Many businesses forced to freeze salaries next year due to pandemic


Published September 30, 2020 at 1:13 am


Were you hoping for a raise next year? You might not want to hold your breath.

A new study from Morneau Shepell found that the average projected salary increase for 2021 is only 1.9 per cent.

With the pandemic wreaking havoc on many businesses’ bottom lines, many owners are being forced to consider salary freezes in order to avoid closing permanently.

According to the findings, 36 per cent of Canadians companies froze salaries in 2020, compared to just two per cent before the pandemic.

This trend is likely to continue through 2021, as 46 per cent of employers are uncertain about whether they will freeze or increase salaries, while 13 per cent have already committed to freezing next year.

Additionally, some sectors will be hit harder than others—when it comes to the arts, 42 per cent of employers have committed to freezing salaries for 2021, as have 25 per cent of employers in educational services.

Further, when it comes to the transportation and warehousing sectors, 68 per cent of employers said they don’t yet know if they’ll have to freeze salaries next year, as did 58 per cent of employers in accommodation and food services.

Uncertainty has been the buzzword of 2020, however, it’s extremely important to look beyond the term itself to understand the critical implications that employers’ instability has on our economy and Canadian employees and how to seek to mitigate that where possible,” Anand Parsan, vice president of compensation consulting practice for Morneau Shepell, said in a news release.

“This year’s results are some of the most concerning that we’ve seen since the survey’s inception in 1982. With nearly half of employers reporting uncertainty going into 2021, it’s important that Canadians recognize the impact on their financial wellbeing as we expect another challenging year. Employers should revisit their total rewards strategy and consider what they can do to support their employees in such times, including access to financial education, access to resources and emotional support, as financial stress has a huge impact on the overall wellbeing, resiliency and productivity of the workforce,” he continued.

Based on the findings, the vast majority of businesses have suffered due to the pandemic; 76 per cent of employers said the pandemic had a negative impact on their bottom-line revenue—22 per cent reported a severe decline, 34 per cent reported a moderate decline, and 20 per cent reported a mild decline.

“The second quarter fell off a cliff in terms of growth, as is made plainly evident through Canada’s GDP and the numbers reported by employers included in this year’s survey,” Guylaine Béliveau, principal of compensation consulting practice for Morneau Shepell, said in the same release.

“With our economy officially entering a recession, it’s important to be mindful of how Canadians are feeling across the country. Financial stability is an important piece of the wellbeing puzzle, and it’s critical that employers continue to maintain open communication with employees about the pandemic’s impact on their business. Ensuring and demonstrating good governance, risk management and communication around key compensation policies and programs are effective ways to help build confidence and an improved sense of security, even while acknowledging a challenging reality,” she continued.

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