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ARCHIVED - Appendices to the Expenditure Review of Federal Public Sector Compensation Policy and Comparability


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Appendix B - Draft compensation policy

Table of Contents

1. The policy statement adopted by the Canada Customs and Revenue Agency (CCRA), March 2001

2. Draft TBS policy — Towards a Compensation Policy Framework for the Federal Public Service: Discussion Paper, July 2003

Table of Figures

Figure 1: Balancing for the Public Interest: An Example  12


1. The policy statement adopted by the Canada Customs and Revenue Agency (CCRA),  March 2001

Compensation in the CCRA

We are pleased to announce that the Board of Management has approved the following Compensation Policy for employees of the Canada Customs and Revenue Agency (CCRA).  We are proud of this policy because it is unique and a first in the Public Service of Canada.  This policy demonstrates our leadership in the public sector because it commits us to providing compensation to our employees in line with what is being provided elsewhere in the employment market.

The principles of the Compensation Policy guide our approach to collective bargaining. For example, they influenced the Board of Management decision on the AV contract that provided a special adjustment for auditors in Toronto. Studies of the Toronto market identified a gap between the CCRA level of compensation and what was being provided elsewhere in that region.

These principles also guided decisions on implementing the recommendations of the Strong Report on compensation for the executive and senior management groups at CCRA. The Strong Report provided extensive market research to support its recommendations.

The CCRA is committed to working with all its unions to look at what compensation is being provided in the outside market, and addressing those realities.

We are committed to using this policy to support fair and reasonable compensation for all employee groups.

Rob Wright
Commissioner

Alain Jolicoeur
Deputy Commissioner

CCRA Compensation Policy

As an organization, the Canada Customs and Revenue Agency provides an exemplary level of service both domestically and internationally. This high level of service is built on the foundation of a good working environment and a skilled, productive workforce that is committed to service improvement.

The CCRA must make sure it has a workforce that continues to strive for better service. Compensating our employees at a fair and reasonable level makes the CCRA an attractive employer. It is also a critical step to building a better working environment. Providing our employees with a better place to work will help us build on our already high level of service.

To ensure a better working environment and to sustain our high standards of service, the CCRA will respond to labour market realities. The ability to attract and retain qualified employees in a competitive labour market is as much a challenge for the CCRA as it is for all businesses.

The CCRA's Board of Management and management team are committed to a compensation policy that recognizes and addresses the realities of competitive labour market forces. If studies demonstrate that a significant gap exists between the CCRA's compensation and that of a competitive labour market and it can be demonstrated that this gap affects our ability to attract and retain employees, the CCRA is committed to addressing the gap.

This compensation policy will help the CCRA retain, motivate and attract the right people with the right skills to deliver the high levels of service that are expected of the CCRA.

DRAFT – July 14, 2003

2. Draft TBS Policy — Towards a Compensation Policy Framework for the Federal Public Service: Discussion Paper, July 2003

Discussion Paper

1. Message from the Secretary

The Public Service of Canada is a critical national institution that has served Canadians well for generations. On a daily basis, and in communities across this country, public service employees enforce laws and regulations, ensure proper stewardship of resources, advise Ministers and provide the programs and services that Canadians want and need. In fulfilling these and other critical duties, public service employees play an essential role in preserving and promoting the high standard of living that we share in this country.

The effectiveness of the public service depends fundamentally on the quality of its people. It is critical that we continue to attract and retain talented, skilled and dedicated employees; men and women of diverse backgrounds and abilities who are united by their shared commitment to serving Canadians. With this in mind, we are moving forward with an ambitious agenda to improve the way that we manage our employees. The Public Service Modernization Act tabled in February 2003 proposes the first major amendments to the legislative framework governing human resources in over 35 years. We have also moved forward with a wide variety of non-legislative reforms designed to build a more supportive and productive workplace. Developing a framework for managing compensation is an important part of these efforts.

Compensation is a multi-faceted and complex issue, particularly within the public sector. It requires reconciling many different and competing interests in a desire to adequately recognize and reward good work, while at the same time ensuring that the public interest is being served. This is often a challenging balancing act.

This discussion paper proposes a policy framework for managing compensation more effectively. It outlines our key objectives and the general approach that the government intends to follow in negotiating or setting compensation. I hope that it will act as a catalyst for productive and ongoing dialogue on the subject. 

2. Why a Compensation Policy Framework?

The government is currently undertaking a variety of measures designed to modernize the way that it manages its human resources. These legislative and non-legislative reforms are ultimately designed to ensure that the public service can continue to be a vital and productive institution, with the capacity to meet Canadians' evolving needs and expectations.

