An “abnormal” number of Canadian organizations are freezing salaries this year as a cost-cutting measure during the coronavirus pandemic, with several firms across key sectors planning to do the same in 2021.
According to figures released Tuesday in a new report about employment compensation, more than one-third of companies have stopped increasing wages in 2020 — well above forecasts of only two per cent projected to do so before COVID-19 took hold.
Data shared with the Free Press by Morneau Shepell, a Toronto-based human resources agency, suggests 13 per cent employers have already committed to freezing salaries next year, and 46 per cent more are on the fence about it.
“These findings are definitely a result of the complete mass economic uncertainty we’re seeing because of the pandemic,” said Anand Parsan, vice-president of compensation consulting at Morneau Shepell, who led the charge on surveying 889 organizations from a broad cross-section of Canadian industries.
“Looking beyond the uncertainty itself,” he said, “I think the results show the lack of stability in our personal financial well-being that we can expect in yet another challenging year to come for the economy.”
About three-quarters of all employers surveyed said the pandemic has had a negative impact on their bottom lines, with at least 22 per cent of firms reporting a severe decline in revenue, and 34 per cent reporting a moderate decline in 2020.
“Things really haven’t looked this bad since the fallout of the 2008 financial crisis,” said Parsan. “And it really wasn’t this bad then either.”
In the first quarter of 2009, Canada’s GDP was down by 2.3 per cent, compared to this year’s second-quarter reports suggesting a staggering decline of 11.5 per cent.
Although numbers show COVID-19 is affecting companies across the country, some provinces might be hit harder than others.
Sixteen per cent employers in Alberta said they expect to see more salary freezes next year — higher than any other province. At eight and nine per cent, respectively, New Brunswick and Nova Scotia are at the lowest end of the spectrum.
“Other provinces certainly have a more enviable position than Manitoba,” said Parsan, citing statistics that show 11 per cent employers in the Prairie province will be freezing wages next year, compared to large provinces such as Quebec and British Columbia, both at nine per cent.
The variance of salary forecasts becomes even more significant when comparing industry-by-industry results.
Sectors relying on in-person activities are most negatively impacted by the pandemic. About 42 per cent employers in arts, entertainment and recreation, along with 25 per cent employers in educational services, said they’ll be freezing salaries in 2021.
Industries performing well and not planning to freeze salaries in the coming year include: real estate employers (at 58 per cent); agriculture, forestry, fishing or hunting (56 per cent); and finance or insurance companies (51 per cent).
Other sectors remain uncertain about such cost-cutting initiatives. About 68 per cent companies in transportation or warehousing, and 58 per cent accommodation or food service firms, said they don’t know if they’ll be stopping wage increases in 2021.
Guylaine Béliveau, principal of the consulting practice at Morneau Shepell, said the key to solving this “well-being puzzle” is open communication from employers about the pandemic’s impact to their business.
“With our economy officially entering a recession, it’s important to be mindful of how Canadians are feeling across the country,” she said. “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.”
Temur Durrani, Local Journalism Initiative Reporter, Winnipeg Free Press