According to a survey about 2010 salary budgets conducted last September by Alpharetta, Ga.-based Culpepper & Associates Inc., base salaries in Canada will increase by an average of 2.4% this year, compared with 1.1% in 2009. Although economic optimism has improved markedly since HR planners set their budgets last fall, I predict that most companies will not increase base salaries in any significant manner in 2010.
For countless SMEs, the Great Recession was their first economic downturn. Experience is a wise teacher, so many organizations will be hesitant to re-establish programs that don’t provide the agility to manage effectively through the troughs of the business cycle. Furthermore, even if companies are budgeting for bigger increases, they won’t spend it across the board; rather, they’ll use it strategically for, say, key hires.
Many companies that I consult with have started to adopt other compensation approaches to manage fixed costs. For example, there is more focus on variable bonus or profit-sharing plans that reward employees who achieve specific measurable goals. Typically, these programs pay for themselves by increasing revenue or reducing costs. Companies are also spending more time communicating the total compensation offered to employees, which often includes group benefits and company-matched RRSP contributions.
Finally, some firms are relieving pay pressures by “opening the books” to give staff a clearer picture of their employer’s financial health. When employees understand how much it costs to run a business, they’re more sympathetic to the need to control all expenses — including their salaries.