While no compensation policy framework will be able to tell us what our decisions should be in a particular case, a good compensation policy framework can help us to make better decisions.

Compensation is a central component of effective management. The ability of the federal public service to attract, retain and motivate the talent we need to advise Ministers and serve Canadians depends importantly on how we compensate employees. There are many diverse and complex factors that must be taken into consideration when addressing compensation issues. Private and public sector labour market trends, internal relativity, social policy, the state of government finances, public opinion, economic conditions and union roles are among the most important elements that must be reconciled in order to achieve an appropriate approach to compensation. Over the last few decades, the government's approach to achieving this reconciliation has evolved, driven largely by the shifting needs of the day while striving to comply with legal obligations such as equal pay for work of equal value. Throughout this time, there has not been an explicit and comprehensive policy framework to guide decision making.

The government intends to adopt such a framework.  This would assist in determining and implementing negotiation mandates. It would also help clarify the government's position on compensation for employees, ministers, union partners, and the public in general.

While no compensation policy framework will be able to tell us what our decisions should be in a particular case, a good compensation policy framework can help us to make better decisions. It will define the elements that must be taken into consideration; describe the risks that have to be identified, assessed and managed; and set out some guidelines for balancing the multitude of forces that are always in play. The relative weight of each factor will shift over time, leading to varying outcomes, but the consistent application of the policy framework will bring coherence, strategic focus and greater effectiveness to public service compensation decisions.

3. What Do We Mean by Compensation?

For the purpose of this discussion paper, the term “compensation” in this paper implies total compensation and covers cash and non-cash remuneration provided to an employee for services rendered, including:

  • wages and salaries and other cash compensation such as bonuses;
  • pensions and insurances;
  • paid time off;
  • allowances, such as the penalogical factor allowance; and
  • programs that compensate employees for the costs of serving in difficult environments—the Isolated Posts Directives and the Foreign Service Directives, for example.

A compensation policy framework would cover the departments and other portions of the Public Service of Canada for the core public service (PSSRA 1-1), as well as the Canadian Armed Forces and the Royal Canadian Mounted Police. Separate employers such as Parks Canada Agency (PSSRA 1-2) may also find this policy framework useful.

4. Objectives and Assessment of Results

Compensation in the federal Public Service serves, within an overall HR framework, to attract, retain, motivate and renew the workforce required to deliver business results to Canadians.

The development of a compensation policy framework must take place hand-in-hand with the development of clear performance indicators. On-going evaluation following implementation will be critical to assessing the effectiveness of the policy framework and targeting areas for improvement and continued innovation.

To measure progress, however, it is not enough to focus simply on the things we do—we also need performance indicators that assess the impacts we want to achieve with the policy framework. Particular attention must be paid to assessing the degree to which the policy framework is achieving its planned results of attracting, retaining, motivating, and renewing the workforce. These performance indicators will be benchmarked against external groups in order to set a desired position and associated comfort zone.

By way of example, below are a few proposed performance indicators that could potentially relate to each of the identified objectives.

Potential Performance Indicators

As the policy framework is developed, it will be critical to identify key performance indicators relating to each of the identified objectives that would act as flags indicating areas warranting further analysis. Baselines and benchmarks would be required for the performance indicators. Where required, breakdowns of the indicator may be analysed i.e. occupational groups, tenure, department/units, length of employment. Potential performance indicators that could relate to the respective objectives include the following and are explained further in Appendix A:

Attraction

  • Number of qualified applicants per job posting
  • Percentage of offers, made to potential new employees, that are refused
  • Use of contracted labour
  • Efficacy of recruitment process: i.e. number of days that a position is open and recruitment costs

Retention

  • Turnover rates
  • Reasons for separations from exit interviews
  • Voluntary separation rates

Motivation

  • Days lost to labour action
  • Absenteeism rates
  • Attitudinal indicators: PS survey questions regarding job satisfaction, work motivation, compensation attitudes

Renewal

  • Voluntary non-retirement rate: total; 1 year after retirement eligibility; 5 years after retirement eligibility
  • Retirement with penalty
  • Separation by tenure and length of employment

5. The Principles of Effective Compensation

As the government develops a new compensation policy framework, it will be guided by four overarching principles. Public service compensation should:

  • be competitive with, but not lead, that provided for similar work in relevant labour markets;
  • reflect the relative value to the employer of the work performed;
  • reward performance, where appropriate and practicable, based on individual or group contributions to business results; and
  • be affordable within the context of the government's commitments to provide services to Canadians, its fiscal circumstances and the state of the Canadian economy.

