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Economic turbulence has negative impact on projected salary increases for next year

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Pension/Retirement / Canada

Economic turbulence has negative impact on projected salary increases for next year

MONTRÉAL, Aug. 28, 2012 /CNW/ - Canadian employers expect salaries to rise by an average of 2.6% in 2013, according to Morneau Shepell's annual Compensation Survey. This is a 0.2% drop from the responses in last year's survey. The 2.6% average includes expected salary freezes and excludes promotional or special salary adjustments. Respondents say that projected base salary increases for 2013 are within the range observed last year, which was between 2% and 3.5%.

Overall, respondents appear to be less optimistic than last year in terms of growth and profitability in their organizations, especially in Alberta.

Morneau Shepell's 30th annual Compensation - Trends and Projections survey was conducted between mid-June and mid-August, 2012, with input from over 250 organizations employing one million people in Canada. The benchmark organizations are mostly from the manufacturing (28%), services (24%), and finance (14%) sectors.

Respondents in the finance sector expect the greatest drop in salary increases, with a forecast of 2.7% increases for management and professionals in 2013, compared to 3.4% last year.

"While insurance companies are hurt by low interest rates, growth prospects in the banking sector are dimmed by the anticipated weakness of the global economy and by the level of consumer debt in Canada," says Michel Dubé, Principal at Morneau Shepell who is responsible for the survey. "We see this impacting salary increases for next year in the financial sector."

The overall expected average increase of 2.6% is twice the inflation rate of the Consumer Price Index, which at the time the survey was conducted was 1.3%. However, a rise in inflation in Canada is likely in the short run given current volatility in the petroleum industry, and expected increases in food prices due to the worst drought the United States has seen in 50 years.

According to survey respondents, for sponsors of defined benefit pension plans, the key priority is to rein in escalating pension costs. Although interest rates are at historical lows, these sponsors are implementing liability-driven, investing strategies. And as a response to exploding pension costs, employers are looking into all available alternatives to modify pension cost sharing and risk.

For sponsors of defined contribution plans, the trend is to establish a realistic retirement income scenario. In addition to retirement income calculators and other decision tools, a personalized scenario is presented to participants to bring about necessary adjustments to their retirement savings strategy.

Survey respondents again identified cost control and disability management as their top priorities for 2013 for their benefits program. Faced with continuous cost increases and higher utilization rates of expensive drugs, employers are seeking the help of outside consultants to implement cost-control strategies without reducing access to medical therapies for employees.

According to the survey, for 2013, the key human resource priorities for employers are the same as last year - talent acquisition and employee retention - especially in the context of an aging population.

"We note a definite trend to increased use of Employee and Family Assistance programs (EFAP) to address mental health issues in the workplace, as well as employees and family members accessing EFAP through new technologies which allow them to get help immediately," said Stephen Liptrap, Executive Vice-President, Morneau Shepell, and General Manager, Shepell-fgi.

About Morneau Shepell

Morneau Shepell is the largest Canadian-based firm offering consulting and outsourcing services for workforce programs. The company works with clients to develop innovative solutions that integrate with their business strategies to achieve results. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity, and improve their competitive positions by supporting their employees' financial security, health and well-being. 

Established in 1966, Morneau Shepell serves over 8,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With approximately 2,700 employees in offices across North America, we provide services to organizations across Canada, in the United States and around the globe. 

Morneau Shepell Inc. is a publicly traded company on the Toronto Stock Exchange (TSX). For more information, visit

SOURCE: Morneau Shepell Ltd.

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