Are you getting two raises a year because of inflation?

I recently learned that companies are giving pay raises to their employees in mid-June. They are in addition to those granted in winter.

In the financial sector, for example, banks and desjardins have successively announced increases for certain categories of workers.

the Wall Street Journal also reported that a growing number of American companies increased the compensation of all their employees twice in the same year.

I asked the question on LinkedIn, it’s worth what it’s worth, but a few have messaged me to confirm that their salary has been increased ahead of the holidays. This topic also seems to be on the minds of many compensation consultants in Quebec these days.

Is this a sign of a trend?

In catch-up mode

At Quebec’s largest cooperative, recent pay increases are rather exceptional.

“Desjardins targeted specific sectors where adjustments were needed, whether it was job reassessment, salary repositioning or salary increases,” says Chantal Corbeil, spokeswoman for the Desjardins group.

As far as I know, it’s not about helping employees take advantage of the increase in gas prices. Faced with labor shortages, the company must compete, especially for entry-level positions and salaries.

With its means, it is undoubtedly easier for the financial services industry to digest, but the problem is the same everywhere.

In virtually every industry today, an employee can claim better treatment by moving to a competitor.

At the same time, these defectors cause wage distortions. Employees with less seniority end up being paid better than employees who have remained loyal. At some point, employers will have to bring everyone back up to par, on the one hand to close the gaps, but also to keep those who have not dropped out yet. There’s a lot of that right now.

Runaway inflation obviously contributes to this phenomenon. It gives workers an extra argument when it comes to not asking for more, but to go elsewhere.

Mid-year adjustments are not common in normal times, admits Marc Chartrand, senior advisor at PCI Remuneration Advisor. Some of his clients have done this recently.

“And many wonder if they should do it,” he says.

The same applies to her colleague Anna Potvin, partner responsible for the compensation practice at Normandin Beaudry: “As the year progresses, more and more organizations grant salary increases. It used to be rare and very targeted. Now the increases seem to be more widespread,” she notes.

On the way to a new normal?

Those who have been managers in a non-union organization know how tedious the process of separating pay envelopes can be, at least in companies that have implemented a compensation policy.

This mechanism is initially based on an endless budget procedure. Raise generally consists of several elements: base raise, scale progression, percentage related to individual performance. It requires an evaluation of each individual by their immediate superior. For both sides, this exercise is as comfortable as renewing a Canadian passport in 2022.

With such a cumbersome procedure, it is not surprising that we limit ourselves to a one-time increase per year!

“Companies that gave raises this summer didn’t bother. They gave everyone the same. What I saw was about 3% up on where it was earlier in the year,” says Mr. Chartrand.

If wage growth continues along this path, two-tier increases could take hold on a more sustainable basis. When you think about it, splitting a 6% annual increase into two 3% improvements six months apart is beneficial for an employer: he saves half the year on his payroll.

“It doesn’t make that much of a difference to the company in the long run,” Anna Potvin believes. According to the compensation expert, wages are expected to increase by an average of 6% next year.

It still doesn’t stop inflation. It has to be said that it is tricky because wages rising too fast would encourage companies to pass the bill on to their customers and thus encourage price increases. A real vicious circle.

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