News From Aon
Canadian salary increases expected to stay flat in 2017
amid economic uncertainty
Aon Hewitt research reveals marginal growth in salary increases and bonuses next year
TORONTO, September 26 2016 – Amid continuing uncertainty over the direction of the Canadian and global
economies, new research from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc
(NYSE: AON), suggests that Canadian employers are not expecting to make higher increases to compensation
budgets for 2017.
Aon Hewitt’s 2016 Canadian Salary Increase Survey of 347 companies projects base pay to increase by 2.8
percent in 2017, up slightly from 2.6 percent (including salary freezes and pay cuts) in 2016. Spending on
variable pay is expected to be 15.4 percent of payroll—unchanged from 2016. “The Canadian companies we
surveyed are clearly reluctant to earmark higher compensation increases as they prepare for a highly competitive
landscape in 2017,” said Suzanne Thomson, Senior Consultant, Global Data Solutions, Aon Hewitt. “On the plus
side, fewer of them expect to freeze pay or cut salaries, and they are planning to keep already strong budgets for
variable pay intact. That’s a key factor in their ability to attract and retain high performers.”
Fewer salary freezes expected in 2017
Financial challenges were reflected in the number of companies that froze salaries last year, but employers are
forecasting fewer freezes in 2017. Aon Hewitt’s research showed that 4.5 percent of employers froze 2016
salaries – in part due to continuing challenges in the oil and gas sector, which had the lowest total salary increase
(1.2 percent) of all surveyed industries after factoring in salary freezes and cuts. Next year, only 0.4 percent of
companies overall expect to freeze salaries.
“For 2017, employers, including those in the oil and gas sector, may be feeling confident that the worst is behind
them,” noted Thomson. “From an employees’ perspective, there might not be much upside when it comes to pay
increases, but they can find some solace in the fact that the downside might be more limited.”
Salaries by industry
Aon Hewitt’s research showed that most salary increases across sectors and regions are in line with the national
average for 2017. However, workers in several industries can expect slightly higher-than-average or lower-thanaverage increases.
Among the former, employees in the automotive and auto-supply, chemicals, consumer products and life
sciences sectors are forecast to see pay increases of 3.0 percent next year, while high-tech and professional
services companies are expecting increases of 2.9 percent.
Lower-than-average increases are expected in the oil and gas (2.2 percent), banking (2.3 percent) and
transportation and logistics (2.1 percent) sectors.
Top performers make more, continuing the trend
In 2016, Canadian employers put a premium on performance, allocating higher increases to top employees. Nine
out of 10 surveyed organizations reported providing a variable pay plan and bonus payouts in 2016. Compared
with the 2.5 percent actual increase to all employee groups in 2016, employees classified as high potentials, top
performers and those in key positions received an average merit increase of 4.4 percent.
The trend towards performance-based salary differentiation will continue in 2017, as the average merit increase
among those top employee categories is forecast at 4.6 percent, compared with a 2.7 percent merit increase
across all employee groups.
Risk. Reinsurance. Human Resources.
The average budget for variable pay in 2017 is 15.4 percent, unchanged from 2016. Two-thirds of organizations
reported offering some form of long-term incentive plan to their employees, most often at the executive level (72
percent). Performance-related share grants remain the most popular form of LTI, followed by restricted stock.
“While the overall job market may be strengthening slowly, competition for high-performing employees remains
high,” says Thomson. “In order to win the competition for top talent, organizations are continuing to differentiate
compensation through variable pay programs.”
END
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