If your organization is on a fiscal year that equates to the calendar year, you’re likely breathing a sigh of relief as you close out your annual increase process for 2022. Though arguably not as dramatic as some of the other situations impacting our labor market, there was a fair degree of uncertainty and curiosity around this year’s actual numbers.

In November 2021, when we last reported on Canada Compensation Planning Pulse survey findings, employers reported that they were budgeting 2.8% for merit increases and 3.1% for total increases. However, in March 2022, when we asked what they actually delivered, the average merit increases, including zeros, were 3.1% and total increases were 3.4%. Though not a huge increase given inflation and the incredible strain on the labor market, it is an increase from the 2.2% and 2.6% that were delivered in 2021 for merit and total increases, respectively.

Employers cited business performance, turnover/retention, and inflation/rising commodity prices as factors having an impact on their actual salary increase budget.

Will employers review pay more often?

Through Mercer surveys, we have learned that some organizations plan to review pay more frequently throughout the year, particularly for critical roles.

While the majority of organizations plan to stick to an annual increase cycle, 6% are considering moving to a multiple increase cycle. Additionally, 19% budget for off-cycle adjustments. Although this off-cycle budget has always been in place to make adjustments for equity and market shifts, we anticipate this will be used more than in years past in order to combat turnover and recruiting challenges in key roles.

Incentives paid out

With just under half of respondents indicating that they paid out short-term incentives above target and almost two thirds paying long-term incentives at or above target, it would appear that organizations met their objectives for 2021. With supply chain issues, labor market challenges, and rising inflation, it’s likely that many organizations set their targets conservatively and we are now seeing higher payouts as organizations have exceeded expectations.

Most are still quite opaque

When asked whether their approach to pay transparency had changed in the last 12 months, 10% indicated that it had and another 17% indicated they are considering changes. The most common reason cited was changing compensation philosophy followed by changing employee expectations.

Getting creative, while remembering basics

This job market and the behavior of candidates and employees is challenging, to say the least. Add rising inflation to the mix and it’s no wonder your HR people are feeling pressure like never before. However, the spotlight is on Human Resources right now, and for good reason. It’s our time to dig deep, get creative, and find out how to get people back in ”seats,” even if they’re not in an office.

How can we meet the ever-growing list of needs, wants, and desires that today’s employees are looking for? It’s not easy, and there’s no one answer, but we can do it. Plug into the data and resources available to you — including peers and consultants — and figure out what will work for your organization. You got this.

If you need advice, Mercer is here for you. Give us a call at 855-286-5302 or email surveys@mercer.com.