Asking the boss for a raise is getting harder on Bay Street as banks keep a close eye on costs and the Canadian economy continues to weaken.
So far, banks have avoided the uproar over executive compensation seen in the U.S., where financial institutions are receiving billions in government aid to keep them afloat.
But Towers Perrin, the benefits consulting firm, found 25 percent of the financial services firms it surveyed in January had frozen their salary budgets. For those that are increasing spending, the gains average about 3 percent this year, and may fall to 2 percent in 2010, says Managing Principal Fiona Macdonald.
"What did not surprise us is that salary budgets are dropping," she says. "The longer people wait, the lower the decision will be."
Nationwide, 74 percent of respondents in all industries were freezing hiring while another 57 percent said they plan "targeted staff cuts focusing on less critical roles and poor performers." Companies also are reducing spending on travel, entertainment, employee events and training.
DundeeWealth, a money manager and investment dealer, eliminated 380 jobs, or 25 percent of its staff, over the last year as part of Chief Executive David Goodman's drive to cut costs and improve returns. The Toronto-based company slashed another 60 jobs on Feb 4. A Dundee spokeswoman declined to specify where the cuts occurred.
While Canadian officials say there is no significant push to regulate bank executive pay, companies are clearly feeling pressure. Mercer National Partner Michael Thompson tells Reuters he expects most CEO base salaries to stay flat, with lower-level employees seeing increases of less than 3 percent. For financial services professionals, that means bonuses will take a hit. "They are more likely to have paid lower bonus ... for 2008 performance, which is probably not surprise to any of us," he says.
Recruiters such as David J. Gardner of David Alpin Recruiting in Toronto expect the pressures to continue, particularly if the economy worsens as expected. "aggressive (bonus) cuts haven't yet been felt fully, but I'm seeing evidence that they'll continue to worsen in the next couple of quarters as the banks will need to show the average Canadian that they are embracing the fiscal prudence that is the new normal," he says. "Certainly, my financial services companies have put a halt on all but essential spending. No salary cuts, but increases will remain on hold until the market is on more solid footing and we see the light at the end of this recessionary tunnel."