Canadian employers say they still plan to follow through with their average salary increase of 3.3% for 2002, according to the Morneau Sobeco Compensation Trends and Projections survey for 2002.

Survey results are based on data collected in August from 309 organizations representing 534,000 employees across Canada. After the tragic events in September, 80% of the largest participating organizations were contacted again to see how, if at all, their plans would be affected.

Only 18% of the organizations contacted stated they now expect to reduce their salary increase budget for 2002 by 0.9% on average. The overall impact of these adjustments is to reduce the average anticipated salary increase from 3.3% to 3.1%. Still, while many Canadian employers expect further layoffs and challenges, as current political and economic dynamics continue to change, certainty about any compensation direction is difficult to determine.

Before these adjustments, salary increases were expected at a rate of 2.9% for unionized hourly staff and 3.7% for executives. Participants in Western Canada reported the highest expectations for all job categories, with average increases of 4.2% for executives compared to 3.9% in Ontario and 3.7% in Quebec.

The number one pension issue identified in the survey was investment performance. The overall decline in interest rates and the plunging value of equity markets are expected to increase the cost for employers of defined benefit pension plans. On the other hand, participants in defined contribution plans will bear the full brunt of the reduced interest rates and equity value.