There are several forces influencing compensation design that are common to business, whatever the day and age, and regardless of the economic sector or geography of the employer. These can be described by the set of four principles described above. Whatever shape the public service compensation policy framework has taken over the last century, some variation of these four principles has always been recognized. A recent Conference Board survey of large private sector and public sector employers in Canada and abroad discovered that these same four principles are widely recognized by other employers in their compensation policies. Each of the principles is described below.

5.1 External Comparability

Public Service compensation should be competitive with, but not lead, that provided for similar work in relevant labour markets.

The government wants compensation in the public service to be fair in relation to the outside world. This is critical, as potential recruits will look for such comparable compensation when they judge the attractiveness of a potential job. Furthermore, existing employees, and their bargaining agents, will track external markets to assure themselves that they are being paid comparably in relation to their private sector and other public sector counterparts. Finally, taxpayers will look, in the absence of a bottom line or market tests for government services, for public service compensation to be related to that of the private sector where such a market test is available.

Compensation and other economic decisions made by private sector organizations directly affect their continuity as viable enterprises. These decisions are constantly tested against the economic realities of the marketplace in which they operate. The composite of their compensation decisions most closely reflects the economic status of the Canadian economy. This marketplace reality is often remote from the public sector, but can be transmitted through the medium of private sector comparisons. This is the most appropriate way of assuring fair value to the taxpayers who support public service expenditures.

When data suggests that a group is significantly above or below market, the rate of increase in the public sector may have to exceed or lag that in the private sector until comparability is established. In such circumstances, adjustments could be misinterpreted unless every effort is made to ensure that the public is fully informed of the particular circumstances surrounding settlements.

5.1.1 Relevant Labour Markets

Public service compensation must be competitive, but not lead, in the various external labour markets in which the public service competes for its employees. Depending on the occupation, these comparator markets could encompass the private sector, other public sector employers and the volunteer sector. It is often easier said than done to identify “relevant labour markets.” The federal government has structured its workforce into 29 occupational groups with the majority of whom it collectively bargains most forms of compensation.[1] Some of these groups, such as the Foreign Service (FS) group, have no counterpart in the private sector. Some groups blend together specialized streams that are distinct in the external labour market. For example, there are several kinds of engineers combined into a single occupational group in the federal public service each of which has its own labour market in the outside world. Some of the new cluster groups, such as the Health Services (HS) group, combine quite different professions in a single entity for which there is no single counterpart outside. As a result, exercising judgment over which groups have external labour markets, which organizations could serve as proxies for those markets, and which jobs in those organizations are the best comparators for public service work is a complex and often difficult process. In many cases, external comparisons are more art than science.

Once we have identified our relevant labour markets, we will select the organizations who can best serve as reasonable comparators. We will look to the private sector first as it is constantly tested against the economic realities of the marketplaceand then to other public sector employers where no private sector counterpart exists. Our external comparisons will be anchored in surveys of comparable jobs situated within these organizations—the rates they pay for their labour will be our proxy for the value set by the outside markets. Where a group has no relevant external labour market, compensation can be based on internal comparisons (see next principle) or methods of indirect comparison with jobs in the private sector (the creation of composite profiles, for example).

Smaller geographic markets can be used for comparisons where external pay data indicate significant variation from the national average, recruitment and mobility of local labour is limited, and where such a policy framework would contribute to the achievement of competitive rates of pay in the regional labour market in which it competes.  However bargaining agents have pressed hard in the past to reduce existing regional rates, as they believe that jobs of the same value should be paid the same across the country.

5.1.2 Competitive Compensation

The government seeks to offer competitive compensation. “Competitive” has traditionally meant mid-market, with the federal public service neither leading nor following the private sector. As with all such targets, this is a crude goal. Compensation experts generally advise that a market difference of 10% is inconsequential—if you are within 10% of your benchmark, you are “on market.”

Potential Indicators

As the policy framework is developed, it will be critical to identify key indicators relating to each of the identified principles. Potential indicators relating specifically to external comparability include (Appendix A):

  • Occupational pay level comparisons based on rates of pay from a mix of external compensation surveys for similar jobs or jobs of equivalent value.
  • Aggregate wage and salary indicators to provide measures of compensation trends and average comparability (i.e. human capital models from Statistics Canada Labour Force Survey and census, taxation statistics, average weekly earnings.
  • Turnover indicators, such as a comparison of recruitment and attrition rates, voluntary separation rates and job external application rates)
  • Compensation level comparisons for non pay and salary compensation such as pensions, insurances, paid time off and other benefits and cash compensation.

