About eight per cent of employers in New Brunswick and nine per cent in Nova Scotia are expecting to freeze salaries next year as businesses and organizations across Canada face significant financial impact due to the COVID-19 pandemic, according to data from Morneau Shepell.
Overall, the annual survey found 36 per cent of Canadian organizations froze salaries this year, that’s much higher than the two per cent of organizations forecasted to do so this year before COVID-19 hit.
“In the past, when we conducted these surveys, and we’ve been doing it for 38 years, generally speaking freezes are in a low single-digit percentage. It’s maybe two or three per cent of organizations,” said Anand Parsan, VP of Morneau Shepell’s compensation consulting practice. “This year, 36 per cent in 2020 gave freezes…it has a huge impact.”
Some 13 per cent of organizations have already committed to freezing salaries next year as well due to pandemic-related uncertainty and concerns about financial instability, while 46 per cent are still undecided on where they’d freeze salaries next year. In New Brunswick, 38 per cent of organizations are undecided. That figure is 40 per cent in Nova Scotia, and 26 per cent on P.E.I.
With so many still uncertain, Morneau Shepell is projecting that the average base salary increase nationally would be 1.9 per cent in 2021, including freezes. This would be the first time since the 2008 financial crisis that this figure falls below two per cent, caused y salary freezes and economic instability.
That’s already a slight recovery from this year’s 1.6 per cent actual average base salary increase.
The Atlantic provinces are “right up there at the top of the list” when it comes to projected base salary increases, Parsan said. New Brunswick is expected to see an average base salary increase of 2.1 per cent including freezes, while the rest of Atlantic Canada sees a two per cent increase.
The four Atlantic provinces are among those doing the best economically across Canada, Parsan said, as provinces like Alberta struggle with low commodity prices, and Ontario and Quebec face growing numbers of COVID-19 cases.
“In terms of the state of the economy, I think it’s showing a little bit more resiliency in Atlantic Canada,” Parsan said. “I think Atlantic Canada has done probably a good job in terms of the pandemic bubble. And there’s lower COVID-19 instances and so forth.”
Parsan said this year’s survey results are among the most concerning in the 38 years that the poll has been conducted. The freezes are representative of the financial blow that COVID-19 has had on businesses and organizations.
This year, 76 per cent of employers in Canada said the pandemic had a negative impact on their bottom-line. Of that, 22 per cent saw a severe drop, 34 per cent saw a moderate decline, and 20 per cent cited a mild fall.
It’s not surprising given Canada posted its lowest GDP for the first and second quarters of 2020 since the 2008 financial crisis. The country saw an 11.5 per cent drop in GDP in Q2 this year, compared to a 2.3 per cent decline in Q1 of 2009.
Certain industries are expected to do worse than others, Parsan added.
For instance, 42 per cent of employers in the arts, entertainment and recreation sector, and 25 per cent of employers in educational services have already committed to freezing salaries next year. These sectors, like others that are mostly reliant on in-person activity, continue to see the negative impact of pandemic-related restrictions.
On the other hand, some sectors are doing OK. Nearly 60 per cent of employers in real estate, rental and leasing, utilities, agriculture, forestry and hunting sectors are not planning to freeze salaries. More than half of finance and insurance organizations also don’t plan to implement a freeze.
Many of those undecided are in the sectors of transportation and warehousing, and accommodation and food services.
Parsan said this period is similar to 2008 in that it is a shock to the economy.
“The difference here is, this is a pandemic. We don’t know where the light at the end of the tunnel is. It’s not the same as an economic downtown. This could prolong for a period of time,” he said. “Why you’re seeing a lot of undecided organizations is because [they’re thinking], is there going to be a second wave? Are we going to go to a partial lockdown, a full lockdown? No one knows.”
With these financial stresses adding on to mental stresses, Parsan said it’s important for organizations to communicate well and openly about the impact of COVID-19 on their businesses, and on programs that are available to support workers. They should also revisit their total rewards strategy and think of ways to support workers, including offering flexibility, access to financial education and emotional support, and other resources.
While employees’ situations will differ from one to the other, Parsan said they should tap into the financial wellbeing programs available through their organizations.
“They might not be aware of … all the great programs are that are available to them…If they don’t know, they should really ask HR and find out how the organization can help them with their particular situation,” he said.
The survey includes 889 organizations from across Canada, including nearly 20 per cent that are operating in the Atlantic provinces. The data was collected between July and August.
Inda Intiar is a reporter with Huddle, an Acadia Broadcasting content partner.
