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Pandemic-related wage freezes expected to thaw this year


By Temur Durrani, Local Journalism Initiative Reporter

WINNIPEG FREE PRESS

After months of “abnormal” economic uncertainty, early projections for 2021 show Canadian employers are beginning to relax cost-cutting measures in place because of the coronavirus pandemic.

But it’s not good news for everyone yet, and certainly not for smaller organizations.

According to figures from a new compensation report, at least seven per cent of all companies expect to freeze salaries this year — a figure well below the nearly one-third which axed wages in 2020, and much less than the 20 per cent projected for 2021.

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At the same time, data from the report by consulting firm Normandin Beaudry suggest, salary-freezing has increased significantly for smaller companies and remains above the pre-pandemic levels of three per cent overall.

About 16 per cent of organizations with 50 to 100 employees said they won’t be increasing wages this year, compared to four per cent in 2020. And 30 per cent of companies with fewer than 50 employees said the same, compared to 12 per cent last year.

“Salary freezes wouldn’t exactly be the biggest measure to look at market outlooks in a normal economic climate,” explains Diane White, principal of compensation at Normandin Beaudry.

“But I haven’t seen wage-freezing represent such a large chunk for our companies in around 25 years of my career. And that’s why, right now, it’s probably the most important figure to factor in when showing how the economics are playing out.”

In terms of salary increases, forecasts show only 2.6 per cent of companies will do so this year (excluding any freezes). The decrease has been partly attributed to around 35 per cent of organizations expecting to allocate a budget less than previous plans.

The pandemic continues to be the reason for causing these shifts to compensation, White told the Free Press Wednesday, and it’s not just affecting salaries — even bonuses are being diminished.

Bonus payments take a blow

More than a quarter of all organizations expect not to pay any bonuses in 2021, mainly because financial results from last year did not meet their set objectives.

For those that do plan to pay bonuses, however, close to half will make payments that are less than 20 per cent of what they’d initially planned to give out as a reward for good performance.

Low levels like this have rarely been seen for such a high number of organizations, said White, adding it will force a “massive” number of employers to look at permanently overhauling their pay bump and bonus programs.

“It’s mass volatility which is causing these trends to kind of be all over the place,” said Bram Strain, president and CEO of the Business Council of Manitoba. “The shock of COVID is settling down after the summer when we had no idea how things were looking, but it seems to be somewhat still lingering.”

“Certainly though, whether things are looking well for you or not, the results are definitely affecting some industries more than the other,” he said.

In summer 2020, Normandin Beaudry believed more than 10 per cent of organizations in the manufacturing sector would freeze salaries in 2021. Barely six months later, the consulting firm says none of those organizations expect to pause their wages.

White said any “good changes” like that after 2020 are likely the result of a “continued war for talent.”

“It’s good to know that there’s still demand for talent, which is likely why projections are better this time around,” she said. “But I think it’s going to need quite a bit of patience before things normalize or settle down to what they looked like before the pandemic.”