Tepid economic recovery will limit salary gains in 2011

In an unsteady economic recovery, organizations are planning moderate base pay increases in 2011. Increases for non-unionized employees are expected to average 2.8 per cent, The Conference Board of Canada revealed while presenting the findings of its 29th Compensation Planning Outlook survey at the recent Compensation Outlook 2010 conference.

“Things are not quite back to business as usual for compensation planners. The economic recovery is still unsteady and burdened by risks from abroad,” says Karla Thorpe, Associate Director, Compensation and Industrial Relations. “The next year will require patience on the part of workers and businesses. Workers cannot yet expect strong wage gains, and businesses have been slow to see improvements in corporate balance sheets.”

In recent years the public sector has outpaced the private sector in base-pay salary increases. This trend is expected to reverse in 2011, with private sector employers planning increases of 2.9 per cent, compared to 2.3 per cent in the public sector (including the public service, agencies and Crown corporations, municipalities, hospitals and schools). Base pay represents the most significant component of total cash compensation, particularly in the public sector.

Projected increases are highest in the oil and gas industry, at an average of 3.6 per cent, slightly greater than the gains expected in natural resources (excluding oil and gas) and construction industries (both 3.5 per cent). The lowest increases – 1.4 per cent on average – are expected in the education and health sectors.

Saskatchewan workers can look forward to the highest average gains in Canada, at 3.6 per cent, followed by Alberta (3.1 per cent). At 2.6 per cent, Ontario workers can expect the lowest average base pay increase.

Less than three per cent of respondents – all public sector organizations – are planning to freeze salaries across all employee groups. In contrast, almost six per cent of respondents to last year’s survey reported a salary freeze for all employees.

Almost every respondent to the survey has an employee pension plan in place. For non-unionized employees, the public sector spends an average of 9.8 per cent of annual payroll compared with the private sector where the average cost is 7.4 per cent. Defined benefit pension plans are far more common in the public sector with 81 per cent of organizations offering this type of plan, compared to 45 per cent in the private sector. The most common type of plan in the private sector is the defined contribution pension plan, with 60 per cent of organizations offering this type of plan.

The findings of the annual survey are published in Compensation Planning Outlook 2011: Playing It Safe in the Face of an Unsteady Economic Recovery. The 29th survey, which includes the responses of 384 Canadian organizations, was conducted between June 15 and September 1, 2010.

For more information, visit www.conferenceboard.ca.