Canadian workers could see smaller salary increases next year

As Canadians continue to struggle amid the cost of living crisis, it may not be great to hear that they could get smaller salary increases next year.

Normandin Beaudry, an actuarial consulting service, released the results of its annual Salary Increase Survey on Wednesday.

After surveying over 750 Canadian organizations, it found that employers are slowly reducing budgets for overall salary increases, with an average of 3.4 per cent expected in 2025, excluding freezes. That’s an o.2 per cent reduction from 2024.

Evolution of the average salary increase budgets in Canada (excluding freezes) (CNW Group/Normandin Beaudry)

"While economic pressures and the competition for talent remain challenging, we're beginning to see a gradual return to pre-pandemic market norms as salary increase budgets reduce for a second year in a row," said Darcy Clark, senior principal of compensation at Normandin Beaudry, in a statement.

The report found that organizations are also continuing to carve out an additional budget to address any pressures that may arise due to labour shortages or economic circumstances.

In 2024, approximately 50 per cent of companies who participated in the survey allocated an additional budget averaging 1% beyond their general salary increase budget.

The latest survey's results show that this trend remains with 44% of Canadian organizations planning on granting the same average additional budget of 1 per cent for 2025.

"Among other purposes, these budgets will be used to apply market-driven adjustments, retain employees in critical roles and differentiate compensation for top performers," reads the report.

Industries forecasting higher salary increases

Wondering if your industry might be handing out higher increases?

The report broke down sectors that projected higher-than-average salary budget increases:

• High-tech: 4.3 per cent
• Telecommunications, data processing, data warehousing and related services: 3.9 per cent
• Professional, scientific and technical services: 3.7 per cent
• Construction: 3.6 per cent
• Computer design, security, IT services and AI: 3.6 per cent
• IT consulting services: 3.5 per cent
• Energy, mining and metals: 3.5 per cent
• Foundations, community assistance and health care: 3.5 per cent

Ultimately, the survey found that as the labour market continues to balance out and inflationary pressures ease, companies are "feeling less pressure" and taking a more conservative approach to managing their compensation spend.

"While average salary increase projections remain above 3 per cent, organizations are considering affordability when defining their long-term plans," explained Clark. "Several significant salary increase cycles may not be sustainable and organizations remain cautious about increasing recurring payroll costs as they plan for the future."

Normandin Beaudry also breaks down projected salary increases by province, industry, type of organization and company size here.