Inflation will continue to make its presence felt in the employer-employee relationship this year. Compensation and pension plans are in the spotlight.
First, pension plans. Those with defined benefits got better in 2022 despite the rather austere situation on the stock and bond markets. Mercer’s index of financial health of pension plans ended the year at 113%, up from 103% at the start of 2022. Of the plans in the HR firm’s database, 79% were estimated to be in surplus position at the end of the fourth quarter, compared to 61% a year earlier.
This applies according to a solvency approach. And this improvement stems directly from the sharp increase in interest rates, which had the effect of lowering the actuarial liability. In the equation, this decrease more than offset “the decline in pension plan assets during the year,” Mercer says. Because based on the so-called continuity approach, the plans have not had it easy in 2022, called upon to deal with negative returns and a stock-bond correlation.
If, in the absence of a new geopolitical shock, we expect an improvement on the bond side and a more interesting year for balanced portfolios, inflation will nevertheless continue to present a risk for employees, employers and plan sponsors in 2023. Indexed annuity pension plans will experience inflation-related cost increases, both realized and future, while non-indexed ones are likely to experience pressure from providers requiring a one-time cost-of-living adjustment. Not to mention that such an adjustment on a discretionary basis would not be without creating tension from contributors.
“Sponsors of fixed-rate annuity plans or career earnings plans can expect to face pressure to increase the annuity accrual rate and update the salary base,” Mercer adds. And this, especially since the plan shows a surplus. In the case of defined contribution plans, group RRSPs and other capital accumulation plans, the negative returns of 2022 combined with the high level of inflation could translate into a postponement of many retirement plans.
Then the pay. Statistics Canada recalled Friday that wages still failed to catch up with inflation. Except in Quebec. Over 12 months, the average hourly wage increased by 5.1% in December in Canada, less than the 5.6% in November, but far below the growth of the consumer price index, which rose to 6.8% in the November reading. In Quebec, the 12-month increase in hourly wages went from 5.8% in November to 6.9% in December.
Money, the main issue
A survey by recruitment agency Robert Half published in December and conducted among 1,100 workers indicates that 50% of respondents plan to change jobs in the first semester. This percentage was 31% six months earlier. Labor shortage, inflation… “Many Canadian workers continue to have confidence in the labor market despite announcements of layoffs and the slowdown in hiring,” the agency points out.
Money remains the main motivation among the factors mentioned. A higher salary is the primary objective for 62% of workers planning to start looking for a new job. This is followed by better benefits and privileges (39%), better opportunities for advancement (30%), and greater flexibility to choose when and where they work (27%).
Another interesting fact showing a certain confidence in an environment dominated by a scarcity of talent, nearly three in ten professionals plan to leave their job to pursue a full-time contract career. “Respondents also consider returning to work for a former employer; four out of ten professionals say they are ready to return to a company where they have worked before if they can obtain a salary equal to or higher than their current salary,” adds Robert Half.
That turns out well. Despite the recession scenario outlined to cover the first half of 2023, the hiring climate will remain “robust”, says ManpowerGroup Canada. At least in the first trimester. The survey of over 1,000 employers across Canada reveals that 46 % of respondents intend to increase their workforce in the first quarter of 2023, compared to 13% expecting reductions, giving a seasonally adjusted net employment forecast of 34 %. “Furthermore, 38% of employers surveyed expect their current workforce to remain unchanged, while the remaining 3% are uncertain about their hiring intentions. »
The net employment forecast also affects 34% of employers in Quebec, an increase of nine percentage points compared to the previous quarterly forecast. (But down four percentage points from the forecast announced at the same time last year.)