Special Report on 2011 Salary Forecasts

Special Report on 2011 Salary Forecasts

President s Message Access to high-quality labour at competitive cost is a primary condition for prosperity. This is why, each year, the Quebec Employers Council publishes salary forecasts for the coming year, in collaboration with the top human resources consulting firms. This overview of salary trends expected in 2011 will allow you, we hope, to develop your own remuneration strategy. Thanks to the information contained in the following pages, you can: Compare the salary increases projected in your company with those forecast for your business sector; Assess the salary increases and adjustments to salary scales in your various employment categories; Learn about the variations in salary growth among the various provinces. This publication brings together in a single document the strategic information of four firms and, as such, it will allow you to see at a glance the opinions of human resources experts. We would like to extend our thanks once again to our partners and congratulate them on their rigorous work. Happy reading! Yves-Thomas Dorval President The Quebec Employers Council would like to thank the participating firms for their contributions in preparing the 2011 salary forecasts:

2010-2011 Aon Consulting Pay Increase Survey The annual Pay Increase Survey was launched on June 14, 2010 and ran through August 18, 2010. Organizations rely on the Pay Increase Survey to make critical decisions on competitive pay adjustments for employees at all levels in the organization. Building upon survey results from 2009, this year s iteration serves to determine what salary increases organizations have implemented in 2010 and what salary increases are planned for 2011. In total, 329 organizations from a wide range of geographical locations and industries participated in the survey. The median salary increase for 2011 is projected to be 2.8%. Data Findings The following are high level findings and observations: The percentage of organizations implementing salary freezes has declined steadily since the major economic downturn of 2009. In 2009 more than 1 in 3 respondents implemented a salary freeze of some kind, and 1 in 6 implemented freezes in 2010. For 2011, only 1 in 11 organizations are now planning a salary freeze. Salary increase budgets for 2011 are expected to fall between 2.5% and 3.0%. In 2009, more than 30% of survey participants were freezing salaries or freezing salaries with some exceptions (meaning some relatively small portion of employees may have received an increase while other employees had their salaries frozen). That number was reduced by more than half in 2010, with approximately 15.5% of organizations freezing salaries or freezing salaries with exceptions this year. Furthermore, in 2011 organizations expect to reduce that number even further with approximately 9% of organizations expecting to either to freeze salaries or to freeze salaries with exceptions. (see table 1). Table 1: Changes in salary freezes Actual 2009 Actual 2010 Forecast 2011 Delivered Increases 68.8% 84.5% 91.0% Salary Freeze 18.3% 8.8% 4.5% Salary Freeze with exceptions 12.8% 6.7% 4.5% Table 2: 2010 increases and 2011 forecasts (including salary freezes) Actual 2010 Forecast 2011 Overall Salary Budget 2.5% 2.8% Salary Structure Increase 1.8% 2.0% In 2011 the median salary increase is projected to be 2.8%, up from 2.5% in 2010. In 2010, organizations have been cautious when it comes to allocating salary increase dollars. The results of the Pay Increase Survey show that companies allocated a salary increase budgets of 2.5%. In addition, organizations have increased their salary structures by 2.0% this year. Looking forward to 2011, organizations were asked to provide their forecasted increases for 2011. Organizations are expecting to give higher increases than in 2010. The overall salary budgets increase is expected to rise to approximately 2.8%, yet organizations are holding salary structure increases steady at 2.0% (see table 2). In a more detailed analysis of the results by province and by industry, there appears to be very little difference between provinces and industries in terms of salary increase budgets. Aon s Perspective The results of the Pay Increase Survey for 2010/2011 suggest the following: The dampening impact on salaries caused by the 2009 economic crisis is subsiding. Most employers are expecting to be in a position to afford more aggressive salary increases than they have implemented in recent years; though not to the same levels as experienced before the economic downturn. Most employers are deciding it is important to reward employees with more substantial salary increases in 2011. There will be more salary increase dollars available in 2011 to reward and retain top performers. Assuming the economy continues to demonstrate recovery, given the upward momentum highlighted in the survey results so far, it is likely that actual salary increase budgets implemented in 2011 will exceed these preliminary levels.

