Employers are handing out pay raises — here's how much you might get next year

You’ll probably get a boost to your salary, but don’t expect it to be as large as before

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Canadian workers have a good chance of getting a pay raise next year thanks to high inflation and continued labour market tightness, though their paycheque boost is unlikely to be as hefty as in previous years.

Many companies are planning to offer salary increases in 2024, with the average hike ranging between 3.3 per cent and 3.7 per cent for non-unionized positions, according to compensation research from companies including Mercer Canada Ltd., Telus Corp.’s Telus Health and Robert Half Canada Inc.

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Those gains are considered significant, though they’re still not as high as 2023’s pay bumps. For instance, the average boost to base salaries amounted to 4.22 per cent this year, Telus Health said. And, according to Mercer, planned merit increases of 3.3 per cent in 2024 fall short of the 3.6 per cent increases companies handed out this year. There’s also a chance companies will spend even less on salaries, due to a slowing economy that is taking the heat out of the jobs market.

“If Canada’s labour market continues to cool over the next few months, it could reduce pressure on 2024 compensation budgets even further,” Elizabeth English, principal in Mercer Canada’s Career Products business, said in a release.

But that doesn’t mean no one is hiring. Indeed, more than 60 per cent of companies in professional services are planning to expand payrolls next year, according to Robert Half research. That will no doubt be welcome news to the four in 10 professionals who complain they have too much work and not enough staff to handle it all.

Those stats are also a sign that labour shortages continue to plague many companies, especially those on the hunt for skilled talent. Though job vacancies are steadily declining from a record peak of more than a million in 2022, Robert Half said 92 per cent of hiring managers in professional services are still having difficulty finding the workers they need.

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Labour shortages mean employees may maintain an edge when it comes to pay increases, at least in certain sectors. Research shows that more money continues to be a key bargaining chip among workers, especially as high inflation squeezes personal finances. As employees juggle skyrocketing mortgage payments and mounting grocery bills, 77 per cent of those surveyed by Robert Half say they’re worried the pace of inflation will outstrip any raises they might win. That’s left some looking for new opportunities, with 35 per cent saying they’ll find a new job if they don’t get the pay hike they’re seeking next year.

The inflationary environment we’re in is a double-edged sword

David King, senior managing director, Robert Half

“There’s definitely ongoing pressure from the employee’s side for more compensation,” David King, senior managing director at Robert Half, said. “(Employees’) cost to purchase … from a household budget standpoint, in their opinion, continues to go down.”

Of course, inflation, which has started to tick up again, isn’t just a worry for employees. It’s also contributing to a rise in companies’ operating costs just as employers attempt to navigate an uncertain and weakening economy. It’s enough to make hiring managers, tasked with keeping costs down while also attracting new workers, break into a cold sweat.

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“The inflationary environment we’re in is a double-edged sword because while staff are looking for more compensation in order to pay for their lives, companies are also faced with higher costs to run their businesses,” King said. “It’s a very challenging dynamic at the moment.”

The good news for employers is that many workers might be willing to overlook a big salary bump if it means securing some coveted perks and better benefits. And flexibility is king when it comes to incentives. Robert Half said four in five professionals cite a flexible schedule as their top workplace perk, with hybrid work considered “ideal” by 49 per cent. Evidence also shows bosses pushing for more in-office days may want to stand down, unless they want to risk losing talent. Sixty per cent of employees would stay in a job offering flexibility over one with higher pay, but more “rigidity” around mandated in-office days.

Employers appear to be catching on and many are offering a greater set of perks and benefits to keep salaries from soaring too high. Telus Health said 33 per cent of companies have increased their benefit plans as they’ve sought to fight inflation.

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Still, most employees will probably see a boost to their paycheques next year, even if it’s not quite as high as hoped. King said employers surveyed by Robert Half are expecting to offer more money to win and keep the workers they need by an average pay increase of 3.5 per cent next year. “That is slightly more conservative than we would have seen in the past year,” he said. “Those increases are slowing a little, but they’re still growing.”

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A version of this story was first published in the FP Work newsletter, a curated look at the changing world of work. Sign up to receive it in your inbox every Tuesday.

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