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Canadian Workers living from paycheque to paycheque

By Workplace Staff
| www.cos-mag.com

A recent major national survey of working Canadians shows that employees continue to live paycheque to paycheque. They are concerned about how interest rates and the economy will affect their personal finances and retirement, says a recent survey from the Canadian Payroll Association.  

The 2nd annual National Payroll Week Employee Survey, conducted by the Canadian Payroll Association (CPA), found that:

  • The majority of Canadian workers continue to live paycheque to paycheque, with 59 per cent saying they would be in financial difficulty if their paycheque was delayed by a week.
  • Sixty-two percent (62 per cent) of respondents expect a salary increase but the the vast majority (83 per cent) also expect their cost of living will increase in the next twelve months.
  • Almost half (47 per cent) are saving only 5 per cent or less of their net pay. Financial planning experts generally recommend a retirement savings rate of about 10 per cent of net pay.
  • The overwhelming majority (81 per cent) say their first priority if they were to win $1 million from a lottery, would be to pay off their debt.
  • While 59 per cent feel the economy in their city or town will improve in the next year, this was down from 67 per cent in 2009. Workers in Ontario, Quebec and the Atlantic provinces are less confident about their local economies.
  • Two in three working Canadians (69 per cent) say it would be difficult to find comparable employment with a similar salary if they lost their job.
  • One quarter of employees (24 per cent) like the electronic pay statements they receive from their employers; an increase of 11 per cent from 2009.

Living paycheque to paycheque

The majority of Canadian workers continue to live paycheque to paycheque, with 59 per cent (same as last year) saying they would be in financial difficulty if their paycheque was delayed by a week.

"The most significant result of Canadians continuing to live paycheque to paycheque is its impact on their concerns about personal finances and retirement," notes Cindy Forget, CPM, chairman of the CPA. "The results also underscore why it is vital for organizations to ensure employees are paid on time."

By age group, the younger workforce is having the greatest trouble meeting their current expenses, with 65 per cent of those aged 18-34 saying it would be very difficult, difficult or somewhat difficult for them to meet their current financial obligations if they missed even one paycheque.

By household, the situation is most precarious for single parents, with 76 per cent saying they would have some trouble making ends meet if their pay were delayed (a 4 per cent increase from last year).

Remuneration

Sixty-two percent (62 per cent) of respondents indicated it is likely they will get a salary increase over the next twelve months (an increase of 3 per cent from 2009).

However, the vast majority of employees (83 per cent) expect their cost of living will increase in the next twelve months (the same as last year). They are split on whether their salaries will keep pace with inflation – 39 per cent saying they'll likely keep up, and 38 per cent saying they will likely fall behind. Only 7 per cent feel any salary increase will exceed the cost of living.

Cash is still king for Canadians when it comes to remuneration with 61 per cent of those who responded saying receiving higher wages from their employer is most important, significantly outpolling other choices of: better retirement benefits (20 per cent), more health benefits (13 per cent), and education funding (6 per cent).

Almost three-quarters (72 per cent) of Generation Y (18-34) are looking for better wages (a 5 per cent increase from 2009); while almost 40 per cent Baby Boomers (55-65) favoured more retirement benefits.

Savings still low but increasing

The survey also found that 47 per cent of Canadian workers are saving 5 per cent or less of their net pay as compared to 50 per cent last year. However, 18 per cent of Canadians are saving more, with a 5 per cent increase in the number of individuals who are saving 16 per cent or more of their paycheques.

Financial planning experts generally recommend a retirement savings rate of about 10 per cent of net pay. They also recommend that people have approximately three months of expenses (rent, mortgage, bills, groceries, etc.) as an emergency fund.

Sixty percent (60 per cent) of Canadian workers said they have been trying to save more money than a year ago (a 2 per cent increase). Yet, over half of workers who are try to save more (33 per cent) have been unsuccessful in doing so. Forty percent (40 per cent) say they are not even trying to save; which is surprising when 1 in 2 employees (52 per cent) feel they will need between $750,000 and $3 million to live comfortably in retirement.

Those finding it most difficult to put money aside are single parents, with 58 per cent saying they're saving 5 per cent or less of their net pay.