Fluctuating economic and business circumstances in external markets can be quite volatile (e.g., airlines and high-tech industries). Since the public service cannot easily reduce rates of compensation when the external market falls, it makes sense to proceed cautiously in the case of “hot markets,” perhaps using temporary supplements to partially address compensation comparability concerns until it is clear whether the external increases are transient or lasting.

5.1.3 Data Collection

All external comparisons depend on data. At the moment, there are several sources of published data and sometimes custom-designed surveys are conducted. None of these sources is sufficient to the federal government's needs. Data sources must be further developed, along with the necessary analytical capability. The relevant labour markets must be further defined and tested, appropriate survey samples determined and approaches to comparing compensation levels developed.

The Public Service Modernization Act now before Parliament proposes the establishment of new compensation analysis and research services as a function of the Public Service Labour Relations Board. Assuming the legislation passes, it will be several years before the PSLRB can become a reliable source of data. In the interim, the Compensation Planning Division of Human Resources Management Office (HRMO) will internally generate data on the public service and evaluate available external data sources. This division will continue to collaborate with the Joint Compensation Advisory Committee of the National Joint Council to investigate ways to develop mutually agreed upon data sources.

5.2 Internal Relativity

Public service compensation should reflect the relative value to the employer of the work performed.

Where external comparability looks for fairness in relation to the outside world, the principle of internal relativity looks for fairness among groups and levels within the public service. The objective of internal equity or relativity is to distinguish appropriate differences in the value of work measured:

  1. vertically between levels within an occupational group and
  2. horizontally among occupational groups who work together.

Potential Indicators

Potential indicators relating specifically to internal relativity include (Appendix A):

  • Compensation comparison for classification levels across occupational groups to indicate possible conflicts with external comparability
  • Measures of compression and inversion to indicate potential staffing problems for executive and management positions

Once these differences and similarities have been ascertained, they can be used as a gauge to ensure appropriate relative compensation.

The internal relative value of jobs within each occupational group and level is established through the application of group-specific, gender-neutral job evaluation plans that support departmental business needs, are capable of measuring the work performed today, treat men and women equitably, and, where appropriate, mirror the work structuring practices of comparable employers for ease of comparison of jobs with outside labour markets.

Job evaluation plans are linked through level structure to the compensation structure (or pay line) that is designed to support the business of the public service. Once a compensation structure has been fitted properly to managers' business needs through reform, its integrity must be maintained by the employer even through successive rounds of collective bargaining.  However, it should be recognized that the relationship of the structure's levels to each other and to the business may change over the years. Maintaining the integrity of the system helps to preserve both the business usefulness and the internal fairness originally achieved by compensation and classification redesign.

To measure value differences and similarities horizontally among occupational groups from the employer's perspective, relationships among groups can be identified based on criteria such as accepted historical pairings, linkage through natural career paths, and other business-based elements.

For occupational groups with no clear external counterpart, this process provides links to related groups who do have one, allowing the discipline of the free marketplace to be applied across the whole of the public service.

This is also useful for understanding, in advance, the implications of a compensation increase for any group with strong relationships to other groups who will look for internal parity.

5.3 Individual and Group Performance

Public service compensation should reward performance, where appropriate and practicable, based on individual or group contributions to business results.

The Government of Canada is committed to effective performance management of every one of its employees. This requires setting clear, agreed upon objectives and establishing simple indicators to measure progress towards reaching those goals. Ideally, compensation can help to promote a more results-focused workforce.

It should be noted that administration of performance measurement, management and rewards is often onerous—it requires dedicated leadership, enabling human resource systems, strong communication programs and significant investment of management time. In consequence, most employers tend to restrict such practices to those segments of their workforce where it makes strong business sense—generally executives and senior professionals. Furthermore, unions, including public service bargaining agents, have traditionally opposed this approach to compensation, as they believe that it does not correspond to their values of equality and fairness in the workplace.

In certain circumstances, better performance management should translate into performance rewards, for either individual contributions to business results or for the contributions of a collection of individuals—a work team. In such cases, performance rewards should:

Potential Indicators

Potential indicators relating specifically to individual and group performance include (Appendix A):

  • Performance pay and variable pay as a percentage of salary and compensation expenditure
  • Percentage of employees receiving performance awards, performance pay, variable pay and bonuses
  • Distribution of awards between high and low performance
  • Percentage of employees refused an increment on grounds of performance
  • be designed to encourage employees to accomplish defined business results linked to corporate priorities;
  • reflect the degree to which the individual or group contributes to the achievement of the defined business results; and
  • reflect the degree to which the desired business results are achieved in a manner consistent with public service core values.

