MERCER

FRAMING THE FUTURE

11 SEPTEMBER 2014

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Economic Overview

Highlights from the survey

Career Frameworks

Questions from the Audience

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The Canadian Economic Outlook

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• Canadian growth continues to hover at 2 per cent.stronger in 2015

• Labour markets will slowly tighten. limiting growth

• Wages growing faster than inflation as labourmarkets slowly tighten

• Canadian businesses adapting to agingworkforce. strong(er) currency and embracinginnovation

Source: The Conference Board of Canada

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Mercer Research

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3.0%

2.8%

4

Excluding Salary Freeze

Average Expected Salary Increase in 2015

Canada :

Atlantic :

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696PARTICIPANTS

20%

Services(Non-Financial)

1 %7Energy

%9Financial Services %7

High TechRetail & Wholesale

%6Consumer Goods

Life Sciences (4%) │ Mining and Metals (4%) │ Transportation Equipment (1%)

%5Insurance

Participant Profile

%10Other Non

Manufacturing

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1 %6 Less than 100 employees

100–299

%9 300–499

1 %4

1,000–2,999 2 %3

%7

500–999

3,000–4,999

1 %45,000 and over

1 %7NUMBER OFEMPLOYEES

Participant Profile

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Year All employees Exec Mgmt Professional Clerical Operational

2015 3.0% 3.1% 3.1% 3.0% 3.0% 3.0%

2014(actual) 3.0% 3.2% 3.1% 3.0% 3.0% 2.9%

2013(actual) 3.2% 3.4% 3.3% 3.1% 3.2% 3.0%

2012(actual) 3.2% 3.2% 3.3% 3.2% 3.2% 3.1%

2011(actual) 3.0% 3.1% 3.0% 3.0% 2.9% 3.1%

Source: Mercer Canadian Compensation Planning Surveys

CANADA(all industries. all locations. excluding zeros)

2015 salary increase projects are consistent with prioryears

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The energy industry continues to lead the way

1. Excluding zeros

3.1 3.0 2.9 2.9 2.8 2.8 2.7 2.6 2.6 2.6

3.7

3.12.9 3.0

2.72.9 2.9 3.0

2.7 2.7

Atlantic Canada

2015 average all-employee increase1

Ene

rgy

Man

ufac

turin

g

Ser

vice

s(N

on-F

inan

cial

)

Hig

hTe

ch

Fina

ncia

lSer

vice

s

Insu

ranc

e

Life

Sci

ence

s

Con

sum

erG

oods

Oth

erN

onM

anuf

actu

ring

Ret

ail&

Who

lesa

le

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OtherAlberta

GreaterCalgary

3.2

3.2

Saskatchewan3.1Greater

Vancouver

Manitoba

GreaterMontreal2.9 2.9

2.8

2.8

OtherQuebec

OtherOntario

Other BritishColumbia

GreaterToronto

AtlanticCanada

Territories

3.0

3.0

3.0

2.9

2.8

Alberta continues to lead the way

3.22.83.0

AVERAGE SALARY EXPECTED IN 2015

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2.9% 3.0%3.2% 3.2%

3.0% 3.0%

2.3% 2.4% 2.4% 2.3% 2.3% 2.2%

0 %

1 %

2 %

3 %

4 %

2010 2011 2012 2013 2014 2015 (projection)

Salary Increase Salary Structure Adjustments CPI

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Inflation is a non determining factor

Excluding zeros CPI Source : Bank of Canada

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PERCENTAGE OF WORKFORCE

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Continued differentiation in performance and rewards

2%

9%

25%

7%

0.3%1.4%

2.9% 3.9%

5.0%

Lowest Low Middle Next highest Highest

2014 Actual Performance Rating

57%

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2 %0Performance Performance &positioning insalary structure

Positioning insalary structureEqually

distributed

Majority of increases considers the salary rangepositioning

12

7 %1

%4%5

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“Meets expectations” employees are receiving STIawards greater than their targets

164% 156% 164%

136% 130% 135%

108% 105% 104%

Execu tive Ma nag em ent Prof ession al (No n-Sa le s)

Highest Next Highest Middle Low Lowest

56%

15%

54%

14%

52%

10%

Executive Management Professional(non-sales)

Target STI(100%)

To see data for other employee groups. refer to the2014/2015 Canada Compensation Planning Survey

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Source: Mercer Canadian Compensation Planning Survey

Off-cycle adjustments are typically used torecognize promotions

5 %3 Promotion

MarketCompetitiveness

Retention

%2

Other 1 %3Temporary

Assignment

2 %5

OFF-CYCLEADJUSTMENTS

%7

For 81% of theparticipating

organizations. off-cycle salary increases

are tracked by HR

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Projected promotional budget for 2015

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A B C0.2% 0.8% 1.4% 2.0%

Mean: 1.0%

In % of Payroll

Approximately 27% of organizations are budgeting promotionalincreases separately from the annual salary increase budget.

