As Canadian employers prepare for 2026, salary increase budgets are continuing a gradual downward trend after the elevated levels seen in recent years. While planned raises remain above long-term historical norms, the pace of growth is slowing as organizations balance competitive compensation with economic uncertainty.
In this article, we explore the national forecast for salary increases in Canada in 2026 and dive into what small and medium-sized businesses (SMBs) are planning based on our survey data.
Canadian Salary Increase Forecast for 2026
Projected average salary increase (excluding salary freezes) is around 3.0% for 2026 according to a survey by Normandin Beaudry, slightly below previous summer projections of 3.1%.
This represents a continued moderation compared with average increases in prior years. Furthermore :
- 74% of organizations are keeping their initial salary increase budgets aligned with last summer’s expectations.
- 42% of employers also plan to allocate additional budget (average ~0.8%) to support compensation challenges such as market adjustments, retention, and high-performer differentiation.
This data shows that Canadian employers are still planning real wage growth in 2026, but with more caution and control than in the immediate post-pandemic period.
Why Budgets Are Moderating
Normandin Beaudry notes that economic uncertainty, trade and market pressures, and a less constrained labour market are all contributing to organizations refining their salary budgets downward.
At the same time, many are focusing on total rewards strategies, reinforcing the importance of broader employee value propositions beyond base pay increases, especially during tighter budget cycles.
What Canadian SMBs Are Planning for 2026
Our own survey with 400+ Canadian SMBs offers a complementary view, particularly relevant for smaller organizations shaping their compensation strategy.
Here’s a Canada-wide snapshot of how SMBs project salary increases for 2025 versus 2026 (based on our dataset):
SMBs' Salary Increases in 2025
| Salary increase category (2025) | Percentage of respondents (2025) | |
|---|---|---|
| Prevailing standard | Between 2% and 4% | 61.5% |
| Higher increases | Between 4% and 6% | 16.5% |
| High salary increases | More than 6% | 3% |
| Low salary increases | Less than 2% | 7.3% |
| Salary freezes | No increase | 3.2% |
| Lack of information or uncertainty | Don't know | 8.5% |
SMBs' Salary Increases in 2026
| Salary increase category (2026) | Percentage of respondents (2026) | |
|---|---|---|
| Still dominant, but declining | Between 2% and 4% | 52.9% |
| Sharp drop in higher increases | Between 4% and 6% | 8.7% |
| Exceptional raises becoming rare | More than 6% | 1.9% |
| Slight decrease for lower raises | Less than 2% | 5% |
| Salary freezes remain stable | Salary freezes | 3.5% |
| Major rise in uncertainty | Don't know | 29% |
A significant portion of SMBs (29%) are still undecided on their 2026 salary budget, highlighting the impact of market uncertainty on planning.
What the Data Means for Canadian Employers
1. Salary Growth Remains Modest but Real
Across Canada, employers are expecting average base salary increases around 3.0% for 2026, consistent with a cautious yet positive compensation environment.
This figure suggests that wage growth is not disappearing, rather, it is stabilizing near historical norms as compared with the more elevated increases seen in 2021–2024.
2. Larger Increase Categories Are Shrinking
In the SMB context, the share of businesses planning above 4% increases drops significantly between 2025 and 2026. This shift indicates that while modest increases are still planned, growth budgets are tightening across the board.
3. Uncertainty Is a Rising Factor
The most striking trend in the SMB data is the jump in respondents who are undecided about their 2026 salary strategies. Nearly three times as many SMBs reported uncertainty in their planning compared with the previous year.
This signals broader economic and labour market unpredictability that is affecting planning cycles, especially in smaller organizations where budget agility is often more limited.
4. Employers Are Prioritizing Total Rewards
Both national forecasts and SMB sentiments point to a bigger emphasis on total rewards strategies: blending base pay, bonuses, market adjustments, and non-monetary incentives to attract and retain talent.
Normandin Beaudry notes that 42% of Canadian employers are already allocating additional budget funds for targeted compensation adjustments and retention efforts.
Key Takeaways for 2026 Salary Strategy in Canada
For HR leaders and business owners, the data suggest:
- Average base salary increases remain positive (~3.0%), but below peak levels.
- SMBs are more cautious than ever, with a notable rise in planning uncertainty.
- Large increases are becoming less common, especially above 4%.
- Total rewards approaches are essential, incorporating both monetary and non-monetary elements.
Taken together, this reinforces the need for strategic compensation planning, one that blends base pay with benefits, flexibility, career development, and culture to remain competitive.
Read our article and get ready for 2026 HR trends!
Salary increases are just one part of the broader HR landscape in 2026.
To uncover deeper insights into talent acquisition, retention, workforce planning, total rewards strategies, and more, download the full Folks HR 2026 Report today!
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