Of course, performance rewards are not always appropriate and practicable and must necessarily have restricted applications. They should not be introduced where the additional cost of performance measurement and management exceed the potential value created in terms of improved business results and values coherence.

5.4 Affordability

The cost of public service compensation must be affordable within the context of the Government's commitments to provide services to Canadians, its fiscal circumstances, and the state of the Canadian economy.


Potential Indicators

Potential indicators relating specifically to affordability include (Appendix A):

  • Debt and deficit as a percentage of the GDP
  • Compensation expenditure as a percentage of the GDP, Labour Income and Government Program Expenditure (excluding servicing of the debt)

A private sector employer's ability to pay compensation is dictated by solvency requirements—if it spends too much on its workforce it may become unprofitable and ultimately may go out of business. While the government must also ensure that compensation is affordable,[2] it does not always have as clear a bottom line as its private sector counterparts do. Instead, affordability tends to be measured against the government's perception of the right level of taxation for the good of the economy (how much it can responsibly claim through taxation and other forms of revenue) and the needs of Canadians that it must serve for the economic and social health of the nation (how much of what it obtains needs to be returned to Canadians through services). The government's responsibility to Canadians is to maximize the results it delivers by prioritizing all expenditures, including public service compensation, within the limits of its ability to pay.

As noted at the outset, decisions on what constitutes the “public interest” will necessarily be influenced by elusive and evolving factors such as public opinion. This is a particular challenge faced by public sector institutions.

6. The Policy Making Environment: The Intersection of Employer Policy and General Public Policy

Government rests on public acceptance—the consent of the governed. Diverse public attitudes, wants and expectations must be reckoned with and reconciled, to produce what has been described as “equality of dissatisfaction.” The test of public acceptance lacks the comparative rationality of the market forces by which, in the main, business operations are tested.

External Factors Influencing  Policy Making

Economic Policy Objectives: policies must be consistent with economic trends and support the achievement of Government fiscal policy

Legislative Framework: policies must respect existing legislative requirements

Social Policy Objectives: policies must be congruent with the Government's national social policy agenda objectives

Public Expectations and Pressures: Government must take into account the public will

Since Treasury Board is both the employer of the core public service and part of the elected governing body of Canada, compensation decisions are always made at the intersection of employer policy and general public policy. This duality must be balanced in the development of our compensation policy framework.

There is a variety of pressures that impact on the government's ability to set the compensation policy framework. These pressures can occasionally limit the parameters within which decision making takes place. It is important to identify and recognize the significance of these economic, legislative and social considerations.

Macroeconomic Policy Objectives

Compensation can be used to advance macroeconomic policy objectives. Sometimes in its effort to manage the national economy, the government will set compensation levels that serve as an example to the private and other public sectors to support its economic policy objectives. At all times, the government wants its compensation settlements to be consistent with economic trends and to support the achievement of the Bank of Canada's inflation targets.

Relevant Laws

Federal legislation often binds the Treasury Board and other federal employers to certain practices. This in turn circumscribes the options open to policy makers. Provisions within the Canadian Human Right Act, for example, require equal pay for work of equal value (section 11) and gender-neutral job evaluation (section 10). The federal government has an obligation to comply with these requirements and to compensate employees fairly without discriminating according to gender.

Social Policy Objectives

Sometimes, compensation design is influenced by the government's desire either to comply with or to advance its national social policy agenda objectives. In these instances, public service compensation policy becomes an instrument of national social policy (e.g. Supplementary Unemployment Benefits plans complementing extended parental benefits under the Employment Insurance program).

Public Expectations and Pressures

The government must take into account public sentiment when it designs its policies and programs. While this does not mean that the government should “govern by polling,” it does mean that decision makers must be aware of public expectations and sensitivities and take these into account when formulating policy.

Public expectations and pressures can have a profound impact on decisions relating to compensation. On one hand, there is a tendency to not want to be seen as over-compensating public servants lest there be some sort of public backlash. For more than 50 years, for example, executive compensation has been benchmarked with the private sector only at the entry level. External comparability for more senior levels of executives has not been pursued because it has been felt that the public would not accept the levels of compensation for public service employees that are common in the private sector.

On the other hand, the public often demands that essential services, or those perceived to be essential, be maintained without interruption. This legitimate demand for continuity in the provision of public services, coupled with the absence of a bottom line or market test of appropriate compensation, can sometimes make it difficult for governments to resist settlements that might otherwise be unwarranted from the employer's perspective.

