Three in Ten Canadian Employers Froze Salaries in 2009

September 10, 2009 ( - According to the 31st annual Salary Increase Survey conducted by Hewitt Associates, 29.2% of Canadian organizations froze salaries this year - the most Hewitt has seen in 10 years.

Prashant Chadha, a compensation consultant in Hewitt’s Toronto office, said in a press release that last summer, 1.8% of Canadian employers were forecasting salary freezes for 2009. For 2010, 6.5% of employers are planning to freeze salaries. Another one-third of respondents are unsure about whether they will do so, preferring to hold off on making a decision until there are clearer indications that the economy is picking up, according to the press release.

“The good news is that 61% of organizations discussed the impact of the recession on salaries with employees,” said Leslie Dutton, a senior communication consultant with Hewitt in Toronto.

Meanwhile, Hewitt found Canadian employers are taking a cautious approach to salary increases for the coming year. The average salary increase is projected to be 2.8% nationally in 2010, up from the 2.2% increase actually awarded in 2009.

However, employees in some provinces can expect their salary increases to better the national average. Organizations in Alberta and Manitoba are projecting average increases of 3% and 3.2%, respectively, while those in Saskatchewan are forecasting 4.2% increases – the highest in the country.

“Half of the respondents indicated that they reduced their 2009 salary increase budgets due to economic conditions, but will increase them in the coming year due to the more favorable outlook. Others are budgeting for higher increases because they expect strong company performance in 2010, while 7% are doing so because they realize their pay levels are below market,” said Jeff Vathje, Hewitt’s Calgary-based national compensation leader, in the announcement.

The survey found 19.4% of Canadian employers have extra funds available to reward employees who are high performers or who have "hot skills," including information technology and engineering. These "special adjustment" budgets were 0.9% of overall salary increase budgets in 2009, but are expected to increase to 1.2% in 2010, according to a press release.

In addition, one-third of organizations are setting aside separate budgets to reward employees who are promoted during the course of the year. In 2009, employers expected that their promotions budgets would amount to 0.8% of their overall salary increase budget, but they actually spent 1.2% to grow talent within the organization and reward those they identified as having high potential for the company. This budget is expected to increase to 1.4% in 2010.

Employers also continue to rely heavily on variable pay programs - programs in which employees receive a bonus if certain corporate, divisional and/or individual goals are attained - to incent and reward employees. However, Hewitt found a slight shift in emphasis in 2009 that is expected to carry over into next year.

"When we surveyed companies last year, 69% said that corporate performance was a factor in determining variable pay amounts. This year, that figure was 74%," said Prashant Chadha, a compensation consultant in Hewitt's Toronto office, in the press release. "It's not a huge increase, but it does suggest that employers are encouraging higher performance across the organization, rather than rewarding only individual performance."

A copy of the survey report can be obtained at .