Companies project record-low salary increases in 2017: survey

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The lingering downturn in Canada's oil patch will continue to hit employees hard next year as energy-sector companies forecast broad salary freezes or lower wage increases in 2017.

A national survey of 500 companies across industry sectors by consulting firm Mercer Canada found employers are projecting record-low salary increases, driven by weakness in the energy sector. Mercer said the normally high-paying energy sector will also offer lower salary increases than other major sectors of the economy, which is a reversal from the past.

Gordon Frost, leader of Mercer's talent business, said the national salary increase projections are the lowest since Mercer launched its survey more than 20 years ago. It is also the first year that the energy sector has forecast wage increases below the national average level.

"People are being very cautious and conservative with what they're planning for salary adjustments next year, primarily as a result of the economic uncertainty in the marketplace," he said.

On a national basis, companies are planning average wage increases of 2.6 per cent for 2017 across all employee groups, a decline from 2.8 projected last year and 3 per cent the year earlier. The 2017 projections are even lower when Mercer includes companies that are planning to freeze salaries, falling to 2.3 per cent for the entire survey group.

The energy sector, meanwhile, is projecting increases of just 1.3 per cent, including companies planning to freeze salaries, which is well below the national average and reflects conservative spending planning in an uncertain environment. Forty per cent of energy companies said they will freeze salaries for some or all of their employees next year, which is an improvement from 60 per cent a year ago, the survey said.

Mr. Frost said companies reported they often plan to freeze executive salaries in 2017, followed by management and then professional workers, which may surprise many who see executive pay levels increasing. Energy companies in particular are freezing executive pay to curb costs.

"I think it's easier to freeze when everybody else in your sector is freezing," Mr. Frost said. "At the executive level, it's less competitive than certainly five years ago."

The salary projections exclude unionized employees because their increases are predetermined by negotiated agreements and are not typically subject to modification annually depending on the company's spending plans.

With the exception of Alberta, Mercer said all other provinces showed similar rates of increase in 2016 and are projected to show little regional difference in 2017.

"We used to see a lot wider divergence from region to region across Canada and from industry sector to industry sector, with energy always at the top and then a big spread down to the bottom," Mr. Frost said. "We're seeing a lot more convergence around the middle this year."

A similar survey of 298 employers by consulting firm Aon Hewitt shows companies are forecasting a 2.8-per-cent salary increase for 2017, which is slightly higher than the 2.6-per-cent projection from Mercer's study.

Aon Hewitt said the highest forecast salary increases for 2017 were in sectors such as construction and engineering, computer hardware and software services, and consulting services, which all forecast gains greater than 3 per cent next year. Sectors with the lowest forecast salary increases included transportation, media, banking, law and energy.

Average salary projections for 2017 were lowest for Alberta and Saskatchewan at 2.4 per cent. In Alberta, actual salary gains for 2016 were 1.6 per cent, the lowest level in Canada, followed by actual 2016 gains of 2 per cent in Saskatchewan.

Companies in British Colombia forecast gains of 2.6 per cent for 2017, followed by Manitoba, Ontario and Atlantic Canada at 2.8 per cent, and Quebec at 2.9 per cent, Aon Hewitt said.