Pay soaring in federal public sector

Report calls for ‘fundamental rethinking and modernizing’
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 10/19/2007

A recent study from the Treasury Board of Canada Secretariat shows the federal public sector has enjoyed considerable gains in compensation in recent years. The 800-page

Expenditure Review of Federal Public Sector

is an analysis of compensation in the federal public sector and includes 77 proposals on how to strengthen its compensation management.

“In many ways the federal government is like any other employer, seeking to fashion the various components of compensation into a regime that is attractive, effective and sustainable,” states the study, which was started in 2004 and released this summer. “But the federal government… must ensure that its compensation regime is fair to the public, providing reasonable value at a responsible cost.”

As of 2002-2003, the federal public sector was a $185-billion enterprise that, excluding federal business enterprises and Crown corporations, employed about 351,000 people at an annual cost of $25 billion. These employees accounted for about 2.3 per cent of total employment in Canada.

In examining numerous components of compensation — including salaries and wages, performance pay, recruitment and retention allowances, overtime, retroactive payments, pensions, health and dental plans, severance pay and insurance premiums — the report reveals that in 2002-2003, the average salary for employees in the core public service was $53,300 and total compensation averaged $73,400.

In contrast, more than one-half of private-sector workers earned less than $40,000 per year compared to only about one-third of federal public sector employees. In the range between $40,000 and $80,000 could be found 59 per cent of public servants compared to just 35 per cent in the private sector.

While the report says comparability is not a simple concept, overall, employees in the lower ranks of the federal public service enjoy advantageous compensation.

“The salaries have just gone through the roof. This is absurd because government jobs tend to be jobs for life. Government employees are far more insulated from the ups and downs of economic upheaval. If you have that added security, it doesn’t make a whole lot of economic sense for government to be additionally compensating people,” says John Williamson, federal director of the Canadian Taxpayers’ Federation in Ottawa.

While federal public-sector jobs tend to be secure, employees aren’t completely immune from cuts. In the early 1990s, total employment stood at 350,000. By the late 1990s, that number had fallen to 275,000. But it had risen to 315,000 by 2003.

In that time, salaries and compensation grew from $13.7 billion in the early 1990s to about $17.9 billion by 2003. That increase is explained by changing workforce composition (with more higher-paid employees such as computer specialists, lawyers and economists) and increasing average salaries.

The average federal government wage bill increased by about 50 per cent from 1997-1998 to 2002-2003, said Pierre-Alain Bujold, a media relations strategist with the Treasury Board of Canada in Ottawa. But this trend has since stabilized as overall negotiated increases in the core public administration have aligned with the market.

Also driving the increases were inflation and contributions to cover the cost of pension entitlements for current service, amounting to $1.29 billion for the core public sector.

The report found, for several groups, the structure of pay bands has strayed “far from reasonable norms” and collective bargaining has all but eliminated regional differences in pay. In fact, the report recommends that removing the public sector’s right to strike be examined as an alternative.

As for leave and severance, employers in the core public service averaged 17.3 days of vacation leave, 8.3 days of sick leave and 1.6 days of family-related leave.

The recommendations cover five broad themes: transparency and accountability; coherent management of compensation; specific substantive compensation issues relating to salaries and pensions and other benefits; and updating the legislative framework for managing compensation.

“In effect, we are calling for a fundamental rethinking and modernizing of the compensation regime governing the federal public service. In our view, this is overdue,” states the report.

The review provides the data and benchmark needed to help modernize the government’s human resources practices and remain competitive, says Bujold. But as a complex, in-depth analysis involving many stakeholders, “it is normal that all proposed changes will not happen overnight nor will all recommendations necessarily be implemented as presented.”

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