Pay Budgets Are Stuck at 3 Per Cent. Actual Wage Growth Just Fell to 2.

Canadian employers are planning a third straight year of flat salary budgets for 2027, and most of them made those plans before the latest tariff escalation.

The first major read on 2027 compensation is in, and it looks a great deal like the last two years. Mercer Canada's July 2026 QuickPulse Compensation Planning Survey, drawing on more than 470 organizations across 15 industries, found employers plan to budget an average merit increase of 3.0 per cent and total salary increases of 3.2 per cent next year. Total increases include merit, promotions, cost-of-living adjustments and other pay changes.

Those figures are nearly identical to what employers actually delivered in both 2025 and 2026, when merit increases held at 3.0 per cent and total increases came in at 3.3 per cent. Canadian HR Reporter described the result as salary budgets holding largely unchanged for a third consecutive year.

The survey also marks a change of name on the masthead. Mercer's Canadian people and investments business is transitioning to the Marsh brand as of September 1, 2026.

Planning in the fog

The stability in the numbers masks a great deal of hesitation behind them. Sixty per cent of respondents expect economic conditions to have at least a moderate impact on their 2027 compensation decisions. And as of July, 89 per cent of organizations were still gathering information for next year's budgets. Only 6 per cent had proposed a budget to leadership, and just 5 per cent had secured approval.

That timing matters. The survey was fielded before trade talks between Canada and the United States collapsed and before Washington imposed 50 per cent tariffs on a range of Canadian goods on August 22. Elizabeth English, senior talent and careers leader at Mercer Canada, told Benefits Canada that the escalating trade war would likely have influenced employers' responses had the survey been conducted afterward. She also noted, in Mercer's release, that past data suggest early projections of this kind tend to prove accurate. Both can be true: the national average may hold while tariff-exposed industries quietly trim.

Sector differences are already visible. High technology is budgeting the largest increases, at 3.3 per cent for merit and 3.6 per cent in total. Banking and financial services is planning the smallest of any industry surveyed, at 2.7 per cent for merit and 3.0 per cent in total. Consumer goods and energy are also tracking below the national merit average, at 2.9 per cent each.

English described employers as balancing the need to stay competitive against slower growth, rising cost pressures and tariff-related expenses. Put simply, budgets are flat on average but increasingly uneven underneath.

A second survey points the same way. Early data from Normandin Beaudry, reported by Canadian HR Reporter in August, suggest average salary increases of 3.1 per cent in Canada for 2027. More than half of participating organizations plan to set aside an additional discretionary budget averaging 0.9 per cent, down slightly from 1.1 per cent in 2026. Half of Canadian organizations have made or plan to make off-cycle salary adjustments, a sign that employers are leaning on tools beyond the annual raise.