Canadian Human Resources
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Pay Cheques Boosted

September 14 2006 - Canadian employees can expect pay raises of 3.5 per cent in 2007, according to findings from the 2006 Annual Canadian Salary Survey by Watson Wyatt Worldwide.

The survey, now in its 38th year, included 380 organizations representing over one million employees.

Graham Dodd, managing consultant with Watson Wyatt Canada said:

"The continuous growth of the Canadian economy, combined with historically low unemployment rates, are forcing employers to take a closer look at their compensation practices to ensure they're able to attract and retain top talent in an increasingly competitive environment. Given these conditions, we expect that actual salary increases will likely exceed respondents' forecasts."

The survey found that employers facing mounting pressure to provide competitive monetary compensation are also turning to complementary strategies to better engage employees and tie pay to performance. In 2006, the majority of respondents (89 per cent) confirmed they have short-term incentive plans in place compared to 86 per cent in 2004. Additionally, 85 per cent indicated that merit increases (based on performance) are a factor when determining their annual salary-increase budget.

Although Canadian employers are tying pay to performance, the difference in merit increases between average-performing employees and top performers remains limited at 3.1 per cent and 5.6 per cent, respectively (compared to 2.9 per cent and 5.4 per cent in 2005).

Graham Dodd said:

"The move to differentiate compensation of low- versus high-performing employees is starting to take hold in Canada, as employers become more strategic about tying pay to performance. However, the survey findings reveal there is room for further improvement as the current difference in merit-pay increases is not particularly significant."

The survey found that key human resource issues faced by survey participants were:

One-to-Two Years
Recruiting key talent
Leadership development
Succession planning
Performance management
Employee engagement
Benefits strategy
Three-to-Five Years
Succession planning
Leadership development
Recruiting key talent
Employee engagement
Performance management
Benefits strategy

Liz Wright, Toronto practice leader, compensation with Watson Wyatt said:

"The looming talent crunch and departure of baby boomers from the workforce have brought 'key-talent recruitment' and 'succession planning' to the top of employers' agendas in the short- and mid-terms, respectively. Additionally and perhaps most notably, is the emergence of 'employee engagement' to the top five issues list. Canadian employers are starting to realize the importance of complementing HR strategies beyond compensation to attract and retain talent. With the expected high demand for skilled labour, employers that do not fully and effectively utilize a comprehensive approach to talent retention may find themselves losing top-performers to the competition."

The survey also provides interesting insights on the heated Canadian labour market for various industry sectors and geographic regions. The survey finds that for the first time in many years, the public sector is slightly ahead of the private sector with a 3.6 per cent forecasted salary increase. Professional/business services also continue to feel the pressure of high labour demand as reflected in the above average (4.4 per cent) base salary increase this sector experienced in 2006.


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