Payroll survey shows weakening financial picture for employed Canadians

More living pay cheque to pay cheque, saving less, postponing retirement and feeling overwhelmed by debt

TORONTO, Sept. 10, 2014 /CNW/ - Most key indicators in the sixth annual National Payroll Week Research Survey, conducted by the Canadian Payroll Association (CPA), point to a weakening financial picture for working Canadians across the country.

More employed Canadians are living pay cheque to pay cheque, saving less and falling further behind in meeting their retirement goals.

Living pay cheque to pay cheque

More than half of employees (51%) report that it would be difficult to meet their financial obligations if their pay cheque was delayed by a single week. This is up from an average of 49% over the past three years.

For those aged 18-29, the number is even higher – 63% report living pay cheque to pay cheque.

Another finding confirms that more than a quarter of those surveyed are living very close to the edge. A total of 26% say they probably could not pull together $2,000 over the next month if an emergency expense arose.

Saving less

The low savings rate has become even more prevalent this year. Half of all employees are putting away just 5% or less of their pay, versus an average of 47% over the past three years. Financial planning experts generally recommend a retirement savings rate of 10% of net pay.

Of those who indicate they are trying to save more today than a year ago, fewer are able to do so (65%, down from an average of 67% over the past two years). Part of the reason for low savings is that 44% of employees are spending all of, or more than, their net pay. Among the top reasons for increased spending, the survey identifies: children, home renovations and education.

The provinces/regions with the highest percentage of employees spending all of, or more than they earn are:  Manitoba (58%), Atlantic Canada (58%), and Saskatchewan (54%).

"Those who are trying to save but finding it hard to succeed should consider directing a portion of net pay into a separate savings account and/or a retirement savings program," says CPA President and CEO, Patrick Culhane. "They can speak to their organization's payroll practitioner to arrange this."

Retiring older and needing more retirement savings

Fully 79% expect to delay retirement until age 60 or older – up from 70% over the past three years. The number one reason cited for retiring later in life is that employees are not able to save enough money.

Employees continue to raise the bar in terms of what they think they will need to retire comfortably:

  • Fewer now feel that savings under $500,000 will be sufficient (18%, down from an average of 21% over the past three years).
  • More think between $500,000 and $2 million will be required (68%, up from an average of 60% over the past three years).

Yet despite upward adjustments in perceptions of what constitutes an adequate nest-egg, the vast majority of employees are nowhere near reaching their goals – 75% say they have put aside less than a quarter of what they will need in retirement (up from an average of 73% over the past three years).

And even among employees closer to retirement (50 and older), a disturbing 47% are still less than a quarter of the way there, indicating a significant retirement savings gap, according to Culhane.

Debt overwhelms many

Well over one-third of employees (39%) say they feel overwhelmed by their level of debt (up from an average of 32% over the past two years). In fact, 12% of respondents this year indicate they do not think they will ever be debt free, and one-third of respondents this year say their debt has increased from last year.

The number one step that employees believe they can take to improve their financial situation is to earn more (27%), while spending less dropped to second place from last year and decreasing debt remained flat.

"Earning more is not always feasible," says Culhane. The CPA suggests that automatic savings through payroll is the best strategy for financial well-being.

Payroll professionals can help

"Even though the Canadian economy did well relative to other G7 countries in the past decade, many employed Canadians say they are having a difficult time making ends meet," notes Marie Lyne Dion, CPA Chairman. "They feel unable to put aside enough money to reach their retirement savings goal.  That's where payroll professionals can help, by assisting employees in setting up their contributions to a savings plan or retirement program."

This is the CPA's sixth annual research survey of Canadian employees. The survey is conducted to mark National Payroll Week (September 15-19, 2014).

Visit www.payroll.ca for a summary of the survey findings (under Media Room) and for further information. CPA spokespersons across Canada are available for interviews.

CPA Research Survey of Employed Canadians:

A total of 3,211 employees from across Canada, and from a wide range of industry sectors, responded to an online research survey between June 17 and August 1, 2014, using a convenience sampling methodology. Respondents were asked to complete the research survey by members of the Canadian Payroll Association with whom they work. This Canadian Payroll Association developed employee research survey was conducted by Framework Partners, a market research and strategic planning firm. The survey is consistent with a margin of error of plus or minus 1.7% 19 times out 20, but as a non-probabilistic methodology was used, a definitive margin of error cannot be expressed. 

About the CPA:

Canada's 1.5 million employers rely on payroll practitioners to ensure the timely and accurate annual payment of $860 billion in wages and taxable benefits, $268 billion in statutory remittances to the federal and provincial governments, and $94 billion in health and retirement benefits, while complying with more than 190 federal and provincial regulatory requirements. Since 1978, the Canadian Payroll Association (CPA) annually influences the payroll compliance practices and processes of over five hundred thousand organizational payrolls. As the authoritative source of Canadian payroll knowledge, the CPA promotes payroll leadership through advocacy and education.

National Payroll Week recognizes the accomplishments of payroll professionals and the CPA by building greater awareness of the size and scope of payroll and its impact on the Canadian economy.

Image with caption: "Most key indicators in the sixth annual National Payroll Week Research Survey, conducted by the Canadian Payroll Association point to a weakening financial picture for working Canadians across the country. More are living pay cheque to pay cheque, saving less, postponing retirement and feeling overwhelmed by debt. (CNW Group/Canadian Payroll Association)". Image available at: http://photos.newswire.ca/images/download/20140910_C2010_PHOTO_EN_5468.jpg

SOURCE: Canadian Payroll Association

For further information: Robert Stephens, robert@prpost.ca, 416-777-0368; Niki Kerimova, niki@prpost.ca, 416-777-0368; Joey Gill, joey_gill@sympatico.ca, 416-556-0675; Leslie Challis, lesliechallis@sympatico.ca, 416-767-0167

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http://www.payroll.ca

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