2011 Compensation Planning Survey For Non-Union Employees Information in the tables below has been extracted from Mercer s 2011 Compensation Planning Survey for Non-Union Employees. Data were gathered as of June 2010, from 605 organizations across Canada. This edition of the Mercer Compensation Planning survey includes responses from over 600 employers in Canada, and reflects the compensation practices for a total of 845,340 non-union employees. In Canada, it s back to cautious normal as most organizations plan to grant salary increases based on conservative budgets. The following table shows the percentage of salary increases and salary structure increases in organizations in Canada in 2010 (actual) and 2011 (projected) for companies that plan to award increases. Canadian employers report they awarded pay increases this year as planned in 2009 and project average base pay increases of 2.9 per cent for 2011. The number of organizations that froze salaries dropped dramatically, from 31 per cent in 2009 to 6 per cent in 2010. Only 2 per cent of organizations are projecting an all-employee salary freeze for 2011. Employers project similar increases for all categories of employees (executive, management, professional, trades and clerical) at either 2.8 or 2.9 per cent. Historically, increases for the executive employee group tracked higher than other employee groups. Recent years have seen increases for executives come into alignment with the rest of the employee population. Signals on the economic recovery have been mixed, but employers show some optimism in projected salary budgets. The 2.9 per cent salary increase planned for 2011 is up over the increases awarded this year (2.7 per cent) and well ahead of the 2.0 per cent awarded in 2009. The following table shows the percentage of projected salary increases for some industries. Table 1: Salary increases and current (2010) and projected (2011) structures by hierarchical level Salary increases Table 2: 2011 Projected salary Increase % Industry Executive Management Professional Office/Clerical/ All (Sales & technicien employees Non-sales) 2010 (actual) 3.0% 2.9% 2.8% 2.8% 2.9% 2011 (projected) 2.9% 3.0% 2.9% 2.9% 2.9% Salary structure increases 2010 (actual) 2.3% 2.2% 2.2% 2.2% 2.3% 2011 (projected) 2.3% 2.3% 2.2% 2.3% 2.3% All employee groups (mean) excluding salary freezes) Oil and gas 3.4% Pharmaceutical and Biotech 3.2% Natural Resources 3.2% High tech & Telecom 3.1% Durable Manufacturing 2.9% Public Sector/Not for Profit 2.9% Finance, banking & Investment 2.8% Wholesale/Retail 2.7% The Oil and Gas and Natural Resources sectors continue to project the largest salary increase budgets. Reductions in planned budgets in the Public Sector may be attributed to legislated compensation restraint in Ontario and Québec. High Technology and Telecommunications, which reported below average increases in 2010, is projecting an increase above average in 2011. Projected increases are comparable across the country, ranging from 2.7 per cent in parts of Atlantic Canada, Quebec, Manitoba and the Territories to 2.9 per cent in Alberta. Limited differences indicate that the majority of organizations do not differentiate salary increase budgets by geography but rather reflect a national scale.

