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Looking past the increase budgets in Canada

     
November 04, 2019

A Shift in Thinking Is Underway

If you’ve glanced at this year’s annual planning reports, such as Mercer’s 2019/2020 Canada Compensation Planning Survey, you know that the budget and actual increase numbers are rather “ho-hum.” Though much of the data hasn’t changed, forward-thinking organizations know it’s time to move beyond the annual increase budget numbers and consider the other elements of rewards and the employee experience.

Looking at the broader employee experience, not just merit numbers, is critical if employers are to remain competitive in today’s tight labor market.

But First, the Budgets

Merit Increase Budget

  Actual 2018 Actual 2019 Projected 2020
All Employees (Non-union) 2.5% 2.6% 2.6%
Executive 2.6% 2.6% 2.6%
Non-Executive 2.5% 2.6% 2.6%

As you can see in the chart above, merit increase budgets have increased slightly from 2.5% to 2.6% in 2019 and are projected to remain flat in 2020. However, there are some exceptions you need to understand to plan for 2020:

Do you have separate promotion budgets?

Survey participants said:

Yes – 41%
No – 59%

  • High-tech industry is budgeting almost a half percentage point higher than the national average, at 3.0% for merit increases.
  • Many industries are showing significant differences between merit increase budgets and total increase budgets. (In this survey, total increase budgets include “across-the-board” increases, cost of living adjustments [COLAs], promotions, and “other increases.”)
  • The average total increase budget projected for 2020 is 3.1%, but in High Tech it’s projected to be 3.9%.
  • Life Sciences is also projecting above average increases in both merit increase and total increase budgets.
  • Health Care Services industry is budgeting below average for both merit increases and total increases for 2020.

2020 Salary Increase Budgets – Industry View

2020 salary increase budgets industry view graphic

Employees’ Satisfaction with Pay Is on the Decline

The most impactful factors influencing compensation decisions for 2020 are retention and attraction concerns and strengthening a performance-based/pay-for-performance culture. According to Mercer | Sirota’s employee engagement database, employees’ satisfaction with pay continues to decline. Are your employees feeling rewarded? And the bigger question is, what more can you do to attract, retain, and motivate them?

People are raising their voice

Going Beyond Compensation

When working on your annual compensation planning, it’s important to go beyond just budget numbers and consider the broader employee experience. The employee experience is considered to be the intersection of employees’ expectations, their environment within the organization, and the events that shape their journeys. So what does this mean for your organization and how can you translate it into things you can act on?

Here are four key priorities to help get you started:

01

Deliver seamless interactions: Do you know what resonates with your employees? What’s important to them from an experiential perspective? Organizations are embracing a consumer mindset to simplify and automate tasks for employees to drive efficiency and productivity. Just as we expect seamless interactions as consumers, our employees now expect this of us. This requires a new partnership between HR and IT to simplify and automate daily work processes to deliver a frictionless experience. This will ultimately drive more efficient experiences and, in turn, greater productivity.

02

Give employees a voice: Engaging employees in new and diverse ways — from continuous listening platforms and “shadow” boards, to participation in design workshops — provides real-time feedback that you can act on. It’s important to solve your employee’s problems so they can solve problems for your organization. Engaging employees at every part of the design process promotes more empathetic experiences that are aligned with employee’s needs.

03

Be transparent: Millennials have challenged organizations to do things differently, including being more transparent about how decisions are made. It’s not just related to compensation and pay, but also how promotions are decided, what the career path looks like, and where career opportunities lie. Greater transparency with employees can drive further understanding of business strategy, but also create more trust and a sense of fairness. This transparency fosters an embracing experience — people feel like they belong when they trust the organization and believe they are being treated fairly.

04

Ignite the power of purpose: More and more employees want to align with the overall purpose of the organization. They want to feel like their values are aligned to the future direction of the organization and that their contribution matters. Turning your business purpose inward to align customer and employee value propositions delivers a more enriching employee experience, as well as more transparency, authenticity, and alignment between your customer and employee value propositions.

Plan the Right Mix

When it comes to compensation planning, managers have many competing priorities, like staying market competitive to attract and retain employees, paying for performance, and maintaining internal pay equity. Since being pulled in these different directions makes it hard to accomplish them all with budgets alone, it has to be more about the overall employee experience. Organizations who’ve invested in better employee experiences have reaped major rewards, including twice the innovation, four times more profitability, and twice the customer satisfaction. All of this translates to a better brand. Getting your compensation right and then building a great employee experience will differentiate your organization in order to attract the best and brightest.

We’re here to help. Learn how compensation data can help secure your spot as a top employer. Visit imercer.com or call 855.286.5302 for more on the Canada Compensation Planning Survey.