Canadian employers are responding to inflation pressures and a tight labor market by raising wages and salaries and offering more perks to attract and retain workers, Robert Half says in its 2023 Salary Guide.

In July, Bank of Canada Governor Tiff Macklem advised the Canadian Federation of Independent Business to resist the urge to raise wages and salaries.

Increasing wages and salaries, after all, can contribute to inflation, which Macklem and other central bankers and economists have been banking on being transitory.

And while inflation has come down slightly in Canada over the summer, by about half a per cent, it appears inflation may not be nearly as fleeting as central bankers had hoped. Canadian employers are now responding with pay raises and perks, says human resources consulting firm Robert Half.

Robert Half’s 2023 salary guide finds 42% of employers are offering higher starting salaries, and of the employers who increased base salaries for new hires, 79% also adjusted compensation for current staff.

The aggregate increase across the country has been about 4% — so about half the rate of inflation — said Mike Shekhtman, senior regional director for Robert Half, BC-Manitoba.

Many employers have resorted to perks, instead of pay, to try to attract and retain staff, with the most popular being mental health resources, flextime and wellness programs. One popular non-compensatory option that some employees may find attractive is remote work options.

“Firms mandating that staff return to the office full time have the most difficulty attracting and keeping talent,” the salary guide notes.

Employers who haven’t yet raised wages and salaries can expect to come under increasing pressure to do so. With an estimated 1 million job vacancies in Canada, the labor pool is so tight that many employers may find they have no choice but to hike wages and salaries.

“It remains the number one reason why people are moving onto new opportunities,” Shekhtman said. “As long as inflation is a headline, it will continue to put pressure on employers.”

Inflation has become a major bargaining issue in labor disputes, with unionized employees demanding cost of living provisions in contracts.

“Despite overall salary growth in Canada, more than half of professionals (57 per cent) feel underpaid with 34 per cent planning to ask for a raise if they don’t get one,” Robert Half says. “Further, nearly four in 10 workers would consider changing employers for a 10 per cent increase in pay.”