7. Approach to a Public Service Compensation Policy Framework: Balancing for the Public Interest

The government recognizes that there will always be competing pressures where compensation expenditures are concerned. There will always be, for example, a clear imperative to keep expenditures down to a prudent and affordable level. At the same time, we need to promote and safeguard the health of the public service and its ability to deliver results to Canadians through a motivated, qualified, efficient and effective workforce. A compensation policy framework needs to navigate effectively between these competing priorities.

As we move forward with the development of a compensation policy framework, we are driven by a commitment to ensure that compensation decisions are fair, and seen to be fair, to both employees and taxpayers alike. All the aforementioned principles and political pressures are important and will be considered in a systematic manner. Our approach involves a balance between the four principles. It would not allow one principle to dominate. This makes it easier for government to be flexible and to respond to unexpected eventualities such as temporary inflationary situations. It also lessens the probability that the government would need to unilaterally break a commitment to its employees. Ultimately, compensation decisions will always seek to respect and further the public interest—both what the public requires and what the public will accept.

The balancing process pivots on the employer's capacity to identify, assess and mitigate risk to the institution both in the near and the longer term. It requires careful study of the implications of compromise and using reliable data whenever possible. There are five steps in exercising judgment in these matters:

  1. The analysis begins with a determination of the requirements for external comparability—the bottom line discipline this principle imports from the private sector is critical to ensuring a fair deal for taxpayers and employees.
  2. The optimal balance of the four principles is determined before the influence of governmental and legislative pressures is taken into account. In this way, the Federal government's interest as an employer will be clear and distinct.
  3. No one principle is automatically preeminent; each must be weighed against the other principles and pressures.
  4. No matter what the balance, each principle continues to have some influence, no matter how small.
  5. Good governance must be respected throughout the decision-making process. Compensation matters must be debated among senior officials of the Secretariat, other central agencies and line departments, before recommendations are crafted for the consideration of Treasury Board Ministers.

Figure 1 illustrates conceptually how each of the four principles, namely external comparability, internal relativity, affordability as well as individual and group performance, will be considered in setting compensation. It should be noted that the degree of influence may change over time. Indicators for these principles will be utilized in setting where on the continuum of influence each of the principles registers as well as their tolerance limits. This balancing process will, as noted, be subject to the influences of governmental and legislative pressure. Figure 1 illustrates this approach by showing each of the principles on the axes with examples of proposed choice and associated tolerance limits within the context of social policy objectives, public opinion and pressures, macroeconomic policy objectives and relevant laws.

Figure 1: Balancing for the Public Interest: An Example

Display full size graphic

Balancing for the Public Interest: An Example
8. Approach to Managing the Policy Framework

Once it comes into effect, the new policy will provide a general framework within which compensation decisions are made and plans are formulated. These parameters are designed to be flexible enough to encourage innovation in planning while at the same time establishing certain touchstones against which policy decisions can be weighed.

Managing the implementation of the compensation policy framework must, out of necessity, be a collaborative process and the Treasury Board Secretariat is committed to working with a range of key stakeholders. It is critical that clearly defined management structures and appropriate processes be in place before the policy framework comes into effect. This will ensure the framework's timely and effective operation. 

9. Next Steps: Moving Consultations Forward

Clearly, developing the type of comprehensive policy framework proposed in this document will benefit from input from a wide variety of stakeholders over the next few months.

Several key questions arise from this document, which could act as a point of departure for discussions.

First, have we got the objectives and outcomes right?

  • Will our objectives support clearer, more transparent and effective decision making?
  • Can we establish measurable targets for our overall efforts? If so, what should these targets be? How will we know that we have succeeded?

Second, can the approach proposed in the policy framework (i.e. balancing the four principles at the intersection of government's role as the employer and agent of the public interest) work in practice?

  • Have we adequately identified the various elements that will need to be taken into consideration during the decision making process? Are there others that will need to be “added to the mix?”
  • We speak of “comfort zones.” How will these be defined? Given that people will have different interpretations of what constitutes comfort, how do we reconcile competing views?
  • Have we established appropriate indicators?

Finally, do you have any views on how the policy framework can be appropriately managed?

As we move forward with the development of the policy framework, it will be critical that we can answer these and other questions effectively.

