Insights

2022 salary forecasts

Analysis
Published on: September 7, 2021
Subjects:  Surveys and forecasts, Total compensation, Performance and bonus

Over the past few months, 263 organizations (220 participants in 2020) took part in the 8th edition of the PCI Compensation Consulting salary forecast survey.

We were somewhat surprised to see that 2022 salary forecasts are very similar to pre-pandemic forecasts. Given the current job market, we expected to see salary increase budgets rise; the labour shortage, inflation, high turnover rates in many sectors, and other factors could all have had an impact on salary budgets.

That said, salary forecast surveys are conducted in the summer when full budget information is unknown and concern the regular salary review cycle. It’s quite possible that some of the money spent on compensation has fallen under the radar, including more frequent off-cycle salary increases and the higher cost to replace employees.

Non-union salary adjustment

The actual salary increase budgets for 2021 are 2.5% (Québec and the rest of Canada); the salary increase budget forecasts for 2022 (excluding freezes) are also 2.5% (Québec and the rest of Canada).

In 2021, 9% of organizations froze salaries; in 2022, 5% of organizations plan to do so.

The average salary increase budgets, excluding freezes, are shown in the table below:

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Additional budget for salary increases

We cannot overlook the fact that 52% of organizations surveyed have an additional budget for non-unionized employees to recognize special cases (high-potential employees, fast-tracked employees, employees in jobs with labour shortages, etc.). The additional budget allocated for all of these organizations is 1.2% in 2021 (actual) and 1.5% in 2022 (forecast). 

Variation of individual increases

Increases expressed as a percentage of salary vary little between employees. In 53% of organizations, increases are between +/- 1% of the budget for the majority of employees.

In 2021, 49% of organizations did not give raises to their lowest performers, while 37% of organizations gave raises of 10% or more to their highest performers.

Furthermore, the average of the lowest individual increases (including 0%) is 1%, while the average of the highest increases is 9.3%.

It’s worth noting that the Finance and Insurance / Real Estate and IT and Communications / Telecommunications sectors have the largest average gap between the highest salary increase and the lowest.

Salary structure

In 2021, 16% of organizations in Québec have frozen their salary structure and in 2022, 6% of organizations plan to do so. The average structural adjustment budgets (excluding freezes) are presented in the following table:

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Variable compensation plan

72% of organizations offer a variable compensation plan. The following table shows eligibility for the variable compensation program by non-union job category as a percentage of the number of organizations that offer a variable compensation plan:

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For the fiscal year ending 2022, companies on average expect to pay:

  • No bonus (5% of organizations)
  • Below target (13%)
  • At/near target (68%)
  • Above target (14%)

Employee attraction and retention issues

Among the organizations surveyed by PCI, almost all (92%) report recruitment and retention challenges. The most affected employee groups are production and IT. As a result of these issues:

  • 70% of organizations have adjusted their entry-level salaries to recruit qualified staff
  • 90% of organizations have noted an upward trend in bidding wars at hiring, particularly for production and finance jobs.

In response to these recruitment challenges and the growing popularity of telecommuting, 56% of organizations expanded their geographic market for recruitment.

Nearly half of participating organizations also offer professionals and executives access to vacation at hiring.

Organizations are divided on the use of additional bonuses to ensure retention: 42% of organizations use them.

Compensation communication

In our survey, we asked a series of questions about communication around total compensation policies and programs. These questions were designed to assess the extent to which organizations, faced with labour shortages, focus on perceptions of fairness and equity to engage their employees. Based on participants’ responses, we find there is both good and not-so-good news.

First, the good news

  • 35% of organizations report that the level of transparency around compensation has improved. To boost positive perceptions, employers need to go beyond compensation amounts to explain the why and how.
  • In 56% of participating organizations, managers are responsible for communicating total compensation to their employees. Of these, 80% have the communication tools to do so. Since managers are essential to the relationship employees have with their organization, they need to be involved in communicating compensation decisions.

Now, for the not-so-good news

  • Pay transparency remains limited; 80% of organizations at most share job-specific salary ranges, and 24% do not disclose any direct compensation information other than salary.
  • Only 26% of organizations train their managers on total compensation.

With a recovering economy and an aging population, employee attraction and retention issues will only accentuate in the years to come. These factors will put considerable pressure on total compensation packages. As a result, organizations will have to be more transparent with employees about compensation. They will also have to rely more on managers to promote their total compensation packages to improve perceptions of equity and fairness, which have an impact on engagement.

Telecommuting

56% of organizations reported having a formal teleworking policy, while 28% do not. This does not necessarily mean that telework is non-existent in these organizations, but that it is simply not supported by a policy.
Last year, 67% of organizations had employees telecommuting more than 80% of their week. This percentage has now been reduced; we now see more of a hybrid model, combining face-to-face and telework (with the exception of production employees):

  • 73% of support and technical staff work with a hybrid model
  • 40% of production staff (mainly in finance, IT and professional services)
  • 65% of sales staff
  • 81% of professional level employees
  • Approximately 75% of executive-level employees

Only 2-3% of organizations have opted to move to a 100% telecommuting model.

In 13% to 18% of organizations, the option of teleworking or in-person work is left to the employee.

More information

In light of all this data, what kind of recommendations should you make to your management or executive committee? We can help you.

We periodically conduct customized surveys to identify significant trends in total compensation and report back to our clients. In addition, our continuously updated databases allow us to provide our clients with an accurate competitive profile of the compensation market.

If you have questions regarding our survey or want to discuss the results, contact us:

Evelyne Gaudreau, Consultant
514 788-4747 ext. 227
egaudreau@pcicompensation.com

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