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Press Release

Canadian employers plan to hold the line on pay raises in 2020 but are planning for greater pay transparency, Willis Towers Watson survey finds

Compensation Strategy & Design|Total Rewards
N/A

October 8, 2019

TORONTO, ON, October 8, 2019 — Canadian employees hoping for larger pay raises next year may be disappointed. A new survey by leading global advisory, broking and solutions company, Willis Towers Watson (NASDAQ: WLTW), reports Canadian employers plan to hold the line on budgeted pay raises in 2020, despite low unemployment, a tight labour market and volatility in the economy. Some employers, however, are projecting slightly larger annual bonuses next year, while 26% of organizations are reporting separate promotional budgets in their efforts to supplement employee salaries, a 35% increase over last year.

Salary budgets are not expected to change in 2020. The 2019 General Industry Salary Budget Survey, conducted by Willis Towers Watson Data Services, found salary increases are expected to hold steady in 2020 for technical and business support employees (2.7%) as well as for production and manual labour employees (2.3% in both years). Professional and client management employees may receive a slightly lower increase next year (2.7% in 2020 versus 2.8% this year). Companies are also budgeting slightly smaller increases for executives (2.4% in 2020 versus 2.6% this year) and management employees (2.7% in 2020 versus 2.8% this year). Virtually all companies (94%) plan to give raises next year, the same percentage as this year; however, more companies are formalizing their promotional increase budget.

Employers continue to reward their star performers with significantly larger pay raises than average-performing employees. According to the survey, employees receiving the highest possible rating were granted an average increase of 4.9% this year, 88% higher than the 2.6% increase granted to those receiving an average rating. "Despite an extremely tight labour market, most employers are either not willing or fiscally unable to increase their fixed costs across-the-board by bolstering their salary budgets," said Amanda Voegeli, practice leader, Canadian Rewards, Willis Towers Watson. "Instead, many companies are doubling down on providing significantly larger market adjustments to employees in high-skill roles and selective pay raises to their top performers.

Annual performance bonuses, which are generally tied to company and employee performance goals, are projected to increase slightly for most employee groups in 2020. The survey also found companies are projecting discretionary bonuses — generally paid for special projects or one-time achievements — will average 3.3% of salary for professional and client management employees, slightly higher than what companies paid in 2018.

"While most companies are keeping their salary budgets steady, we are also seeing companies getting creative with base pay beyond the traditional annual merit increase. For instance, some employers are carving out increase pools for their high-potential and top-performing employees, setting aside premium pay for highly valued skills, considering 'market adjustments' for critical segments and providing more frequent increases outside of the annual cycle for in-demand jobs. In these situations, I would encourage Canadian organizations to challenge the norm by defending above-average increase budgets — as a segmented approach can be more beneficial in supporting talent needs," concluded Voegeli.

While salary budgets are anticipated to remain at the same level in 2020, Canadian organizations are slowly starting to increase transparency with their employees as it relates to their pay. Currently, 24% of organizations have a pay transparency policy in place. About one-third of organizations fully share an employee's relative position within their current pay grade, and a similar percentage share the employee's pay range. Fewer employers fully disclose pay ranges above an employee's current grade or all pay range data (15% and 14%, respectively). Even in organizations planning to implement a pay transparency policy, only 58% are willing to share in full, or upon request, all pay ranges.

However, organizations are starting to feel the pressure in the market with respect to pay transparency due, in part, to Quebec's pay equity legislation (requiring increased communication on pay practices), proposed pay transparency legislation in Ontario and from employees — who are now expecting to know more and more about the fairness of their pay.

About the survey

The Willis Towers Watson Data Services General Industry Salary Budget Survey was conducted between April and July 2019, and includes responses from 384 companies representing a cross section of industries. The survey report provides data on actual salary budget increase percentages for the past and current years, along with projected increases for next year.

The 2019 General Industry Salary Budget Survey — Canada report is available for purchase here.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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