Survey shows consistent salary increases, with most firms abandoning across-the-board pay hikes
Canadian organizations largely followed through on compensation plans set late last year, maintaining steady salary increases in 2026 while sharpening their focus on rewarding performance, according to new data.
Findings from Mercer’s 2026 QuickPulse – Canada Compensation Planning Survey (March Edition), which polled 271 employers, show that average merit increases came in at 3.0%, while overall pay adjustments, including employees who received no increase, averaged 3.3%. These figures closely mirror projections issued in October 2025, underscoring a disciplined approach to budgeting.
Despite that consistency, the survey points to a notable shift in how raises are allocated. Broad, uniform pay increases have largely fallen out of favor, replaced by more targeted strategies tied to employee performance and market positioning.
Only 4% of surveyed organizations reported issuing equal, across-the-board raises. Instead, most employers said they are differentiating compensation based on factors such as individual results, alignment with market rates, and internal pay equity.
"Our latest compensation planning survey clearly shows that Canadian employers are being strategic with their compensation budgets, rather than delivering across-the-board increases," said Elizabeth English, Senior Principal in Mercer’s Career Practice. "With only 4% reporting a 'peanut butter' approach of giving the same increase to all employees, companies are prioritizing performance, market value, and internal equity to differentiate pay. This approach is designed primarily to retain top talent in a competitive market.”
While overall increases remained stable, certain industries stood out. Life Sciences and Retail & Wholesale reported some of the highest adjustments, with merit increases averaging 3.3% in both sectors and total increases reaching 3.8% and 3.6%, respectively.
In contrast, Banking & Financial Services and non-financial Services sectors posted slightly lower merit increases of 2.8%. However, the banking and financial segment offset this with total increases of 3.7%, suggesting additional base pay changes beyond standard merit adjustments.
Beyond direct compensation, many employers are also revisiting their broader salary frameworks. More than half of respondents indicated plans to modify formal pay structures this year, with adjustments averaging 2.7% among those making changes. Mercer noted that this reflects a common pattern, as many organizations update salary bands on a biennial basis.
Overall, the data suggests Canadian employers are balancing cost discipline with a more selective approach to pay, using compensation as a tool to retain high-performing employees in a competitive labour market.