The Survey on Trends and Projections in Compensation and Employee Benefits for 2011 The Morneau Sobeco survey on trends and projections in compensation and employee benefits for 2011 is based on data collected from 305 organizations representing more than a million employees across Canada. The survey was conducted between mid-june and mid-august 2010 and covers a broad range of total compensation issues. The following tables summarize the main findings of the survey with respect to base salaries for Canada and more detailed results for Quebec by sector. Despite the fragile economic recovery, the number of 2011 Compensation Trends and Projections Survey respondents who anticipate salary freezes in 2011 is smaller than last year, and those planning salary increases are more generous than a year ago. The 305 survey respondents expect salary increases of 2.7% on average, slightly higher than last year s level. In comparison, the 2010 Morneau Sobeco National Compensation Survey reported the main trend actually observed was an increase of 2.2%. Salary budgets increases in 2011 are predominately expected to be in the range of 2% to 3.5% for all sectors combined. Survey respondents represent organizations which employ in total more than a million workers in Canada, primarily in the manufacturing (31%), finance (13%) and trade (13%) sectors. The average expected increase in salary budgets in these sectors is, respectively, 2.8%, 3.1% and 2.5%. The highest predicted increases are by respondents in organizations in the mining and oil and gas extraction sector (4% on average) and the lowest by respondents in the health care and social assistance sector (2.1% on average). Table 1: Salary increase, by employee category, Canada (%) Employee category Projection 2010** Actual 2010* Projection 2011** Executives 2.5 2.6 2.6 Management and professional employees 2.5 2.5 2.6 Technical and administrative personnel 2.5 2.0 2.6 Operation or production employees 2.4 0.5 2.4 * Morneau Sobeco s 2010 National Compensation Survey ** Morneau Sobeco s 2010 and 2011 Compensation - Trends and Projections Survey Table 2: Expected average annual increase for 2011 in Quebec, by industry sector and sub-sector (%) Executives Operation or production employees Structures Salaries Structures Salaries Overall results 1.7 2.8 1.8 2.4 Manufacturing 1.8 2.6 1.9 2.4 Food, beverage and tobacco manufacturing 1.3 2.5 2.0 2.7 Pharmaceutical manufacturing 1.9 2.8 1.8 2.9 Fabricated metal product manufacturing n/a 2.6 2.3 2.4 Transportation equipment manufacturing n/a 2.0 n/a 2.0 Wholesale trade 1.8 3.6 1.8 2.8 Retail trade 1.0 3.0 2.2 2.5 Transport and warehousing 2.8 2.5 1.5 1.7 Finance and insurance 1.8 3.0 1.8 3.2 Insurance carriers and related activities 1.9 3.1 1.8 3.0 Professional, scientific and technical services 2.0 3.5 n/a 3.0 Other services (excluding public administration) n/a 2.2 n/a 2.3 Public administration 1.3 3.4 1.0 1.6 These results are based on 101 respondents who reported projections for their operations in Quebec. For survey respondents in Alberta, predicted profitability is up significantly compared to their forecasts a year ago. This optimism is reflected in the expected salary increases by region, with respondents in Calgary reporting the highest increases (3.4%) of all major Canadian cities, whereas last year they had the lowest. In Quebec, the expected salary increases reported by respondents fall in the range of 2% to 3.5% between the 10th and 90th percentiles and could reach an average of 2.7%. According to the respondents, this figure would rise to 3.2% if provisions for catch-up wage increase adjustments or promotions are included. The following table shows the expected average increases in a number of sectors for two employee categories, excluding such provisions.

2010-2011 Towers Watson Data Services Salary Budget Survey Report Each year, Towers Watson conducts a survey of current salary management practices and trends in the Canadian marketplace. This year, 200 organizations participated in the survey. Data were broken down by profit status, industry sector, region/ province and organization size. Data were further broken down by employee group, which included the following: Executive Management Professional/Technical Administrative/Support Hourly Key Findings There was a dramatic rise (36%) in organizations that budgeted salary increases in 2010 (94.5%) as compared to those that granted salary increases in 2009 (69.5%). Furthermore, the percentage of participating organizations projecting salary increases in 2011 (97.7%) is slightly higher than those budgeting increases in 2010. Tableau 1: Rates of increase in base salary Entire Sample Combined Actual 2009 Budget 2010 Forecast 2011 Executive 3.4% 2.9% 3.1% Management 3.1% 2.8% 3.0% Professional/Technical 2.9% 2.8% 2.9% Administrative/Support 2.9% 2.8% 2.9% Hourly 3.1% 2.7% 3.0% More organizations are planning to adjust salary range midpoints in 2011 compared to those that have already adjusted or that plan to adjust salary range midpoints in 2010. Approximately one out of participating organizations have projected budget increases averaging 1.4% of total base salaries. The base salary increases reported below reflect general increases, including cost-of-living and/or merit components. Salary freezes and reductions are excluded. For more information, please contact Mathieu Boisvert at (514) 982-2043. 1010 Sherbrooke Street West, Suite 510 Montréal (Québec) H3A 2R7 Tel.: 514.288.5161 / 1 877.288.5161 Fax: 514.288.5165 www.cpq.qc.ca Graphic Design : www.oblik.ca