CANADIAN MINING PERSPECTIVES: Tight labour market pushes salaries up (August 29, 2007)

PRICEWATERHOUSECOOPERS (PwC) and COOPERS CONSULTING have released their annual salary survey of the mining industry...
PRICEWATERHOUSECOOPERS (PwC) and COOPERS CONSULTING have released their annual salary survey of the mining industry. The results confirm what we had surmised. Strong metals prices and tight labour markets are pushing up salaries and compensation packages in our industry.

The only question in my mind is: How much higher?

According to PwC, the average base salaries of mining site staff in Canada rose 3.8% in 2007 over 2006. The average bonus paid in 2007 was up to 16% of base salary, compared with 13% the year before. Of the mine site staff represented in the survey, 80% were eligible for bonuses, up from 73% in 2006. Since 2002 the average base pay for salaried mine site workers has risen 18%.

In the head office, the compensation is rising even faster. CEOs had average base salary increases of 7.2% in 2007 over the previous year. Ninety-six per cent of these executives were also eligible for incentives. And hold onto your hat: cash incentives paid to mining CEOs averaged 71.4% of base salary, up from 66.1% in 2006.

Times are good for the mining industry. We can thank metal and commodity prices that are at historical highs, even if they are corrected a bit from month to month.

The explosive (and expensive) growth in the oil sands sector is attracting experienced workers to Alberta and forcing other regions to offer higher wages. Plus, the number of workers eligible for retirement by the middle of next decade may add up to as much as half the workforce in some centres. The shrinking pool of employees is tightening the labour market, and the numbers of new engineers and tradesmen is not expected to be sufficient to replace them all.

Other key findings of the survey include:

-There is a link between the maturity of a mining company and the compensation package it offers.
-Investors are forcing companies to become more transparent in their compensation structures and administration.
-Canadian CEOs are seeing a trend toward trading off base salaries for higher at-risk compensation and annual incentives.
-Stock options remain the most popular form of long-term equity-based incentive program.

"Regardless of whether or not the current strong metals prices hold, we expect these compensation trends to continue in the mining industry, simply because of the demand for qualified people and the short supply," said Len Boggio, a senior partner in PwC's mining practice. "Mining companies are having to consider incentive compensation plans at more junior levels to attract the right people."

The "2007 Mining Industry Salary Surveys" cover 38 typical mining office positions, 61 salaried mine site positions, and 11 field exploration positions. The survey database includes 5,386 individuals from Canada and 3,411 from the United States. Data are presented on 70 Canadian mining companies, including 97 Canadian mines.

For information on how to obtain copies of the salary survey reports, contact Lou Vujanich at Coopers Consulting in Vancouver by calling 604-632-4611 or e-mailing [email protected]


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