Canadian firms expect lower salary increases and promotions in 2025, survey shows

Canadian organizations have gradually reduced their budgets over the past few years, and projections for 2025 indicate that this trend will continue.  

The next version of the Mercer QuickPulse Compensation Planning Survey, set for release in November, will provide a clearer picture of these developments.  

While the full survey covers a variety of topics, early data from almost 600 Canadian organizations reveals their initial budget projections, along with strategies for promotions and pay transparency. 

Ninety-one percent of respondents labelled their 2025 salary increase budget as ‘preliminary.’ Projections for merit increases are set at 3.0 percent, with total increases—including zeros—expected to reach 3.4 percent.  

These numbers are slightly lower than the actual increases reported for March 2024. The final numbers for 2025 will be available in November 2024 and March 2025. 

There are noticeable differences across industries. Chemicals are forecasting a 3.4 percent merit increase budget, while the energy sector anticipates 2.8 percent, and mining and metals predict 2.6 percent. 

Pay increases outside of the annual process have largely ceased. In March 2024, total increases averaged 3.5 percent, but when reviewing changes for the same incumbents between January 1 and June 30, the average increase was 3.4 percent. 

This reflects a shift away from the market adjustments and retention-driven pay increases that were more common in 2021 and 2022. 

Additionally, most companies no longer differentiate budgets for specific leaders or business units. Seventy-five percent of organizations reported that all leaders or units received the same budget, calculated as a percentage based on their overall salary budget. 

For 2025, companies plan to promote 7.5 percent of their employees, down from the 8 percent they aimed to promote in 2024. Organizations with separate promotional budgets are forecasting an average promotional increase budget of 1.1 percent, excluding zeros. 

In terms of promotion frequency, nearly half of the companies reported that promotions are given ‘as needed,’ rather than at a specific time of year. Just over a quarter limit promotions to once a year. 

Additionally, employers are increasingly offering pay raises for lateral job changes, provided certain conditions are met. 

Pay transparency has become a standard practice for many organizations. While most comply with legal requirements, 25 percent of companies are exploring the idea of sharing pay ranges beyond what the law mandates.  

Another 15 percent already share pay ranges both internally and externally in a consistent manner. 

However, there are still some unresolved questions surrounding pay transparency, particularly with remote roles. One question concerns whether companies should provide salary ranges for fully remote jobs.  

Twenty-one percent of organizations include salary ranges for all remote positions, while 33 percent only include ranges if the remote job is tied to a location where such disclosure is required by law. 

Another question focuses on the type of salary range included in job postings. Fifty-one percent of employers only share ranges when legally required, while 18 percent provide salary ranges in all job postings across Canada. 

When sharing salary ranges, companies typically follow one of several structures: 

• 17 percent use a national, market-based pay structure. 
• 12 percent apply a geographically adjusted market-based pay structure. 
• 15 percent opt for a subsection of their market-based structure, often within a 10 percent range of the midpoint or market median. 

As companies anticipate the continued expansion of pay transparency regulations, both nationally and globally, many are taking steps to ensure compliance.  

Common preparations include assessing the competitiveness of pay levels, refining job architecture for consistency, and conducting pay equity studies. These actions help organizations stay ahead of evolving regulations while fostering fairness in compensation practices.