What's Up with Salary Slowdowns?

It looks like paycheques in Canada may start feeling a little tighter over the next couple of years. With the economy slowing down in 2025 and 2026, many employers are rethinking their compensation strategies.

A recent Gallagher survey shows that nearly two-thirds of Canadian organizations plan to offer smaller salary increases in 2026 compared to 2025.

Here’s what we know:

• Salary growth is cooling off. Non-unionized employees are expected to see an average increase of 3.1% in 2026, down from 3.5% this year and 3.8% in 2024. That’s closer to pre-pandemic levels.

• Quebec is leading the pack. It has the highest forecasted salary budgets (3.2%), while sectors like legal, real estate, and professional services remain the most generous.

• Education and municipalities are tightening more. Some raises will be closer to 2.7%.

• Global growth is slowing. Canada, the U.S., Mexico, and China are expected to feel it most.

Beyond salary increases, some trends stand out:

• Targeted budgets. About one-third of employers are setting aside extra funds for high-potential or “at-risk” employees.

• Indexing salaries. Most organizations will adjust salary structures to keep up with the market, but 1 in 5 won’t.

• Non-monetary perks are shrinking. Fewer employers are offering things like mentoring, training, and career development compared to recent years.

• Attraction and retention are dropping in priority. Half of organizations see it as a key challenge in 2026 – it’s down from 62% in 2024.

And let’s not forget about pay transparency. With new legislation in B.C. and Ontario, most employers (84%) say their managers have resources to support pay discussions, but only 27% actually provide formal training.

What does this mean for you?

Compensation is shifting back to a more cautious, pre-pandemic pace. Employers will need to balance tighter salary budgets with competitive practices if they want to keep their best people. And as for employees, they’ll be looking for clarity, fairness, and development opportunities when raises are modest.

👉 If you’d like to review your compensation strategy, or explore how non-monetary programs can support retention when budgets are tight,

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I’d be happy to help you plan ahead.