If you were relying on a pay raise before the end of 2020, chances are that’s not happening.
According to Gallagher's 2020/2021 Salary Planning Survey – Canada Edition, 62 per cent of employers implemented pay raises before the pandemic. However, as the economic realities of COVID-19 set in toward the end of first quarter 2020, many organizations were forced to reduce employee headcounts, implement hiring freezes and decrease salary-increase budgets. As a result, 38 per cent of employers indicated that their salary-increase plans were modified for 2020 – a trend that will continue into 2021.
As Canadian employers plan for the year ahead, nearly half (43 per cent) of organizations modified salary increase plans in 2021 due to COVID-19. Among the employers expecting their 2021 salary-increase plans to be adversely affected, 45 per cent expect to reduce raises, 35 per cent plan to suspend raises and freeze salaries, while six per cent plan to reduce salaries next year.
"Market reactions to the pandemic and the economic downturn are applying downward pressure to Canadian salaries and employers tell us that these compensation-containment measures will extend into next year," said Melanie Jeannotte, CEO of Gallagher's Benefits & HR Consulting division in Canada. "The impact COVID-19 will have on costs and revenue will be unpredictable in the year ahead, which is causing many employers to reconsider salary increases in an effort to preserve jobs in 2021."
The findings of the 2020/2021 Salary Planning Survey – Canada Edition align with Gallagher's 2020 Benefits Strategy & Benchmarking Survey – Canada Edition, which found that in addition to a reduction in salary increases, the economic impact of COVID-19 is forcing Canadian employers to shift their employee-benefit priorities towards reducing expenses and focusing on financial stability. The study found that the top benefits-related challenge this year for organizations is controlling costs (55 per cent).
"Employers' priorities have changed as a result of the pandemic, and leaders have shifted their focus from talent acquisition and retention to financial stability and business continuity," said Jeannotte. "However, while many employers have looked to reduce expenses in response to COVID-19, it's critical to remember that employee wellbeing and engagement remain key components to business performance. As employers review total rewards cost structures to reflect new financial realities, it's imperative that they also address their employees' evolving needs."
Additional key findings from the Benefits Strategy & Benchmarking Survey include:
- To combat costs, employers are exploring variable cost structures and rebalancing cost-sharing. People are among an organization's most important assets and also one of the most expensive due to compensation and benefit costs. Medical inflation continues to outpace general inflation in Canada. As such, employers are beginning to rebalance traditionally generous cost-sharing across multiple plan-design components. While a majority of employers still pay 100 per cent of plans, downward trends abound with fewer employers offering full coverage of extended healthcare co-insurance (down three per cent), extended healthcare premiums (down six per cent), paramedical co-insurance (down six per cent), and drug plan premiums (down nine per cent).
- Aligning benefits with shifting workplace preferences increases perceived value amongst employees. Moving forward, employers will likely look to more flexible total rewards strategies, policies and practices that can be reconfigured to more readily to align with trends in workforce needs and interests. Full-time telecommuting more than tripled from early 2020 to June, reaching 72 per cent, and most employers (85 per cent) expect to retain their work-at-home policies post-pandemic to accommodate employees that prefer this arrangement. As both physical and emotional health are prioritized by employees and employers alike, increased access to virtual healthcare and Employee Assistance Plan options, along with more flexible sick-day policies and personal-day allowances, are becoming more important to the perceived value of the benefits package.
- Strategies for emerging from the pandemic can position the organization to thrive in future periods of disruption. Most employers planned and managed benefits from year to year (66 per cent) in 2020, while just 12 per cent relied on a multi-year strategy. But with the impact of COVID-19, there's a stronger case for preparing a longer-term roadmap that includes scenario planning and regular checkpoints to ensure both employers' and employees' needs and interests are being met. This includes updating policies around leaves; educating managers to ensure compliance with federal, provincial and municipal regulations; and investing in HR technology that can more safely support areas of increased intensity including off-boarding and outplacement.
"'Business as usual' lost all meaning in 2020. Co-existing with COVID-19 has required an unprecedented level of adaptability, however employees are looking for stability more than anything," said Jeannotte. "Employers who can strike the right balance between cutting costs and investing in their employees' financial, physical and mental health will be better positioned to retain staff and compete for new talent when the labour market picks up."