Performance Pay Increases in Canada

September 12, 2001 ( - Canadian variable pay plans continue to grow in both number and design sophistication, according to the Watson Wyatt Worldwide's Annual Canadian Salary Survey.

The survey reveals an increasing trend towards offering pay-for-performance to all levels of employees.

Second and third-generation programs, designed to increase the awareness of employees to their company’s performance, are also becoming more evident.

The survey notes a 10% increase in the number of organizations using variable pay programs, which involve a combination of quantifiable and subjective objectives to measure and reward employee contribution.

Plan Type

Results show that:

  • the number of organizations providing annual incentives increased to 83%, up 7.8% from the previous year
  • the number providing long-term incentives increased by 10% to 33% of the sample
  • the use of stock option plans remains at 26% of organizations providing incentives
  • the use of stock purchase plans increased by 14% over last year.

Other findings show that the average salary increase for all employees in the past year was 4.1%, an increase of 0.3% on the previous year’s growth rate.

Executives’ pay grew by 4.7%, an increase of 0.4% over the previous year’s increase. A further 7% of respondents did not provide salary increases last year.

Crystal Ball

While fewer organizations were willing to forecast rates for next year, compared to previous surveys, 71% of respondents did provide forecasts.

They revealed that average salary increases for next year are expected to be 3.7% overall and 3.8% for executives.

When the numbers are broken down by region, the survey reveals that for the coming year:

  • respondents in Ontario and British Colombia forecast 3.9% increases
  • those in Manitoba, Saskatchewan and the Atlantic provinces forecast 3.3% hikes
  • Quebec respondents forecast an overall increase of 3.7%.

British Columbia, Saskatchewan, and Quebec experienced the largest salary increases over the respective CPI rates for the past year.

Sector Increases

Breaking the data down by economic sectors:

  • public-sector companies forecast increases of 3% for the coming year and provided increases of 3.3% last year
  • private-sector organizations forecast increases of 3.8% for the coming year and provided increases of 4.3% last year
  • within the communications, electronics, and software sectors, forecasts are 4.6%, while increases for the previous year were 5.9%.

The survey, now in its thirty-third year, included the responses of 425 organizations of varying size, industry sectors, and location participating, representing 830,000 employees.