Companies are revising their salary increase forecasts upwards and it is in Quebec that they plan to grant the largest increases in 2023.
The results of a Canada-wide poll conducted at the end of 2022, released Monday, are not good news for the Bank of Canada, which is trying to curb inflation.
Companies confirm that they are more than ever under pressure to increase wages, according to the firm specializing in compensation Normandin Beaudry. Half of the companies surveyed indicated that they had revised their compensation budget upwards in recent months.
In Quebec, companies planned to increase wages by 4.1% last summer. In the fall, the forecast increase was 4.4%, the highest in Canada.
The average increase expected in Canada and Quebec for non-unionized companies is at a very high, even historic level, according to Anna Potvin, partner and head of the firm’s compensation practice. “We haven’t seen compensation budgets this high in the last 20 years,” she says.
Almost half of companies also plan an additional budget to retain employees, avoid resignations or make ad hoc adjustments based on the market.
It is also a first that this possibility of readjusting wages during the year is so widespread, according to Anna Potvin, which proves that the labor market is very tight.
“Even with the threat of a recession, the effect of the labor shortage is such that the prospect of shedding some employees is not considered by companies. They want to keep all their people in the boat. »
Including the additional budget planned by companies, the increase in the compensation budget for 2023 reaches 5.1% in Quebec, compared to 4.7% for the Canadian average.
It’s not surprising that Quebec companies are planning the largest wage increases in Canada, according to the compensation specialist, because it is in Quebec that the labor shortage is most acute.
Recruitment challenges are fairly widespread across industries, but information technology and the service industry in general.
Effect on inflation
At 4.2%, the average wage increase expected in Canada (without additional budget) by non-unionized companies is cause for concern for the Bank of Canada, which fears a wage-price spiral that would thwart its efforts to reduce the inflation.
Already, in 2022, salaries have increased considerably. According to Statistics Canada, the average hourly wage increased by 5.1% between December 2021 and December 2022.
In his Monetary Policy Report (RPM) released last week along with the announcement of an eighth 25 basis point rate hike, the Bank of Canada pointed out that wage growth was broad-based but appeared to be holding steady around 4% to 5%.
It’s too high, she says. Unless there is strong productivity growth, “it will not be possible to reach the inflation target of 2% if growth remains in this range of 4 to 5%,” warned the Bank of Canada.
National Bank economists agree. “Wage growth remaining stuck in its current range of 4-5% would be problematic since it could prevent inflation from returning to its target,” they write in their commentary on the MPR.
Salary increase forecasts stated by companies vary according to the type of organizations. They are 5% in the private sector not listed on the stock exchange, 4.8% in non-profit organizations and 4% in the public and parapublic sector.