Canadian firms plan 3.1% salary increases in 2026 as 42% set aside extra budgets
Canadian organizations are bracing for leaner salary increases in 2026, with budgets projected to rise by an average of just 3.1 percent, down from 3.2 percent in 2025, according to Normandin Beaudry’s 15th annual Salary Increase Survey.
Despite the pullback, 42 percent of organizations plan to secure an additional 0.9 percent in salary budgets next year, mirroring 2025 levels.
These funds are earmarked for market adjustments (59 percent), rewarding high performers (58 percent), retaining strategic roles (54 percent), progression for employees lower in their pay range (38 percent), internal equity (37 percent), retention risk (27 percent), and off-cycle increases (20 percent).
Factoring in these allocations, total salary increases are expected to average 3.4 percent in 2026.
Some industries are projecting stronger-than-average increases.
Pharmaceuticals and building construction lead with 3.8 percent, followed by telecommunications and IT consulting at 3.7 percent. Accommodation, food services, tourism, professional services, and real estate are all forecasting 3.5 percent.
The survey, which gathered input from more than 1,000 organizations across Canada, found that only 0.4 percent anticipate freezing salaries in 2026, while 12 percent have yet to decide.
In 2025, 3 percent froze salaries, in line with projections set a year earlier.
Darcy Clark, senior principal of compensation at Normandin Beaudry, said, “With salary increase budgets continuing to decline, organizations face growing pressure to do more with less.”
He added that this makes it essential to strategically plan salary increases to retain talent and maintain workforce strength.
Clark added that even with a less constrained labour market, planning remains critical amid economic and geopolitical uncertainty.
He noted that balancing monetary and non-monetary rewards could help organizations set themselves apart.
