Rethinking compensation: Smart pay strategies to keep up with current trends
By Wanda Loewen and Emily Toth, Senior HR Consultants
As we move through 2025, Canadian employers are navigating a perfect storm—rising inflation, economic uncertainty driven by US “on again-off again” tariffs, a recent federal election, and the need to address artificial intelligence and its use in their organizations. Internal pressures as employees struggle to manage rising costs of living and saving for their future is another weight to bear. Needless to say, there’s a lot of stress and uncertainty going on. Yet one constant remains: compensation is often a company’s largest expense and one of its most powerful tools for attracting and retaining talent.
As your organization navigates these challenges, focusing on your compensation approach can help you ensure long-term sustainability. Here are four strategies that may assist in your 2025-26 plans.
Pay transparency
While provinces such as British Columbia and Ontario already have pay transparency legislation, it’s a practice that’s expected to be more broadly accepted. Job seekers view this as a “plus” when they apply for a job and it increases employer credibility.
What can you do?
Be proactive
Add pay ranges to your job postings and communicate them to your staff. This will build trust with your employees as they see what the organization commits to for pay for their positions and that it’s consistently applied. It’ll also encourage role mobility for employees looking to apply for positions that could be a promotion for them (or save them time in applying if the pay isn’t a match).
Educate leadership on how to hold pay discussions
Sharing pay information internally may bring up questions from employees about their own pay. Educating leadership on how to have pay conversations with employees can bring clarity, and build trust and employee loyalty — whether to explain why someone isn’t receiving an annual increase as their pay is at the top of the pay range or their annual increase is delayed.
Analyze market rates before hiring
Get reliable compensation benchmarks (not just scanning posts on sites like Indeed or GlassDoor) for the job you’re looking to post. Using a compensation expert to review the market and provide a validated salary range is more accurate than looking at salaries of competitor job postings or letting the candidate pool dictate pay rates. We use validated data sources that are based on job content comparisons rather than just the job title, and can specifically look at pay within your targeted talent market (i.e. sector, industry, organizational size, and geographic scope).
Make your jobs and organization stand out
In a job posting, remember to emphasize the other key differentiators of the position and organization on top of salary—benefits, retirement savings, and other perks matter to candidates; ensure the total package you’re offering is clear. Your reputation is in the spotlight when you put out a job posting, so brag about your full offering.
Prioritize strategic pay increases
Even with the pressure on salaries, the Conference Board of Canada in their Compensation Planning Outlook 2025 report from January 2025, identified that only 2.5% of organization across Canada were planning to freeze salaries for some employee groups this year. Previously in October, non-unionized increases were projected to be 3.4%1 across Canada.
Instead of freezing salaries, the Board identified that labour markets are tightening, and they expect more vacancies and the continued shortage of skilled talent.
Strategically invest in talent
If you’re struggling to provide pay increases due to limited budget, we suggest looking for areas where you have a strategic need for talent. Identify the roles where employees have a critical skill, essential to your organization’s strategy. It may be roles supporting new technology, new products, or essential business functions. Then align pay adjustments with strategic priorities to ensure you invest where it matters the most.
Compensation and AI
There’s no doubt that artificial intelligence is transforming workplaces, as it impacts new role creation and the obsolescence of others. We recommend planning for the impact in your organization. Plan thoughtfully for reskilling of employees and consider shifting to paying for skills and not job titles. This may be the opportunity to revisit your compensation philosophy to align with the future of the organization and the ability to remain agile to the changing job landscape.
What’s next?
Compensation in 2025 and beyond is about more than managing costs- it’s about making intentional and strategic decisions that support employees and performance. By taking a thoughtful approach, by prioritizing transparency, targeting key talent, and preparing for the future of work, you can ensure employee trust and drive your organization’s success. Your leadership, employees, and investors will thank you. Have a question on your compensation strategy? Let’s have a conversation.