021 forecast

According to the July Pulse for Mercer’s Compensation Planning survey, most organizations have not yet finalized their 2021 annual increase budget. Of the 294 organizations that participated in the survey, 86% indicated that they were either “still discussing” or hadn’t even started the process of determining their annual increase budget. A small minority (3%) reported they plan to freeze salaries. With such a small sample (n=32) of employers reporting 2021 budget numbers, it’s still too early to identify the average merit or total increase budget. Perhaps we will see an increase in salary freezes this year — we’ll have to wait and see. (We plan to ask these questions again in the fall, hoping many employers will have worked through some of their budgeting activities and can provide better estimates.)

Evaluating the employee value proposition

Since we know that employers are looking at redefining the employee experience, or value proposition, we asked about recognition, development, and the impact of remote work on pay.

It’s good news that the majority of respondents did indicate that they have recognition programs, with the most common forms being a formal “Thank-you”/e-card program, gift cards, charitable donations/matching programs. Among employers prioritizing change to their recognition programs (16%), most commonly, they are making adjustments to increase employee engagement due to changing employee needs and preferences. Forty eight percent indicated that they would maintain the status quo and were not planning on enhancing or decreasing their offerings.

Employers indicated that the top development programs they have in place are professional training/ certificate reimbursement, training, and challenging/cross-functional work assignments. A small percent of respondents indicated that they were planning to enhance these and other development programs. Thankfully, an even smaller percentage indicated that they plan to reduce their development programs.

Impact of remote work on pay

You may have seen some headlines lately, of companies reporting that they plan to encourage remote working going forward, and with some of them giving up part or all of their office space. According to the July Compensation Planning survey pulse, 34% of employers are expecting that in the future only 0-25% of employees will work remotely. However, almost 3 in 10 report that 25%+ of their work force will work remotely — this compares to 17% of organizations reporting 25%+ of their employees worked remotely pre-COVID. Another 38% indicated that they “don’t know” or are unsure of the levels of future remote work. About a third of respondents use geographical differentials; among those, 59% plan to continue to use them, while 10% are considering removing them.

Continued uncertainty

While most provinces and territories have being cautiously progressing along their staged reopening schedules, there is still much uncertainty about COVID. Perhaps we thought that we’d hit a point where we could return to “normal” at some point. Though in some ways this new life does seem normal, the continued uncertainty and developments do seem to be causing a delay in planning and budgeting for 2021.

All we can do is continue to collect data and make the best decisions for our organizations, weighing our risks. By participating in our next Compensation Planning Pulse, you’ll received additional information that will help you finalize your 2021 plan.

Need more information? Reach out to us at 855-286-5302. Mercer’s got your back.

compensation pulse survey july infographic Canada