____ Posted Thursday August 10, 2017 ____

Employee Expectations

Survey shows salaries expected to increase by 2.3 per cent in 2018

Annual survey of Trends in Human Resources indicates employers are cautious about salary increases, while focusing on building a high-performing workforce

Employers in Canada are expecting salaries to rise by an average of 2.3 per cent in 2018, according to Morneau Shepell's annual survey of Trends in Human Resources. This is up from the actual 2.2 per cent average increase in 2017. The forecast for 2018 includes expected salary freezes and excludes promotional or special salary adjustments.

"Employers are relatively optimistic about the coming year," said Michel Dubé, a principal in Morneau Shepell's compensation consulting practice. "Those expecting better financial performance in the coming year outnumber those expecting weaker performance by four to one. Despite this optimism, employers are still cautious about salary increases, perhaps reflecting a concern that rising interest rates may dampen economic growth next year."

The expected 2.3 per cent increase compares favourably to the current rate of inflation, which is about 1.0 per cent.

The survey identified some industry sectors that are expecting higher than average salary increases in 2018. They include utilities at 2.9 per cent, and manufacturing and wholesale trade at 2.7 per cent. These industries may be catching up after lower than average increases over the past few years. Expected salary increases in sectors such as finance and insurance are expected to remain strong at 2.7 per cent next year.

Lower than average increases are expected in certain industry groups that face more uncertain economic circumstances. This includes mining and oil and gas extraction where average salary increases of 0.8 per cent are expected. Salary increases in the public sector are also expected to be below average. Salary increases in public administration, health care and social assistance employers are expected to average 1.7 per cent next year, with educational services slightly higher at 1.9 per cent.

Reflecting the different mix of industries by province, Alberta and Prince Edward Island are expected to have the lowest salary increases next year, at 1.8 and 1.9 per cent respectively. Quebec is expecting the highest salary increases next year, at 2.6 per cent. Salary increases in other provinces will be close to the norm.

Building a high-performing and resilient workforce is a priority for employers

In addition to looking at expected salary increases, the survey also asked Human Resources (HR) leaders about their priorities for 2018.

Their top priorities were on building a high-performing workforce that adapts better to change. Almost two thirds of HR leaders (65 per cent) said that improving employee engagement was a top priority for the coming year. Over half of HR leaders (56 per cent) said they will also be focusing on attracting and retaining employees with the right skills, and 55 per cent identified helping their organizations adapt better to ongoing change as a top priority. Improving the physical and mental health of employees was also high on the list for HR leaders, with 47 per cent identifying this as one of their priorities for the coming year.

The top priorities of HR leaders align closely with the views of their employees. In a study of workplace mental health published by Morneau Shepell earlier this year, among employees who had experienced organizational change, 40 per cent said the change was negatively affecting their health, and 30 per cent indicated that it impacted their job performance.

"HR leaders are looking for ways to build more resilient workforces – the most successful organizations will be those that can adapt best to change," said Paula Allen, vice president of research and integrative solutions at Morneau Shepell. "To build more resilient workforces, HR leaders are implementing a range of solutions from training employees to have stronger coping skills, to providing better tools and training for managers to ensure that employees facing challenges get the help they need."

Employers are concerned that employees are not adequately prepared for retirement

The survey also picked up some important changes in employer attitudes toward retirement. More than 90 per cent of HR leaders said they were concerned about how well their employees were prepared for retirement. This is a growing concern because an increasing proportion of employees today are covered under defined contribution (DC) retirement plans that do not offer guaranteed payments after retirement. HR leaders are exploring a range of solutions from providing better education for employees (58 per cent), offering them decumulation options when they retire (27 per cent), and allowing retirees to purchase insurance at discounted costs through online retiree marketplaces or other options (23 per cent).

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