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Salary Increase Budget Communication

80%

38%

8%

18%

12%

44%

Managers Employees

Open Communication Communication on Request No Communication

The majority of employees do not receive anycommunication about the organization’s salaryincrease budget

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PERCENTAGE OF ORGANIZATIONS

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What is the percentage of organizations that openlycommunicate:

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Salary range of employee’scurrent grade/band

Salary range for grade/band above orbelow employee’s

Salary range all grades/bands

39%

23%

20%

CAREER FRAMEWORKS

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E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Career Frameworks anchor jobs to a common verticaland horizontal structure

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Support

Professional

Management

Executive CAREERSTREAMS

CAREERLEVELS

E

D

C

B

A

CAREERSTAGES

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Most organizations have a single Career Framework

Learning & Dev. Network Architecture Applications Development ..….

ITHR

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

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Employee’s Perspective

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“We need to

build ourtalent fromwithin byidentifying the rightskills and creatingcareer paths.”

“Employees are asking

for clarity onexpectations at each

step of the careerjourney as theymove up and laterally.”

“Employees are asking

for clarity onexpectations at each

step of the careerjourney as theymove up and laterally.”

“There is too

much ad hocand discretionarydeal making -leading tomanager angstand

employeemistrust”

“There is too

much ad hocand discretionarydeal making -leading tomanager angstand

employeemistrust”

Why is there a growing interest in career frameworks:employer’s perspective

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Why is there a growing interest in career frameworks:employee’s perspective

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“I would love to

navigatefuturepossibilitiesstarting from mycurrent role andcompany.”

“I don’t see a

clear pathto progress in thisorganization.”

“I don’t see a

clear pathto progress in thisorganization.”

“There is no

consistencyin levels or

pay. making mequestion theorganization’spromise to me.”

“There is no

consistencyin levels or

pay. making mequestion theorganization’spromise to me.”

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Four Reasons Canadians Quit

1 Promotion opportunities elsewhere 24%

2 Lack of career and training opportunity 16%

3 Higher base salary elsewhere 14%

4 Career change 12%

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Career Frameworks are becoming more common

Don't have a careerframework but planning

to implement one

Have a careerframework3 %8

3 %2

Don't have acareer frameworkand not planningto implement one

3 %0

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CAREERFRAMEWORKS

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Competencies and job levels are most often used tounderpin Career Frameworks

40% Core and technicalcompetencies

Core/behavioralcompetencies

Job Evaluation /Job Leveling

%5 Other2%Market

28%

UNDERPINNINGCAREER

FRAMEWORKS

%25

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There is still room for improvement

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56%

62%

65%

68%

46%

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Short-term Incentive Targets

Career Streams / LevelsCareer Streams / Levels

5%

8%

10%

12%

15%

5%

5%

30%

28%

25%

20%

18%

Compensation ProgramCompensation Program

Frameworks can connect talent management.careers. and compensation management

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E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Base Salary Ranges

Career StagesCareer Stages

E

D

C

B

A

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Key Takeaways

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Compensation budgets are stable. but pay forperformance is still a challenge

Opportunity for improvement in communication of annualincreases and total rewards overall

Career Frameworks have the potential to optimize thelinkage between rewards and talent management

ü

ü

üEmployees have choices and we need to help themFrame Their Futureü

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1 Mercer’s 2015 Canadian Compensation Planning Report

1-800-333-3070 or www.imercer.ca/cps

2 Mercer’s Global Compensation Planning Report

1-800-333-3070 or www.imercer.com/gcpr

3 New Graduate Pay and Student Hiring Rates Survey

Participate by September 26 and receive a free preliminary report.

4 HR Knowledge Series – Sessions on Compensation. Benefits and Pensions

Sessions in the fall. request an invitation at EventsCanada@mercer.com

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Questions from the Audience

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Please take a minute to fill outthe Evaluation Form.

Thank you.

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