Sector gaps emerge despite flat national averages
Canadian employers delivered merit pay increases in 2026 that matched their projections from the previous year, according to a new compensation survey published by Mercer.
The 2026 Mercer QuickPulse Canada Compensation Planning Survey, released Wednesday, drew responses from 271 Canadian employers. The mean merit increase delivered to employees was 3.0%, consistent with projections made in October 2025. Average total increases, which include all types of pay increases beyond merit, came in at 3.3%.
The figures were unchanged from 2025 actual increases, when merit also stood at 3.0% and total increases at 3.3%.
Industry variations
Not all sectors moved in lockstep with the national average. Services (non-financial) and banking and financial services both came in below the national average, delivering merit increases of 2.8%. Life sciences and retail and wholesale led the group at 3.3%.
Total pay increases told a different story for some industries. Life sciences topped all sectors at 3.8% in total increases, while banking and financial services delivered 3.7% in total increases despite its 2.8% merit figure – a gap the survey said reflected base pay increases delivered through other means. Retail and wholesale rounded out the above-average group at 3.6%.
Increases also varied by employee level. Executives received smaller merit and total increases, at 2.5% and 2.7%, respectively. Non-executive salaried employees saw 2.9% in merit and 3.3% in total increases, while non-executive hourly workers received 2.8% and 3.0%.
Performance still drives pay
The survey found that individual performance remains the most widely used factor in determining salary increases. Among respondents, 88% said merit increases were based on individual performance, 80% factored in the relationship between an employee’s current salary and market value, and 71% considered internal equity.
Only 4% of participants reported giving equal, across-the-board salary increases – a method sometimes referred to in compensation circles as the “peanut butter approach,” where a pay budget is spread evenly across all employees regardless of performance.
Salary structures
Most Canadian employers continue to manage pay through formal salary structures. Among survey participants, 31% use geographic differentials, 33% operate across multiple locations under a single national structure, and 34% operate in one location using one structure.
Slightly more than half of respondents said they plan to adjust their salary structures in 2026 by an average of 2.7%, excluding those who reported zero changes – a figure below the mean merit increase, consistent with patterns Mercer described as typical for annual or biennial structural adjustments.
