Compensation packages in Canada, especially in Alberta, are rising to levels that could force more companies to put investments on hold, according to The Conference Board of Canada.

The findings of the Conference Board’s 25th annual Compensation Planning Outlook survey, released today, indicate that non-unionized Canadian employees can expect wage increases averaging 3.9% in 2007. Average wage gains of 5.1% are projected for Alberta, while increases in British Columbia are expected to average 4%.

“This kind of increase in compensation levels puts firms’ growth strategies at risk,” said Prem Benimadhu, vp, governance and human resource management. “Labour markets are tight across the country, especially in western Canada, where workers are in high demand throughout the resource and construction sectors. Despite substituting capital for labour, firms continue to face a difficult choice between paying to retain their employees and putting off longer-term investments.”

Almost three quarters of survey respondents report that recruitment and retention challenges are intensifying, not only among their top performers, but throughout their workforce.

The tight labour market is affecting the public sector as well. This sector is importing private-sector pay practices as a tool to attract and retain employees. Public sector employees are likely to receive four per-cent increases in base pay. In addition, the public sector is allocating 8.2% of its salary budget in the form of bonuses.

Wage increases are projected to reach 5.5% in the oil and gas sector, the highest among all industries. Above-average increases are expected in the transportation and utilities sector, and in education and health. At a time of very tight labour markets, wage settlements for unionized workers are, surprisingly, expected to average only three% in 2007.

Increases of 3.8% are forecast for workers in Saskatchewan and Manitoba, and wage gains of 3.7% are expected in Quebec. The average increase in Ontario is expected to be 3.5%, as a strong dollar continues to hamper the manufacturing sector. The lowest average increases (3.1%) are expected in the Atlantic Provinces.

The report, Compensation Planning Outlook 2007- Labour Shortages Put Pressure on Pay, is based on the responses of 279 organizations participating in this year’s survey, which was conducted in July and August 2006.