Appendix A – Description of Performance Indicators

Indicator

Performance Measurement

Strength/Weakness

Source/Availability

Attraction

Number of qualified applicants per job posting

Number of qualified applicants per job posting

Weakness

  • Data are not currently collected
  • Labour-intensive for departments to collect

Not available

Percentage of offers made to potential new employees that are refused

Percentage of offers made to potential new employees that are refused

Weakness

  • Data are not currently collected
  • Labour-intensive for departments to collect

Not available

Use of contracted labour

Percentage of total workforce that is contracted labour

Weakness

  • Data are not currently collected
  • Labour-intensive for departments to collect

Not available

Efficacy of recruitment process: number of days that a position is open; recruitment costs

Number of days that a position is open; and recruitment costs

Weakness

  • Data are not currently collected
  • Labour-intensive for departments to collect

Not available

Retention

Turnover rates

Separation rates

Strength

  • Readily available
  • Standard measure
  • Available by group, age gender, department
  • These separations are very often related directly or indirectly to compensation competitiveness

Weakness

  • Can also be related to unsuitable working environment or unfulfilled expectations especially during the first year of employment

Mobility system

Reasons for separations from exit interviews

Qualitative responses

Weakness

  • Data are not currently collected
  • Labour-intensive for departments to collect

Not available

Motivation

Days lost to labour action

Days lost to labour action

Weakness

  • Crude measure

TBS and HRDC

Absenteeism rates

Days of sick leave, personal leave, family related leave and other paid leave

 

Annually from Leave Reporting System

Attitudinal indicators

PS survey questions regarding job satisfaction, work motivation, compensation attitudes; results for selected questions from PS survey

Weakness

  • No regular cycle for collection
  • Labour-intensive for departments to collect 

Ad hoc basis only.

Renewal

Voluntary non-retirement rate

Total and percentage of retirement eligible employees who separate within first year and after 5 or more years of becoming eligible for retirement

Strength

  • Some sensitivity to relative compensation rates and to changes in CPI

Weakness

  • May be attributable to non-compensation related causes (demographics, employment restraint, job satisfaction or recent promotion)
  • Significantly affected by events in previous years

Available from Mobility System about a month after end of fiscal year

Retirement with penalty

Percentage of employees 50-59 who can't retire without penalty that voluntarily separate

Strength

  • Some sensitivity to relative compensation rates and to changes in CPI

Weakness

  • May be attributable to non-compensation related causes (demographics, employment restraint, job satisfaction or recent promotion)

Available from Mobility System about a month after end of fiscal year

Separation by tenure and length of employment

Separation rates

Strength

  • These separations are very often related directly or indirectly to compensation competitiveness

Weakness

  • Can also be related to unsuitable working environment or unfulfilled expectations especially during the first year of employment

Available from Mobility System about a month after end of fiscal year

External Labour Market Comparisons

Occupational pay level comparisons based on rates of pay

Comparison of job rate and average salary with external mean, median and Q3

Strength

  • Includes base salary and cash compensation
  • Covers common jobs found in both public and private sector
  • Job matches are relatively close to PS jobs
  • Broad industrial comparison for relatively large firms
  • Collectively creates a relatively large sample size

Weakness

  • Does not cover jobs unique to public sector or specialized occupations
  • Results may differ between surveys
  • Minimal coverage for small and medium sized firms
  • Subject to sample composition change
  • Comparison measures are not always the same
  • Does not include total compensation comparison

Annual survey from Watson Wyatt, Morneau Sobeco, Mercer, Towers Perrin and Economic Research Institute

Usually available in the fall after a spring survey. The job match data from Statistics Canada will only be available in two or three years.

Aggregate wage and salary indicators, i.e. Labour Force Survey Wage Data

Comparison of PS average salary with that of other sectors

Human Capital Model comparisons with that of other sectors

Strength

  • Covers all employees from all sectors regardless of size
  • Relatively large sample size
  • Covers all occupations
  • Includes data (i.e. education, gender) that can be used to perform human capital comparisons

Weakness

  • Does not allow comparison for similar jobs or levels of work
  • Includes comparison to some organizations that do not have defined compensation plans
  • Does not include job rate, cash compensation or total compensation
  • Participant self identification of occupation
  • Sector classification may not match FGE

Monthly data from Statistics Canada

Aggregate wage and salary indicators, i.e. Census Wage And Salary Data

Comparison of PS average salary with that of other sectors

Human Capital Model comparisons with that of other sectors

Strength

  • Covers all employees from all sectors regardless of size
  • Covers all employees (not a sample)
  • Covers all occupations
  • Results are very reliable
  • Includes data (i.e. education, gender) that can be used on sample basis to perform human capital comparisons

Weakness

  • Does not allow comparison for similar jobs or levels of work
  • Comparison is usually out of date
  • Includes comparison to some organizations that do not have defined compensation plans
  • Does not include job rate, cash compensation or total compensation
  • Participant self identification of occupation
  • Statistics Canada's classification of organizations does not match that of federal government

Data from Statistics Canada collected every 5 years and available about two years later

