Canadian Employers Plan 3.1% Pay Raises for 2027 as Nearly Half Hold Extra Cash for Hard-to-Keep Workers

35,000+ smart investors are already getting financial news, market signals, and macro shifts in the economy that could impact their money next with our FREE weekly newsletter. Get ahead of what the crowd finds out too late. Click Here to Subscribe for FREE.

Canadian employers are signalling that 2027 will bring another year of restrained but still-positive pay growth. New compensation data from Normandin Beaudry puts the average planned salary increase at 3.1%, excluding freezes, almost exactly where actual 2026 increases landed. The more revealing number may be 46%: nearly half of organizations expect to set aside an additional pool of money for targeted pay problems, including market adjustments, top performers and employees in critical roles.

That combination tells a more nuanced story than the headline raise alone. Companies are trying to control fixed payroll costs while keeping enough flexibility to respond when a valued employee becomes difficult to replace. For workers, the result could be a year in which the average raise remains modest, but the gap between routine increases and strategically targeted adjustments becomes more noticeable.

The 3.1% Number Signals Stability, Not a New Pay Boom

Normandin Beaudry’s 2027 outlook is based on responses from more than 800 Canadian organizations and marks the firm’s 16th annual national salary-planning exercise. Employers project average increases of 3.1% for 2027 when organizations freezing salaries are excluded. That is the same level respondents say they actually granted in 2026, after earlier forecasts had pointed to a slightly smaller 3.0% increase. In other words, employers are not preparing for a dramatic acceleration in base pay, but they are also not broadly pulling back from increases.

Salary freezes remain the exception rather than the norm, although more organizations are considering them for next year. Only 1.7% of respondents reported freezing salaries in 2026, while 3.6% currently project freezes in 2027. The contrast is important: the national average describes organizations that are still raising pay, but individual outcomes can vary widely. A company facing weak revenue may hold salaries flat, while another competing for specialized workers may spend well above the benchmark.

Nearly Half of Employers Are Building a Second Pay Pool

The most striking feature of the 2027 plans sits outside the regular raise budget. Normandin Beaudry found that 46% of responding organizations expect to secure an additional compensation budget averaging 0.9%. The share is identical to 2026, when 46% said they actually used an extra pool of roughly the same size. That suggests targeted pay adjustments are becoming a recurring part of compensation planning rather than an emergency measure reserved for unusually tight labour markets.

This extra money is not simply added to every employee’s annual increase. It gives managers room to respond when standard salary grids no longer fit the market. A software specialist whose pay has fallen behind competing offers, an experienced technician occupying a difficult-to-replace role or a high performer nearing the top of an internal range could receive attention from that pool. When these discretionary budgets are included, Normandin Beaudry estimates average total salary increases for 2027 could reach about 3.3%, higher than the headline 3.1% general budget.

Employers Are Prioritizing Market Gaps and Retention Risk

The intended uses of the extra money show how selective pay decisions are becoming. Among organizations planning additional budgets, 67% expect to use them for market-driven salary adjustments, while 55% plan to differentiate pay for high performers. Half say the money will help retain employees in strategic or critical roles. Smaller shares are targeting employees low in their pay ranges, internal equity problems, workers considered a retention risk and off-cycle increases.

That hierarchy reveals a shift from treating the annual raise as the only meaningful compensation event. Employers appear more willing to preserve a relatively modest company-wide budget and then intervene where the cost of losing a worker or falling behind market pay looks highest. Research on wage setting has found that firms respond to outside offers and retention pressures with targeted compensation changes, while more recent labour-economics work highlights recruitment and retention bonuses as tools that can support long-term employment relationships. The practical result is a more differentiated system in which two employees at the same company may experience very different pay outcomes.

Some Industries Are Budgeting Above the National Average

A 3.1% national figure can hide meaningful differences between sectors. Normandin Beaudry projects 3.4% salary budgets in telecommunications, data processing and related services, as well as in finance and insurance. Real estate, rental and leasing, technology and construction are clustered around 3.3%, while professional, scientific and technological services are projected at 3.2%. Those differences are small in percentage-point terms, but they compound when applied across large payrolls and can matter when employers compete for the same specialized talent.

Ownership structure also creates modest variation. Privately held organizations are projecting average increases of 3.2%, compared with 3.1% at publicly traded companies, 3.0% at not-for-profits and 2.9% at government and Crown corporations. Mercer’s separate 2027 compensation research points to a similar pattern of sector divergence, with high-tech employers budgeting above-average increases while several other industries sit below the national benchmark. The message for workers is that occupation, industry and employer type may matter almost as much as the headline Canadian average.

Inflation Will Determine How Far a 3.1% Raise Actually Goes

The value of a nominal raise depends heavily on what happens to prices. Statistics Canada reported that the Consumer Price Index was up 3.0% year over year in July 2026, while average hourly wages among employees were up 2.8% over the same period. On that snapshot, wage growth was roughly keeping pace with inflation rather than delivering a large improvement in purchasing power. Average weekly earnings measured through payroll data were somewhat stronger, rising 3.4% year over year in June.

