Get ready, Canadian workers! The anticipated salary growth is about to take a hit, with projections indicating an average increase of just 3.1% for 2026. This marks a noticeable dip from the previous year as companies tighten their budgets in the wake of relaxing inflation and a cooling job market.

Consultancy giants Gallagher and Normandin Beaudry have released new compensation data highlighting this downward trend. Following a series of robust increases during the pandemic, the forecast for next year shows a decline—down from 3.5% in 2025 and 3.8% in 2024. Normandin Beaudry confirms that this 2026 estimate represents a modest decrease of 0.1% compared to 2025.

As the economic landscape shifts, workers may find themselves returning to the salary norms of the pre-pandemic era. With inflation dwindling and the job market showing signs of cooling, employers are feeling less pressure to significantly hike salaries to attract and retain talent.

Caroline Long, vice-president of compensation practice at Gallagher, notes that during the pandemic, workers could expect their pay raises to somewhat align with inflation rates. However, as inflation continues to taper off, the aggressive salary hikes that characterized that period have decreased. "We’re seeing returns to pre-COVID, pre-pandemic type increases," she adds.

Interestingly, the urgency to compete for talent has diminished, dropping from 62% of employers citing it as a top concern in 2024 to just 50% in 2026. Furthermore, only 32% of firms have earmarked additional budgets for pay raises targeting high-potential employees.

Statistics reveal that the job vacancy rate has also taken a dive, plummeting to 2.7% in May 2025—its lowest since October 2017. This cooling job market means employers are less inclined to offer hefty compensation packages to lure candidates away from competitors.

Currently, Canada’s unemployment rate hovers at 6.9%. Alarmingly, in July alone, the workforce lost 40,800 jobs, with a staggering 23.8% of unemployed individuals facing long-term unemployment, the highest level since February 1998.

Moreover, looming economic uncertainties and tariffs are prompting firms to tread cautiously, as disclosed in the Bank of Canada’s second-quarter business outlook survey. Many organizations plan to maintain current staffing levels and limit their investments over the next year.

In light of these shifts, employees are encouraged to seek out training, mentorship, and growth opportunities rather than relying solely on salary increases. Additionally, with new pay transparency laws coming to Ontario in January, job seekers will gain insights into salary brackets for positions under $200,000, helping them navigate their compensation expectations.

As the landscape evolves, being proactive about professional development might be the key to thriving in this changing economy!