As many organizations approach their fiscal year end and assess the financial impact of COVID-19 on their business, the main question being asked is not about raises or promotions, but whether salary freezes are necessary to stay afloat. According to Morneau Shepell‘s 38th annual Salary Projection Survey, more than one third (36 per cent) of Canadian organizations froze salaries in 2020, compared to a pre-COVID forecast of just two per cent. This trend is likely to hold true for the coming year, with almost half (46 per cent) of employers uncertain about whether to increase or freeze salaries and 13 per cent already committed to freezing in 2021.
For the first time since the 2008 financial crisis, the survey saw the national average base salary increase projection drop below 2.0 per cent, driven by the combined impact of salary freezes and economic instability. In 2019, the average salary increase, including freezes, was 2.4 per cent year-over-year – a significantly higher number when compared to the actual base salary increase of 1.6 per cent in 2020. For 2021, employers in Canada anticipate a slight recovery, with base salaries expected to increase by an average of 1.9 per cent, including salary freezes. With salary freezes and promotional adjustments excluded, employers are projecting salaries to increase by 2.5 per cent in 2021 – down from the actual 2.6 per cent in 2020, excluding freezes.
The variance in freeze projections becomes even more significant when comparing results by industry. The survey found that 42 per cent of employers in arts, entertainment and recreation and 25 per cent of employers in educational services have committed to freezing salaries in 2021 as their sectors, largely reliant on in-person activities, continue to be negatively impacted by the pandemic’s physical distancing restrictions.
