Canadian organizations plan to offer an average salary increase of 3.1 per cent in 2026, down from 3.2 per cent in 2025, according to a new survey by compensation consulting firm Normandin Beaudry.
The 15th annual Salary Increase Survey, which included more than 1,000 Canadian organizations, found employers continue to scale back salary budgets despite ongoing talent retention challenges.
“With salary increase budgets continuing to decline, organizations face growing pressure to do more with less making it essential to strategically plan salary increases to retain talent and maintain workforce strength,” said Darcy Clark, senior principal of compensation at Normandin Beaudry.
Additional budgets target retention
Nearly half of organizations are allocating extra funds beyond their base salary increase budgets, the survey found. Forty-two per cent of respondents plan to secure an additional 0.9 per cent budget in 2026, matching the same percentage and amount allocated in 2025.
Organizations use these additional funds primarily to support market adjustments to salaries, according to 59 per cent of respondents. Other priorities include differentiating compensation for high performers (58 per cent) and retaining employees in strategic roles (54 per cent).
The extra budgets also help accelerate progression for employees lower in their pay range (38 per cent), address compression and internal equity challenges (37 per cent), and retain employees with perceived retention risk (27 per cent).
Some sectors buck the trend
Several industry sectors expect to offer higher than average increases in 2026, according to the survey. Pharmaceutical companies and construction of buildings both project 3.8 per cent increases.
Telecommunications, data processing and data warehousing services plan 3.7 per cent increases, along with IT consulting services. Accommodation, food services and tourism, professional and scientific services, and real estate sectors all expect 3.5 per cent increases.
Clark noted that despite a less constrained labour market, strategic salary planning remains critical for talent retention, particularly given economic and geopolitical uncertainty.
“Organizations hoping to set themselves apart may benefit from adopting innovative approaches to balancing monetary and non-monetary elements in their total rewards,” Clark said.
The survey results exclude salary freezes from the average calculations. Normandin Beaudry provides actuarial and total rewards consulting services from offices in Montreal, Toronto and Quebec City.
