Due to a tightening economy and labour market, Canada’s employers plan to award average base pay increases of 3.8% in 2009, slightly less than the 4% increase granted in 2008, according to the 2009 Canadian Compensation Planning Survey from Mercer.

Pay raises are significantly higher, however, for employees in regions with high-performing industries.

Increases to base salaries differ considerably by industry reflecting their performance. Compared to the expected average national pay increase of 3.8% in 2009, Canadian employers in high-performing industries plan to grant salary increases that are about 40% higher. Oil and gas and natural resources are the highest, with projected pay increases of 5.4 and 4.2% respectively for 2009. In contrast, durable manufacturing and transportation are expected to award less-than-average pay raises in 2009 at 3.4%.

“Clearly the uneven economy is having an impact on human capital and compensation strategies,” says Iain Morris, principal at Mercer. “Alberta’s economy, led primarily by the energy and natural resources sectors, continues to boom and employers are granting higher pay increases to reflect this growth. Organizations in other areas, such as Ontario where the manufacturing sector is struggling, are facing the challenges of a tightening economy.”

According to Mercer’s survey, organizations are using cash-based approaches, such as signing bonuses, spot cash awards and retention bonuses to hire and retain key talent.

The current edition of Mercer’s survey, which has been conducted annually for more than two decades, includes responses from more than 485 employers in Canada and reflects pay practices for more than 850,000 non-unionized or a total of almost 1.7 million workers.