More than Base Pay Needed to Attract and Retain Employees
TORONTO, Sept. 6 /CNW/ - The shortage of labour in Alberta has caused
salary increases in Calgary to far exceed those in the rest of the country,
according to new research conducted by Hewitt Associates, a global human
resources services company. As a result, many employers report that
maintaining the market competitiveness of their pay levels is a challenge and
they are considering more cost-effective attraction and retention solutions.
Hewitt Associates' 29th annual "Canada Salary Increase Survey" reveals
that, across Canada, average base salary increases are projected to be 3.8 per
cent in 2008. Base salary rose by the same percentage this year and by 3.6 per
cent in 2006. These numbers are comparable to actual and projected salary
increases for U.S. workers.
Hewitt found that virtually no Canadian companies reported freezing
salaries in 2007 and none expect to do so in 2008. Salary increases for 2007
were 3.7 per cent in Vancouver, 3.4 per cent in Montreal and 3.3 per cent in
the Greater Toronto Area. Increases in these cities are expected to be
virtually flat in the coming year: employers project a 2008 increase of
3.7 per cent in Vancouver, with increases of 3.5 per cent and 3.4 per cent
expected for Montreal and the Greater Toronto Area, respectively.
Calgary Raises the Bar
In Calgary, however, employees experienced an average increase of 5.3 per
cent in 2007, only slightly higher than the 5.2 per cent increase employers
projected a year ago and on par with the 5.3 per cent actual increase in 2006.
Employers are forecasting an average 2008 increase of 5.2 per cent for workers
"Calgary employers have focused this year on meeting their current labour
demands," stated Dan Stewart, a senior consultant in Hewitt's Calgary office.
"However, even with the current economic boom, it may become difficult to
continue to increase salaries at these rates. Employers in Calgary are
becoming more strategic both in what they offer and how they explain
compensation, so they are well-positioned to win not just the battle but the
war for talent. They're setting the standard for employers in the rest of
Canada as the attraction and retention challenge spreads beyond Alberta."
Money Isn't Everything
Alternatives to dramatic increases in base salary include initiatives
geared to awarding higher pay for high performance as well as ensuring that
employees appreciate the value of all the benefits they receive as part of
their compensation package.
- Variable pay plans - Performance-related rewards that must be
re-earned each year and do not increase base salary are currently
offered by 80 per cent of organizations. According to Hewitt's
survey, awards based on corporate performance are most common
(62 per cent), followed by individual performance awards (51 per
cent). This is a change from last year when 67 per cent of
organizations reported that their variable pay plans were based
mainly on corporate performance and only 35 per cent offered
individual performance awards. "Providing a variable pay plan is one
thing, but ensuring that it successfully keeps employees focused on
what they need to do to drive business results and achieve additional
pay is the challenge," said Keri Humber, a Toronto-based senior
consultant with Hewitt. "Over half of employers reported difficulty
with designing pay programs that provide workers with a clear line of
sight between effort and rewards."
- Total compensation approach - Rather than providing salary only,
organizations may want to consider also spelling out the value of
benefits like health care and retirement programs. "If employees
understand how much all aspects of their compensation package cost,
they'll be able to make apples-to-apples comparisons with what a
competitor is offering," explained Humber. "They may not be lured
away by a higher salary if they appreciate the value of the
orthodontia coverage and pension plan provided by their current
- Communication - Transparency is key when it comes to communication
around salaries. It's important to share the organization's pay
philosophy and how salary figures were determined. "Employees may
feel as though they are being exploited if they find out a competitor
is paying a much higher salary for the same position," said Stewart.
"By explaining the methods used to determine pay levels, workers will
know they're being treated fairly." This may be harder than it
sounds, however. Almost half (48 per cent) of employers reported that
raising the ability of managers to have effective pay conversations
with their direct reports was a challenge.
- Separate compensation arrangements for "hot skill/location" jobs -
Employers may offer such things as additional base pay, sign-on and
retention bonuses to employees who agree to work in certain
locations. More than half (52 per cent) of organizations provide
special compensation arrangements to employees who work in Calgary,
while 25 per cent offer them to those in Edmonton, 23 per cent in
Fort McMurray and 16 per cent in Vancouver. Special compensation
arrangements for those with "hot skills" seem to be cooling off,
however. While 45 per cent offered them in 2005, 39 per cent did so
in 2006 and only 34 per cent in 2007.
- Non-monetary benefits - Flexible work arrangements are taking the of
special compensation arrangements for "hot skill" jobs. They are
currently offered by 81 per cent of organizations, up from 75 per
cent in 2004, and include flexible hours, working from home all or
part of the time, and compressed work weeks. The challenge is what to
offer next when so many employers are already offering flexibility.
"Some companies are providing employees-especially in "hot"
locations - with housing allowances/subsidies/loans, COLA/living
allowances, computers with Internet hook-up, assistance in locating
housing, and additional vacation time," stated Stewart.
Salary Increases by Position and Industry
In 2007, average actual salary increases across all industries ranged
from 3.2 per cent for union employees to 4.1 per cent for executives. Salary
increases projected for 2008 run from 3.1 per cent for union employees to
4.0 per cent for executives.
Increases are highest in the oil and gas industry, where they averaged
6.3 per cent for all positions in 2007, and are expected to be around 5.5 per
cent next year. Other industries where salary increases are projected to
exceed the national average in 2008 include government (5.2%),
construction/engineering (4.7 per cent) and aerospace (4.0 per cent).
Industries with lower expectations for salary increases in 2008 include
automotive (3.4 per cent), hospitality/restaurants (3.2 per cent), printing
(3.0 per cent), and forest and paper (2.8 per cent).
Copies of Hewitt Associates' 29th Annual "Canada Salary Increase Survey"
are available at www.compensationcenter.com, or by calling 847-295-5000.
About Hewitt Associates
With more than 65 years of experience, Hewitt Associates (NYSE: HEW) is
the world's foremost provider of human resources outsourcing and consulting
services. The company consults with more than 2,300 organizations and
administers human resources, health care, payroll and retirement programs on
behalf of more than 340 companies to millions of employees and retirees
worldwide. Located in 35 countries, including Canadian offices in Toronto,
Montreal, Vancouver, Calgary and Regina, Hewitt employs approximately 24,000
associates. For more information, please visit www.hewitt.com.
For further information:
For further information: Marcia McDougall, (416) 225-5001,