Canadian Employers Slash 2009 Salary Hike Budgets

November 7, 2008 ( - Struggling with a weak economy, many Canadian employers are cutting the salary increase budgets put together just a few months ago - in some cases by more than one percent.

That’s a key conclusion of an October 2008 online Hewitt Associates survey that found 36% of the 411 responding companies will cut their earlier 2009 salary increase budgets.

On average, these organizations had set up 3.8% salary hikes that have now been scaled back to 2.8%, according to a Hewitt news release.

British Columbia and Quebec employees are looking at the highest cutbacks in salary increases, above the national average.

The British Columbia survey respondents had intended to increase salaries by an average of 3.63% in 2009 and have now lowered that projection to 2.25%, Hewitt said. In Quebec, the average increase has gone from 3.5% to 2.2%.

The same holds true for 2009 salary increases for employees in Alberta. The average increase projected earlier this year by survey respondents in that province was 5.13%; increases are now down to 3.96%.

"Alberta salary increases for 2009 are still expected to be well above the national average," said Jeff Vathje, a senior compensation consultant in Hewitt's Calgary office, in the news release. "Employers in Alberta are not acting rashly. They are well aware that they still need to offer competitive salaries in order to attract and retain employees in a labor market that continues to be fairly tight."

In Ontario, however, for those employers planning to cut back on their original salary increase forecasts, the drop will be less than the national average. The initial forecast of an average 3.54% increase in 2009 is now 2.69%. "The likely reason is that Ontario had been experiencing economic slowdowns prior to the recent crisis and employers modified their forecasts accordingly," stated Vathje.

When respondents that are planning more modest salary increases over the coming year were asked to provide reasons for the reduction, almost three-quarters responded that it was due to market conditions in general.

Hewitt conducted a similar survey in the United States and found that 42% of American employers are revising their 2009 salary increase forecasts (see Tough Economic Times Hurts Pay, Bonus Awards ). On average, salary increases at these organizations are expected to drop from 4.1% to 3.1%.