Fifteen percent of employers unsure about increasing base pay this year: Report

As fewer companies plan increases, what factors come into consideration?

Fifteen percent of employers unsure about increasing base pay this year: Report

Still troubled about the current economic status, a huge number of employers are now thinking twice about increasing workers’ minimum wage, finds a new report.

Fifteen per cent of employers in three countries are unsure whether to give base pay increases in 2023, five times more than the three per cent that shared that sentiment in 2022, reports Payscale.

And while just five per cent of companies are sure they will not increase the pay rate is lower this year compared to last year (10 per cent), just 80 per cent plan to give base pay improvements, down from 87 per cent last year.

“This is a reflection of last year’s white-hot labor market cooling, the risk of a recession increasing, and organizations reflecting that perhaps they spent too much on pay in 2021 and 2022 to compete for talent,” says Payscale.

Only a third (33 per cent) of Canadians are feeling positive about their financial situation, reports The Co-operators Group Limited, and 45 per cent are worried their income won't keep pace with their basic expenses this year.

How much?

How much will that base pay increase be, exactly? Higher than it had been in the past for many employers, finds Payscale’s survey of nearly 5,000 employers headquartered in the U.S., Canada, Europe, the Middle East and Africa, conducted between October and December 2022.

This year, 56 per cent plan to give base pay increases over three per cent, up from 53 per cent in 2022, 36 per cent in 2021 and 26 per cent in 2020. The number of companies planning to give this much pay boost is also far higher than what was recorded for 2019 (33 per cent) and 2018 (32 per cent).

Specifically, 26 per cent of companies plan a base pay increase of something between four and five per cent, 19 per cent plan to up the pay by three per cent and 12 per cent are looking to give a raise of between 3.50 per cent and 3.99 per cent.

Eleven per cent even plan to give a base pay increase of more than five per cent.

On April 1, Yukon minimum wage employees will get a bump in paycheques, from $15.70 to $16.77 per hour, the government announced.


Coming up with the exact figure to give as a base wage increase is no easy task. This year, employers focused on the following factors

  • performance (72 per cent)
  • market adjustment/talent competition (67 per cent)
  • inflation/cost-of-living (54 per cent)
  • internal pay equity (44 per cent)
  • hot skills (27 per cent)
  • minimum wage increases (18 per cent)
  • tenure (19 per cent)
  • preparations for pay transparency (18 per cent)

“There is a lot that goes into determining base pay increases, and that has never been truer than in 2022 when inflation was through the roof, pay compression seemed to be impacting nearly every employee, and pay transparency legislation was demanding greater commitment to pay equity,” says Payscale in its 2023 Compensation Best Practices Report.

“Although base pay increases are typically called “merit increases,” the average is usually tied more closely to the economy than to performance.”

When it comes to biggest challenges right now for staffing, recruitment comes out on top (54 per cent) for Canadian employers. But pay increase requests (46 per cent) and employee retention (37 per cent) are also top of mind, finds a survey by consulting firm Peninsula.

Before you start implementing pay raises, you should consider the best practices for how, when and why to issue them, according to Indeed. These may include:

  • Encouraging an employee to stay.
  • Recognizing an accomplishment.
  • Acknowledging loyalty.
  • Rewarding exceptional performance.

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