It’s no secret that salaries across Canada can vary significantly based on where the job is located. Average salary variations are due to several factors that affect the salary range within a specific province or region. Such factors can include labor market specifics and average cost of living.

While many people assume pay differentials are the same as adjustments for cost-of-living measures, high (or low) living costs in an area may only have a moderate impact on pay levels. Salary levels in geographic areas relate more specifically to the rate of unemployment and number of qualified laborers in the area (supply and demand). However, analyzing all of these factors separately to determine appropriate salaries based on geography can be time consuming, especially when considering multiple markets and multiple positions.

Even with the variations between markets, employers can still make sense of geographic differences by comparing aggregated national data against a specific location to determine an appropriate workforce compensation strategy in that area.

Insights from Geographic Salary Differential Results

The below graphic, based on data collected from Mercer’s 2020 salary surveys, shows the salary differences for both the highest paying and lowest paying Canadian locations compared to the national average.

When it comes to compensation planning, Mercer’s 2020 Canada Geographic Salary Differential Tool provides key advantages for HR and financial professionals alike. Let’s look at some common scenarios by analyzing actual 2020 data from 10 locations that have the largest aggregate difference.

Hiring Across Multiple Markets

Most commonly, employers leverage salary differential data when budgeting for large, multi-location hiring efforts. An organization hiring for the same position in multiple Canadian markets might know exactly what to pay employees at their current location and may even know the national salary average for that specific job. However, what about the pay differentials in unfamiliar markets? There could be enormous budget implications if compensation planning doesn’t account for the appropriate deviations in other markets.

For example, if the average Canadian salary for a particular position is $50,000, and a company needs 250 new hires at this position, a quick calculation indicates they should budget $12.5 million to cover the annual salaries, not including additional compensation, benefits, etc. In Fort McMurray, Alberta, however, where positions pay 11.6% more than the national average, a competitive salary for the same job should pay $55,800. If all 250 employees were located in Fort McMurray, Alberta, the budget needed for these salaries is nearly $1.5 million more — a difference that would give most CFOs cause for concern. Comparatively, if these employees were all located in Moncton, New Brunswick, one could safely estimate a budget of $11,187,500 in annual salaries payments, saving the company about $1.3 million from the national average calculation.

More commonly though, positions are spread across multiple cities with varying differences. In these situations, it is crucial to ensure that one is properly calculating the expected costs of salaries in each specific city.

Structuring Salaries

Let’s say that an organization and its employees are spread across multiple geographic locations within the country. The organization may already have remuneration and salary data to help with their compensation planning. However, to competitively attract and retain top talent, their compensation strategy is to target the market median for the position.

Again, a fair 5% higher salary in Fort McMurray, Alberta is actually 5% tacked on after accounting for the 11.6% differential. In New Brunswick, positions pay 9.3% less than the national average. So even when paying their New Brunswick employees 5% more than the aggregate local average, they are still paying a bit less than the national average while offering what would likely be an appealing figure to potential hires in New Brunswick.

Attract and Retain Top Talent Across All Your Markets

From cost of living differences between cities to labor market specifics, it can be tricky to make sense of the ever-changing differences for why and how salaries differ across cities. With an increasing number of companies having operations in multiple locations and the growing number of remote employees, you need credible salary differential information to stay competitive.

Mercer’s 2020 Canada Geographic Salary Differential Tool will give you accurate geographic salary estimates to enhance your workforce compensation strategy. Determine the cost of your staff with pay differentials for 97 cities and compare your compensation data at the city or national level using information from more than 2,000,000 employee observations.

Evaluate employee pay using both 2020 actual increases and 2021 projected increases while also translating the rates of pay in one location to comparable rates in another. Data is presented in different pay bands — up to $150,000 across five job levels — to ensure detailed compensation planning.

For additional resources, check out Mercer’s Knowledge Library for compensation planning, benefits, policies and practices and more.