Salary Growth Slows Across Canada as Companies Exercise Fiscal Caution
A comprehensive new report from financial management consulting firm Normandin Beaudry indicates that companies across Canada are projecting average salary increases of 3% for 2026 when excluding salary freezes. This forecast represents a slight downward adjustment from the firm's summer projection of 3.1%, reflecting what analysts describe as a "steady decline" in salary increase budgets observed since 2023.
Survey Methodology and Key Findings
The report, based on a survey of nearly 400 Canadian businesses conducted during the fourth quarter of 2025, reveals that 74% of organizations surveyed are not planning any changes to their initial salary increase budget projections from last summer. For those organizations planning adjustments, the results present a mixed picture with more than half making reductions while the remainder intend to increase their initial budget allocations.
Darcy Clark, senior principal of compensation at Normandin Beaudry, explained in a news release: "As economic and trade uncertainty continues to shape Canada's market, organizations are taking a cautious, gradual approach to salary increase budgets. At the same time, heightened expectations for transparency are pushing organizations to refine and clearly articulate the holistic employee experience and total rewards they offer."
Compensation Challenges and Workforce Planning
The consulting firm's analysis also uncovered that 42% of organizations plan to secure additional budgets specifically to address compensation challenges. This strategic approach suggests that while overall salary increase projections have moderated, companies recognize the ongoing importance of competitive compensation packages in attracting and retaining talent.
Despite the cautious salary outlook, the report highlighted several positive economic indicators. Notably, 47% of surveyed companies expect their annual incentive plans (bonuses) to pay out 100% or more of their target amounts. Additionally, 35% of organizations are planning workforce increases for 2026, suggesting continued business confidence in certain sectors.
Broader Economic Context and Implications
The slight dip in projected salary increases occurs against a backdrop of ongoing economic uncertainty and shifting market conditions across Canada. The report's findings suggest that Canadian businesses are navigating a complex landscape where fiscal prudence must be balanced against the need to remain competitive in the labor market.
This trend toward more conservative salary budgeting reflects broader patterns in the Canadian economy, where organizations are carefully evaluating their compensation strategies in response to multiple factors including inflation rates, productivity measures, and global economic pressures. The data provides valuable insights for both employers developing compensation strategies and employees planning their financial futures.
