The financial services industry is facing a more acute talent shortage than other sectors, and despite easing increases in wages next year, companies will need to continue focusing on attracting and retaining skilled employees, according to the Conference Board of Canada.

A Conference Board survey that polled 395 organizations in July and August shows that non-unionized companies plan to increase wages by 3.9% in 2009, down from an increase of 4.2% this year.

But the Conference Board considers this ambitious planning, and projects actual wage growth to be just 3% next year, according to Prem Benimadhu, vice-president of governance and human resource management for the Conference Board. Speaking at the Conference Board’s annual Compensation Outlook in Toronto on Monday, he said typically during times of recession or slower economic growth, actual wage growth tends to be lower than companies plan.

In addition, the significant market turmoil that took place in September, following the survey, has changed the landscape slightly, according to Benimadhu.

Overall, the slower growth in wages is largely the result of a slower economy. “In 2009 and 2010 this economic slowdown that we’re now seeing in Canada will take pressure off the labour market,” said Paul Darby, deputy chief economist with the Conference Board. For 2009, he expects no growth in general employment, and an unemployment rate averaging 6.6% or 6.7%.

“It’s going to look like a softer labour market for sure,” he said. “It’s going to take pressure off your hiring problems, there is going to be more people looking for work.”

Facing less difficulty finding and retaining workers during the economic downturn, employers will be less motivated to continue boosting compensation.

“There will be no more acute tight labour market situation that we’ve faced over the last five years,” said Benimadhu. “Compensation planners are going to be very cautious next year.”

The fact that many businesses have begun to cut back investment indicates their concern about the economic environment, Benimadhu said. He pointed to Suncor’s announcement last week that it would cut back oilsands investment, as one example, and said companies will likely continue to be very disciplined in spending. This will result in reduced labour costs and efforts to increase efficiency, he said.

The slower economy is also beginning to drive down employee confidence, which will lead to less turnover, according to the Conference Board. “The kind of job-hopping that we have seen in the past will not be around in next two or three years,” Benimadhu said.

The easing labour market, however, won’t last long. Given massive numbers of retiring workers in the years ahead, the labour market is set to tighten again once the economic environment improves.

As a result, organizations should not lose sight on long-term human resource strategies. “Attraction and retention of talent will stay as a major priority of organizations,” said Benimadhu.

In 2008, 74% of organizations report difficulty attracting and retaining talent, according to the Conference Board survey, and the level of difficulty is particularly high in the accounting and financial services industries.

According to the survey, organizations in the financial services sector plan to increase wages by 3.8% in 2009. The industry topping the list of projected salary increases is oil and gas, with a 5.4% projected rise.

The lowest increases are expected in the beleaguered manufacturing sector, and in the communications and telecommunications industry.

Wage increases will vary significantly across Canada in 2009. Increases in the four western provinces are expected to exceed 4% on average, with Alberta’s non-unionized workers gaining an average of 5.1%.

Increases in Ontario, Quebec and the Atlantic provinces are expected to fall below the national average.

IE