Canadian employers are heading into 2027 with compensation budgets that look remarkably familiar. Mercer’s July survey of more than 470 Canadian organizations found an average planned merit increase budget of 3.0% and an average total salary increase budget of 3.2%. Those figures are close to the actual increases employers reported for 2025 and 2026, which suggests that organizations aren’t responding to economic uncertainty by either opening the pay taps or shutting them abruptly. That stability is useful as a benchmark, but it isn’t a salary decision. A national average says something about the direction of the market. It doesn’t tell an employer what a particular role in Calgary, Moncton or Toronto needs, and it certainly doesn’t tell a manager whether a strong employee who has fallen behind the market should receive 3%. Salary budgets are an allocation tool. Individual pay decisions still have to account for market position, internal equity, performance, scarcity and retention risk. The distinction between merit budgets and total increase budgets matters too. Mercer’s 3.2% total figure includes more than the annual merit cycle.
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