'Organizations face growing pressure to do more with less'
Canadian organizations are planning smaller salary increases in 2026, according to the latest annual Salary Increase Survey from Normandin Beaudry.
The survey, which gathered responses from over 1,000 organizations, projects an average salary increase of 3.1% for 2026 (excluding salary freezes) — a slight decline from the 3.2% actual average in 2025.
“With salary increase budgets continuing to decline, organizations face growing pressure to do more with less making it essential to strategically plan salary increases to retain talent and maintain workforce strength,” said Darcy Clark, Senior Principal, Compensation at Normandin Beaudry.
Additional budgets for 2026
Despite the overall restraint, 42% of organizations plan to secure an average additional budget of 0.9% in 2026, mirroring 2025’s approach.
These extra funds are primarily intended to:
- support market adjustments to salaries (59%)
- differentiate compensation for high performers (58%)
- retain employees in strategic or critical roles (54%)
- accelerate progression for employees lower in their pay range (38%)
- address compression and internal equity challenges (37%)
- retain employees with a perceived retention risk (27%)
- provide for off-cycle salary increases (20%)
When these additional budgets are included, the average total salary increase for 2026 is expected to reach 3.4%, says Normandin Beaudry.
That compares with predictions from Gallagher that the average salary bump for non-unionized employees is expected to drop to 3.1% in 2026, down from 3.5% this year and 3.8% in 2024—a return to pre-pandemic norms.
Regional and industry salary outlooks
Most provincial projections for 2026 are below the national average, with Quebec (3.2%), British Columbia (3.1%) and Ontario (3.1%) expecting the highest increases.
Some sectors are projecting higher-than-average increases for 2026, including:
- Pharmaceutical: 3.8%
- Construction of buildings: 3.8%
- Telecommunications, data processing, data warehousing, and related services: 3.7%
- IT consulting services: 3.7%
- Accommodation, food services, and tourism: 3.5%
- Professional, scientific, and technological services: 3.5%
- Real estate, rental, and leasing: 3.5%
Organizations in the software and IT sectors reported the highest actual salary increase budgets for 2025—4.7% and 4.4%, respectively. In contrast, the manufacturing sector saw a sharp decline in 2025, with average increases of just 0.5% due to ongoing tariff-related pressures, says Normandin Beaudry. For 2026, manufacturing is expected to see more moderate reductions.
Salary structure increases and compensation strategy
For non-unionized employees, the average salary structure increase in 2025 was 2.7% (excluding freezes) and is projected to be 2.6% in 2026.
This follows a trend toward more prudent increases after significant post-pandemic adjustments:
- 2022: 3.0%
- 2023: 3.4%
- 2024: 2.6%
- 2025: 2.7%
- 2026 (projected): 2.6%
“Reported salary structure increases provide anecdotal evidence of a more balanced market, with organizations focusing on affordability to preserve cost structures as they manage annual salary increases,” says Normandin Beaudry.
Economic context and future outlook
The survey results indicate that, amid economic slowdown and trade uncertainties, Canadian organizations are continuing to scale back salary increase budgets as a way to recession-proof their operations.
Only 3% of respondents reported freezing salaries in 2025, and just 0.4% expect freezes in 2026, though 12% remain undecided.
“Although the labour market has become less constrained, strategic planning around salary increases remains essential for talent retention and sustaining workforce strength, particularly in the uncertain economic and geopolitical context. Organizations hoping to set themselves apart may benefit from adopting innovative approaches to balancing monetary and non-monetary elements in their total rewards,” says Clark.