The outlook for 2027 could be more favourable if inflation cools as expected. The Bank of Canada projected in July that inflation would ease to about 2.5% in the second half of 2026 and reach its 2% target by early 2027. If that path broadly holds, a 3.1% salary increase would represent a clearer real gain than it would against 3% inflation. Still, salary budgets are not cost-of-living guarantees, and the timing of individual raises, taxes and household expenses means employees can experience the same percentage increase very differently.

The Labour Market Has Cooled, but Employers Still Face Pockets of Scarcity

Canada is no longer in the exceptionally tight hiring environment seen earlier in the decade, yet the labour market is far from uniform. Employment rose by 75,000 in July 2026 and the unemployment rate slipped to 6.4%, its lowest level since July 2024. Statistics Canada also counted 509,100 job vacancies in June, with the national vacancy rate holding at 2.8%. There were about 2.9 unemployed people for every vacant position, giving employers more choice than during the post-pandemic hiring crunch.

Even so, vacancy trends show why companies continue reserving money for selected roles. June job openings were up year over year in manufacturing, retail, professional and scientific services, and mining, quarrying and oil and gas extraction. Manufacturing vacancies, for example, were 17.3% higher than a year earlier, while professional and scientific vacancies rose 9.1%. A softer national labour market therefore does not eliminate recruitment pressure in particular occupations or regions. That unevenness supports compensation strategies that concentrate extra dollars where replacement difficulty is greatest.

Skill Gaps Help Explain Why Certain Workers Still Have Leverage

A newly published Employment and Social Development Canada research summary offers another reason employers may resist across-the-board generosity while paying more to protect key positions. Using data from more than 9,300 private-sector businesses, the study found that more than half reported employees with skill gaps, and 26% said at least one-fifth of their workforce needed stronger skills. The most commonly cited gaps were technical or job-specific skills, problem solving, critical thinking and customer service.

The underlying business data were collected in 2021, so they should not be treated as a direct measure of today’s labour market. But the findings illustrate a persistent management problem: having enough employees is not the same as having enough employees with the right capabilities. Businesses with notable gaps most often responded with training, feedback and mentoring, while many also hired new staff or changed work practices. When a company has already invested heavily in an employee who possesses scarce technical knowledge or institutional experience, a targeted pay adjustment can become one tool for protecting that investment.

Mercer Sees the Same Shift Toward Flexible, Off-Cycle Pay

Separate compensation planning data from Mercer reinforces the idea that Canadian employers are holding the line on broad raises while becoming more tactical with individual adjustments. Its July 2026 research, covering more than 470 Canadian organizations across 15 industries, found average 2027 merit budgets of 3.0% and total salary increases of 3.2%. Sixty percent of respondents expected the economy to have at least a moderate effect on compensation decisions, and most were still gathering information rather than locking in final budgets. That caution comes even as revised Statistics Canada data show real GDP rose 0.1% in the first quarter and 0.8% in the second.

Mercer also found that about half of Canadian organizations had provided or expected to provide off-cycle salary adjustments in 2026, with a similar pattern anticipated for 2027. Promotion activity is expected to slow, with roughly 6.4% of employees projected to be promoted next year compared with 7.6% in 2026. These findings fit the broader picture: employers are not abandoning pay growth, but they are increasingly separating routine annual increases from promotions, market corrections and retention moves. That gives companies more control over where limited compensation dollars are spent.

Workers Should Treat 3.1% as a Benchmark, Not a Promise

For employees planning around 2027 compensation, the national average is best understood as a budgeting reference rather than an expected personal raise. Another large international compensation study, reported by WorldatWork from Korn Ferry data, also placed Canada’s average 2027 increase at 3.1%, with a median of 3.0%. Its Canadian median was 3.0% across executive, management, junior professional and clerical or operations groups, reinforcing the idea that employers are converging around a relatively narrow national planning range.

Actual pay changes will still depend on performance, salary position, promotion, market demand and whether an employer uses discretionary funds. Some workers may receive less than 3%, some may see no increase, and others in critical or under-market roles could receive substantially more through targeted adjustments. Major Canadian collective agreements have recently produced annual wage adjustments in a similar neighbourhood, averaging 3.2% across settlements covering at least 500 employees through May 2026. The broader signal is stability: employers are budgeting cautiously, but they are keeping money available when retaining the right worker becomes more important than holding to a uniform formula.

This Options Discord Chat is The Real Deal

While the internet is scoured with trading chat rooms, many of which even charge upwards of thousands of dollars to join, this smaller options trading discord chatroom is the real deal and actually providing valuable trade setups, education, and community without the noise and spam of the larger more expensive rooms. With a incredibly low-cost monthly fee, Options Trading Club (click here to see their reviews) requires an application to join ensuring that every member is dedicated and serious about taking their trading to the next level. If you are looking for a change in your trading strategies, then click here to apply for a membership.