Survey on Compensation & Trends in Human Resources

To support employers in their annual planning for Human Resources, Morneau Shepell conducts an annual survey of Compensation and Trends in Human Resources. Some highlights of the results are provided here, and more information about the results is presented in a series of breakfast seminars in cities across Canada.

Salary increases will be higher next year

The survey showed that employers in Canada are expecting salaries to rise by an average of 2.8 per cent in 2015. This is up slightly from the average 2.6 per cent salary increase expected for 2014. The average includes expected salary freezes and excludes promotional or special salary adjustments.

The survey showed higher than average expected salary increases in a few sectors. The mining and oil and gas sectors expect average increases of 3.4 per cent, down from last year’s 3.9 per cent. Professional, scientific and technical services will also be higher than the national norms, at 3.0 per cent on average, reflecting increased competition for talent in this sector.

Lower than average increases are expected in certain industry groups that face more challenging economic circumstances. This includes wholesale and retail trade, where average salary increases of 2.4 per cent are expected.

Reflecting the different mix of industries across Canada, the survey showed that salary increases will vary by almost 1% by province.

2015 expected salary increases by province
2015 expected salary increases by province

Faced with tight salary budgets, employers will be investing in programs that help to improve engagement and productivity. About half of the survey respondents indicated their priorities for 2015 include improving their programs for communication of total rewards, training and development, and workplace health and well-being.

To help fund training programs, organizations will also be looking for ways to reduce costs and be more efficient, such as finding ways to reduce sick leave and disability costs.

Top 5 priorities for employers in 2015 (% who saw this as a concern)

Top 5 priorities for employers in 2015

Mental health in the workplace

One interesting set of findings in the survey related to employer attitudes with respect to mental health. Workplace mental health is now the leading cause of sick leave and disability and is a growing concern in many companies. The Conference Board of Canada estimates that mental illness costs employers more than $20 billion per year.

As a result, this topic is getting a lot of attention among employers. The survey found that employers are making greater use of existing programs that support mental health, such as their Employee & Family Assistance Programs (EFAP).

In addition, the survey showed that mental health training for managers will more than double in the next 12-18 months. This is fundamental to managing mental health in the workplace because, if properly trained, managers are in the best position to identify employees with mental health challenges, and to ensure they get help. Employers will also be making greater use of specialized tools like Health Risk Assessments (HRA) to help employees self-identify any mental health issues so they can get help.

Mental health graph

Finally, the employers are formalizing their commitment to mental health by adopting the new Standard on Psychological Health & Safety in the Workplace. About 20% of employers said they intended to implement the new standard in the next 12-18 months.

Reducing the cost and risk of retirement plans

There were also some interesting findings from the survey with respect to retirement plans. There have been significant changes in this area in the past years as many employers moved from Defined Benefit (DB) to Defined Contribution (DC) arrangements.

Although strong investment results have returned many DB pension plans to a fully funded status, the survey found that employers with Defined Benefit (DB) retirement plans are still looking for ways to de-risk these plans. Most of the options being considered relate to financial or investment strategies that are behind the scenes, and will not have a direct impact on employees. However about 1/3 of DB plan sponsors are considering changes to plan design or cost sharing that will have an impact on employees, and 22% sponsors are looking at whether they should go further and convert to DC plans.

Reducing cost graph

Results of the survey underscore the need for governments to open the door for alternatives, such as target benefits plans, to help preserve many of the benefits of our current pension system for employers and their employees.

The change to DC arrangements eliminates some risks, but also creates some new ones for employers. One of these relates to the risk of inadequate income for their employees when they retire. Our survey showed that 52% of employers are not monitoring the adequacy of the retirement income that their plans will provide for employees.

Monitoring the adequacy of retirement income

Monitoring the adequacy of retirement income

Risk in this area arises both from a legal perspective in terms of future class action suits from employees, and from a workforce management perspective in terms of difficulty in transitioning older employees to retirement without substantial severance payments. Monitoring the adequacy of retirement income will likely become a governance issue for DC plan sponsors in the years to come.