Tougher economic conditions mean doing more with less
Canadian organizations are tightening their compensation plans heading into 2026, according to a new report.
Normandin Beaudry’s 15th annual Salary Increase Survey is based on feedback from more than 1,000 employers and shows average salary increase budgets at 3.1% (excluding freezes), slightly lower than the 3.2% actual increases reported for 2025.
Read: Canada's labour market shows gains in wages but job losses persist
Despite the downward trend, many employers are setting aside extra resources with around 42% planning to earmark an additional 0.9% in their salary budgets to tackle specific pay challenges.
Top priorities include keeping salaries aligned with market standards (59%), rewarding high performers (58%), retaining employees in essential roles (54%), and addressing pay compression or internal equity concerns (37%).
Some industries are anticipating higher-than-average adjustments such as pharmaceutical companies and the construction sector, which lead with 3.8%, followed by telecommunications and IT consulting at 3.7%. Hospitality, professional services, and real estate organizations expect increases closer to 3.5%.
Read: Paycheque squeeze: How stagnant wages are failing to keep up with inflation
“With salary increase budgets continuing to decline, organizations face growing pressure to do more with less making it essential to strategically plan salary increases to retain talent and maintain workforce strength,” says Darcy Clark, senior principal in Compensation at Normandin Beaudry.
Clark also notes the role of broader rewards strategies in helping employers stand out.
“Although the labour market has become less constrained, strategic planning around salary increases remains essential for talent retention and sustaining workforce strength, particularly in the uncertain economic and geopolitical context,” he said. “Organizations hoping to set themselves apart may benefit from adopting innovative approaches to balancing monetary and non-monetary elements in their total rewards.”
