It looks as though employers are remaining fairly steady in terms of their projected annual increase budgets for 2025. The most recent Canada Compensation Planning Survey shows that employers are projecting average merit budgets to be the same as those delivered to employees in 2024 — 3.2% merit and 3.5% total increases.
However, only 14% of the 490 respondents have finalized their budgets; 51% are still in the preliminary phases of collecting information. This suggests that there is still a chance we will see budgets change between now and when increases are delivered in Q1 of 2025. Only time will tell, but let’s take a look at what this survey reveals.
Variations in base pay increase budgets
We always see some differences in projected merit budgets from one industry to another. This year a few of the standouts that are planning budgets higher than the national average are Mining & Metals (3.6%) and High-Tech, Consumer Goods, Life Sciences, and Other Manufacturing (all 3.4%). Banking & Financial Services is reporting the lowest, at 3.0% for merit increases.
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While most segments of the labor market have become more stable, the one that still leaves employers struggling is the hourly workforce. Even though enticing hourly workers to stay remains a challenge, the national average for the Non-Executive Hourly merit budget is 2.8%, which is less than the overall national average. Looking at industries that are heavily reliant on hourly workers, we do see some of the higher merit budgets for their hourly populations:
- Consumer Goods — 3.2% merit budget for hourly workforce
- Other Manufacturing — 3.4% merit budget for hourly workforce
- Retail & Wholesale — 3.2% merit budget for hourly workforce
The respondents that classify their budgets as final or “approved by leadership” have an average of 3.1% set aside for merit and 3.5% for total increases. As you are finalizing your budgets, perhaps take those numbers as indicators of the national averages and take directional guidance from the industry numbers.
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Promotions
Similar to prior years, on average, companies do plan to promote between 7% and 8% of their workforce in 2025, delivering an 8.9% pay increase, on average, for a one-level promotion. The highest percentage of any one group of employees expected to be promoted is the Non-Executive (Salaried) group, which you can think of as the professional and management group. Conversely, employers only plan to promote 4.5% of Executives, which is understandable.
Following the trend of the last couple of years, organizations that have a separate promotional budget are averaging 1% of the overall salary budget.
New hire pay
We know that most of the accelerated or elevated pay practices that took place in the tight labor market post-COVID have all but disappeared. What about paying premiums for new hires? Sixty-five percent of the organizations surveyed said that they offer new hires salaries that are comparable to those of current employees. Another 12% said “We didn’t give premiums to new hires over the past few years.”
Moving forward
The next Mercer QuickPulse™ Canada Compensation Planning Survey will open for participation in mid-March of 2025. That’s the survey where we will find out what exactly happened during the annual increase season when we publish our report in April. Will some political or economic factors impact the final budgets and actual spending for total increases in the new year? We’ll have to wait and see!
In the meantime, reach out to us for help on any of your year-end compensation planning or even to get a jump start on 2025. Call 855-286-5302 or email surveys@mercer.com.
