As inflation continues to impact the cost of living across Canada, the question of fair employee compensation is more critical than ever. From rising grocery bills to increasing housing costs, Canadians are feeling the squeeze—and employers are being called to respond.
Understanding inflation and its impact.
After a period of historically low rates, Canada has faced notable inflationary pressures post-pandemic, peaking at over 8% in 2022 before easing somewhat in 2023 and 2024. Even as inflation slows, a new year and the uncertainty of the USA, brings questions about inflation. Essentials like food, transportation, and housing remain well above pre-pandemic prices.
For employees, this means their paycheques may not go as far as they once did. For employers, this presents a challenge: how to ensure compensation keeps pace with the cost of living while maintaining organizational sustainability.
The case for fair compensation.
Fair compensation is not just about matching inflation—it’s about valuing employees. When wages lag behind the cost of living, the real value of pay decreases, leading to financial stress, lower morale, and higher turnover.
In Canada, where many households are already grappling with affordability issues, particularly in major cities like Toronto, Vancouver and Kelowna, the stakes are high. Employees may be forced to seek additional work, relocate, or look for new employers who offer more competitive compensation packages.
Key considerations for employers
1. Cost of Living Adjustments (COLA)
One way Canadian employers can address inflation is by implementing a Cost of Living Adjustment. A COLA is a periodic increase in wages tied to inflation metrics like the Consumer Price Index (CPI). While not always feasible for small businesses, larger employers or those in high-turnover sectors may find COLA increases essential to retain talent.
2. Transparent compensation policies.
Employees want to know they’re being paid fairly. Transparency around how pay is determined—including market comparisons, internal equity, and performance-based increases—helps build trust and morale, even if wages can’t fully match inflation.
3. Non-monetary benefits.
When budget constraints limit wage increases, employers can consider boosting non-monetary benefits. These might include:
- Enhanced health benefits
- Additional paid time off
- Flexible or remote work options
- Professional development budgets
- Mental health support
While these don’t replace income, they do contribute significantly to employee wellbeing and job satisfaction.
4. Benchmarking against industry standards
Staying competitive means knowing what others are paying. Canadian employers can use resources like Job Bank Canada, Glassdoor, or industry association surveys to benchmark salaries and adjust accordingly.
Glassdoor is a way for employees to also see industry standards to ensure they’re being paid a fair wage when accepting a job.
5. Employee feedback and engagement.
Open lines of communication about compensation expectations and financial stressors can help employers make informed decisions. Regular surveys and one-on-one check-ins offer valuable insight into how employees are coping with inflation and what changes would support them most.
A shared responsibility.
Fair compensation is a shared responsibility. While employers should offer wages that reflect economic realities, policymakers also play a role in managing inflation, supporting small businesses, and ensuring workers are protected.
In 2024, Canada saw incremental changes to the federal minimum wage and provincial living wage campaigns, signaling a broader societal recognition of the importance of fair pay. Businesses that proactively respond to inflationary pressures are not only helping their employees—they’re also contributing to a stronger, more resilient economy.
Navy & Sage Benefits is here to help.
Inflation is a complex challenge, but fair employee compensation doesn’t have to be. With empathy, transparency, and strategic planning with the help of benefits advisors at Navy & Sage Benefits, Canadian employers can support their teams through uncertain times.
Remember, one thing remains constant: people are a business’s most valuable asset. Investing in them is not just the right thing to do; it’s the smart thing. Call Navy & Sage Benefits to discuss what you can do for your employees today.