Cash compensation and total compensation comparisons

Comparison of PS average salary with the Hay Pay and Compensation Line

Strength

  • Includes base salary, cash compensation and total compensation
  • Broad industrial and public sector comparison for large and some medium sized organizations
  • Largest sample size for private survey
  • Does not require job matching and allows for the comparison of dissimilar jobs

Weakness

  • Does not allow comparison for similar jobs
  • Poor coverage for small organizations
  • PS sample of jobs is currently very small and unrepresentative
  • Will be a few years before sample is sufficiently large enough to be reliable

Annual survey from Hay available in the fall

Compensation level comparisons

Comparison of the increase in average salary in federal government administration to that in other sectors

Strength

  • Includes base salary and cash compensation
  • Covers a broad selection of organizations both unionized and non-unionized
  • Comparison directly usable in developing the compensation mandate
  • Short term forecasts are available

Weakness

  • No occupational breakdown
  • Tends to overweight large establishments and unionized establishments
  •         Does not include total compensation

Annually from Conference Board, Mercer and Watson Wyatt

Internal Relativity

Compensation comparison for classification levels across occupation groups

Comparison of pay lines or job rates for public service occupational groups or classifications

Strength

  • Can cover rates of pay, cash compensation or total compensation
  • Universally accepted evaluation tool
  • Can be used to measure very dissimilar jobs

Weakness

  • PS sample of jobs is currently very small and unrepresentative especially at the occupational group level
  • Will be a few years before sample is sufficiently large enough to be reliable
  • Will be a number of years before it is possible to do group to group comparisons
  • Sample needs to be monitored regularly to ensure that the jobs are appropriately described, evaluated and are at the proper classification

Internally once Hay has completed the evaluation; updated as required

Compensation comparison for classification levels across occupation groups

Comparison of pay lines or job rates for public service occupational groups or classifications

Strength

  • Can cover rates of pay, cash compensation or total compensation
  • Can be used to measure very dissimilar jobs
  • Only evaluation system that has been applied to most positions in the PS

Weakness

  • Evaluations have not been verified
  • Data has not been updated
  • Reliable data will most likely not be available for a long period of time
  • UCS has not been accepted as a legitimate evaluation tool

UCS

Measures of compression and inversion to indicate potential staffing problems for executive and management positions

Ratio of maximum pay rates within an occupational group

Strength

  • Allows for measurement of maturity level in workforce
  • Standard methodology

Weakness

  • Highly skilled analysis required

Internal pay files

Performance Related Compensation

Performance pay and variable pay as a percentage of salary and compensation expenditure

Performance and other merit based pay as a percentage of straight time payroll and compensation expenditure

Strength

  • Complete for PSSRA 1-1

Weakness

  • Not available for other federal public sector organizations

Available from Entitlements and Deductions Information System about one month after end of fiscal year

Percentage of employees covered under performance, merit and other variable pay measures

Number of employees receiving performance bonus, merit pay and other performance based allowances and premiums as a percentage of PS employment

Strength

  • Complete for PSSRA 1-1

Weakness

  • Not available for other federal public sector organizations
  • Difficult to determine where multiple annual increments are possible

Available from Entitlements and Deductions Information System about one month after end of fiscal year

Distribution of awards between high and low performance

Frequency distribution of performance-related compensation by employee amount

Weakness

  • Not currently available
  • Will be difficult to produce truly meaningful values

Not currently available

Percentage of employees of adversely affected by poor performance

Number of employees denied an increment or rejected on probation for a promotion

Weakness

  • No data exists for employees denied an increment

Not currently available

Affordability

Government debt and deficit as percentage of GDP

Debt and deficit as a percentage of GDP

Strength

  • Closely watched fiscal indicator

Weakness

  • Only minimally affected by changes in compensation expenditure

Finance Canada

Compensation expenditure as a percentage of GDP, labour income and government program expenditure

Compensation expenditure as a percentage of GDP, Labour Income and government program expenditure

Strength

  • Cover all aspects of compensation
  • Cover a broad range of federal government organizations
  • Corresponds to what the public sees as the impact of PS compensation
  • Historical data to at least 1930

Weakness

  • Includes organizations over which TBS has little or no control
  • Organizational composition changes from year to year
  • Variability related retroactivity and special programmes
  • May conflict with Statistics Canada classification of these organizations on an industrial basis

Public Accounts and Statistics Canada

Footnotes


[1] With the exception of minor changes of mutual benefit to the Employer and bargaining agents, the current occupational group structure will most likely endure.

[2] The Public Service Modernization Act under consideration before Parliament contains a section (148(e)), which instructs any Arbitration Board, when making an arbitral award, to consider "the state of the Canadian economy and the Government of Canada's fiscal circumstances."