The Salary line, for most companies, is the largest single item in the annual budget. Getting it right is a large factor for the success of the organization. Pay too much – money wasted. Pay too little – risk being uncompetitive.  Each year, we review salary intention surveys and provide our clients with our best estimate of what will be happening in the following year. This information is important when developing a reliable budget that is built on good data.  For 2014, the consensus for salary budget increases in Canada is:

Salary Budget Increases                                            2013       2014 (proj)

Non-Management                                                         3.07%       3.07%

Management                                                                 3.10%       3.10%

Officer/Executive                                                           3.12%       3.06%

Inflation (July 2013)                                                       1.32%        1.7 – 2.0%

These figures are a little higher than the last few years, but not by much. Prior years have centred around 3.0%, with few organizations differing by more than 0.2% either way. In Canada there are regional differences, with the western provinces trending a little higher than the east. Québec’s numbers are approximately 0.1% lower than the national averages.

Salary budgets usually include provision for both general annual adjustments, and special situations such as promotions that require special attention.  Many companies also review their salary policies annually, or biennially. The surveys indicate that salary policy (or structure) will increase roughly in line with anticipated inflation:

Salary Structure Changes                                        2013        2014 (proj)

Non-Management                                                        2.00%      2.00%

Management                                                                2.00%     2.00%

Officer/Executive                                                          2.00%     2.00%

Inflation (July 2013)                                                      1.32%     1.7 – 2.0%

Most companies monitor the CPI consumer price inflation index and adjust their compensation policies in keeping with the CPI movement, unless they have a particular problem (e.g. high turnover, hiring difficulties etc.) that requires special attention.

Using annual salary reviews to motivate employees is difficult when managers have little money available. A salary increase of 2.5% is not likely to be an incentive that will influence employee behaviours. We have been counselling our clients to base their policy on assuring that employees are paid correctly each pay period during the year. Make sure everyone is paid equitably compared to their colleagues, on their contribution to the company’s success, and the external market. Then, communicate that policy to employees – assure that everyone knows that the reward for excellent performance is to be paid fairly (and perhaps generously) every time their pay is  deposited in their bank accounts. Let employees know that top performance is rewarded 52 weeks per year – compensation is not a lottery that happens only once each year, with an unpredictable outcome. We can provide additional information and details regarding 2014 salary projections, and we would be happy to discuss any issue concerning effective compensation management or any general HR issue.