Canadian employers are expected to raise salary budgets by an average of 3.3 per cent next year, according to a recent pulse survey by Normandin Beaudry.
Almost 400 organizations took part in the November 2024 survey, which found that 68 per cent made no changes to their earlier summer forecasts for 2025. Of the respondents who did adjust their projections, 65 per cent lowered them, citing cost reduction efforts as the main reason.
“Organizations are trying to find the right balance between retaining top talent, while also managing their compensation spend to remain agile and competitive amid an evolving and uncertain geopolitical landscape,” said Darcy Clark, Senior Principal, Compensation at Normandin Beaudry. “While less aggressive than last year’s 3.6%, it’s important to note that the forecast for 2025 remain above historical norms and are outpacing current rates of inflation.”
Most industries reported only minor decreases to their initial salary increase budgets. The largest cuts came from electronic gaming and visual effects, transportation and warehousing, and telecommunications and data processing or warehousing. Finance and insurance, public services, and pharmaceutical and biotechnology industries, however, indicated small increases to initial salary budgets.
The study also found that 42 per cent of surveyed employers plan to keep an extra 0.9 per cent of their salary budget for flexibility.
“By reserving these resources, organizations are positioning themselves to better address potential challenges during the next compensation cycle,” said Clark. “This strategy provides them with an opportunity to tackle internal inequalities more thoroughly with ad hoc salary adjustments. Additionally, setting aside a portion of their budget can help support salary increase differentiation for high performers and address retention efforts for highly strategic or business-critical roles.”
Including these extra funds, the average total salary increase budget in Canada remains at 3.6 per cent, slightly lower than the 3.7 per cent forecast last summer. Not-for-profit organizations reported the highest projected total salary increase budgets at 4.1 per cent, with privately held organizations at 3.9 per cent, government organizations or Crown corporations at 3.6 per cent, and publicly traded organizations at 3.4 per cent.
Normandin Beaudry’s report says many employers are aiming to stay competitive beyond cash compensation. Of those surveyed, 58 per cent plan to bolster their total rewards programs, 57 per cent are working on employee engagement and communication, and 32 per cent are reviewing their job architectures and hierarchy.
Founded in 1992, Normandin Beaudry is an actuarial and total rewards consulting firm with offices in Montreal, Toronto and Quebec City. Its team of more than 350 employees serves clients across Canada on issues related to pension, savings, investment consulting, pension plan administration, group benefits, compensation, health, performance and communication.