"If I won a million dollars, I'd... pay down debt"

The overwhelming majority of respondents (81 per cent) say their first or second priority if they were to win $1 million from a lottery would be to pay off their debt. This is an 11 per cent increase from last year, indicating that more Canadians are concerned about their debt load than they were a year ago.

There was a 24 per cent increase in the percentage of Canadians (44 per cent) saying they would buy a house (or a new house) with their winnings. The third most common use of a million dollar windfall would be to contribute as much as possible toward retirement (42 per cent); this was a 7 per cent increase from last year. The fourth most popular use of lottery winnings was investing at 35 per cent.

After paying down debt, different age groups would use their windfall in different ways. Members of Generation Y (18-34) are more likely to save money in order to purchase a home (53 per cent); while Baby Boomers (55-65) say they would top up their retirement funds (50 per cent) and share their winnings with their families (63 per cent).

Concerned about the economy

While 59 per cent feel the economy in their city or town will improve in the next year, this was down from 67 per cent in 2009. Workers in Ontario, Quebec and the Atlantic provinces are less confident about their local economies.

"We're surprised by the drop in optimism because last year's survey was in the middle of the recession," says Patrick Culhane, president & CEO of the CPA.

When asked to rank issues facing the economy and personal finances, employees across the country cited the greatest concerns as, in order, higher interest rates, not being able to save for retirement, inflation and falling back into a recession were their top concerns.


Ranking of Economic Issues by Canadians

 

  • First or most frequently mentioned concern: Higher interest rates
  • Second concern: Not being able to save enough to retire comfortably
  • Third concern: Inflation
  • Fourth concern: Falling back into a recession
  • Fifth concern: Loss of my job
  • Sixth concern: A decline in the value of my house


Generation Y (18-34) stated they were most concerned about the prospect of higher interest rates (55 per cent); while Generation X (35-54) are most worried about not being able to save enough to retire comfortably (54 per cent).

Job Concerns

Two in three Canadians (69 per cent) say it would be difficult to find comparable employment with a similar salary if they lost their job. Forty percent (40 per cent) said it would likely take over six months to find a comparable job. Another quarter (26 per cent) believes it would take them between 3 to 6 months to find a similar job, and 9 per cent felt they would never find a comparable job.

The numbers are even higher in certain areas and among certain groups. Baby Boomers (82 per cent) and employees from Ontario (75 per cent) and the Atlantic provinces (73 per cent) are most concerned about finding a comparable job with a similar salary.

Electronic pay statements

One quarter of employees (24 per cent) like the electronic pay statements they receive from their employers, an increase of 11 per cent from 2009. Another 23 per cent indicated that if electronic pay statements were offered it would be easier for them, while 27 per cent stated they would be fine with them.

"Since the majority of Canadians are using online banking now, we were not surprised that employers are offering electronic pay statements and employees like them," notes Forget.

A small number of respondents (5 per cent) indicated that they do not like the electronic pay statements they currently receive. Ten percent (10 per cent) felt it would be an inconvenience and 11 per cent worried about their personal financial information.

The association encourages employers to use tools such as the CPA Pay Statement Guidelines to ensure pay statements – whether electronic or paper – provided to employees have appropriate information and that organizations' policies and procedures are in compliance with employment and labour standards.

Over 2,766 employees from across the country responded to this survey. This survey is consistent with a 95 per cent confidence level and a margin of error of 1.86 per cent, 19 times out of 20.

Payroll professionals in 1.5 million organizations across Canada are responsible for ensuring the timely and accurate payment of $730 billion in wages and taxable benefits, $230 billion in statutory remittances to the federal and provincial governments and $80 billion in health and retirement premiums, while complying with more than 185 legislative requirements. The Canadian Payroll Association (CPA) has influenced the payroll compliance practices and processes of hundreds of thousands of employers since 1978. As the authoritative source of Canadian payroll knowledge, the CPA affects the legislative processes and practices of payroll service and software providers, as well as hundreds of thousands of small, medium and large employers.

National Payroll Week (September 13 - 17) recognizes the accomplishments of payroll professionals and the CPA by building greater awareness of the size and scope of payroll and its impact on employers, employees and government across Canada. Visit

www.payroll.ca

for more information.

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