Archived [2022-05-27] - Guide to Ex Gratia Payments and Honorariums
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1. Date of publication
This guide was published on November 22, 2019, and incorporates changes effective as of April 1, 2022.
This guide replaces the provisions on ex gratia payments in the Guideline on Claims and Ex Gratia Payments dated October 1, 2009.
2. Application, purpose and scope
This guide applies to the organizations listed in section 6 of the Policy on Financial Management.
The purpose of this guide is to support departments in managing ex gratia payments and honorariums.
This guide supports the requirements set out in Appendix A to the Treasury Board Directive on Payments and it does not present new mandatory requirements. Examples are provided for illustrative purposes only and may not apply to all departments or situations.
Section 3 sets out the considerations for issuing ex gratia payments.
Section 4 sets out the considerations for issuing honorariums.
3. Overview of ex gratia payments
3.1 Definition
The Directive on Payments defines an "ex gratia payment" as follows:
A benevolent payment made by the Crown and used only when there is no other statutory, regulatory or policy vehicle to make such a payment. The payment is made in the public interest for loss or expenditure incurred where the Crown has no obligation of any kind or has no legal liability, or where the claimant has no right of payment or is not entitled to relief in any form.
3.2 Considerations for issuing an ex gratia payment
Ex gratia payments should be managed with prudence given that they closely resemble gifts. The following are key considerations for the use of ex gratia payments:
- ex gratia payments should be used only in exceptional or urgent circumstances
- ex gratia payments are not intended to be used as a mechanism to deliver a program and are not appropriate for making recurring payments
- the purpose for which the ex gratia payment is intended must fall within the mandate of the department
- an ex gratia payment cannot be used if there are any legal restrictions to doing so (for example, a department may be prevented from issuing payments for certain expenses, such as interest payments, in their enabling legislation)
- ex gratia payments should not be used to address claims or situations where a liability exists (refer to the Guide to Claims for more information)
3.3 Authorities for issuing an ex gratia payment
Table 1 details the various authorities available for issuing an ex gratia payment. When considering the use of an ex gratia payment, departmental chief financial officers (CFOs) should engage their legal services and can consult with the appropriate program sector at the Treasury Board of Canada Secretariat and the Office of the Comptroller General to determine the appropriate authority.
| Authorities under which the issuance of an ex gratia payment may be considered | |||
|---|---|---|---|
| Directive on Payments | Ministerial authority | Treasury Board or Governor in Council | |
| Guidance on appropriate usage |
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|
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| Approval level required |
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|
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3.4 Consideration for issuing an ex gratia payment under the Directive on Payments
Proposed payment is not covered by another governing instrument
Under subsection A.2.2.3.1.1 of Appendix A to the Directive on Payments, managers must ensure that ex gratia payments are issued only when the proposed payments are not covered by other authorities, governing instruments, Treasury Board policies or other mechanisms for compensation. Examples of other authorities are program funding, transfer payments, statutory or regulatory schemes, insurance and contracts.
Before issuing an ex gratia payment, the delegated departmental manager must determine whether there are any other possible authorities for making the payment. If the proposed payment is covered by another governing instrument, the payment must be made pursuant to that instrument and not by means of an ex gratia payment.
For example, a consultant came to the departmental office for a meeting, and an employee accidentally placed several file folders on the consultant's eyeglasses and damaged them. The consultant asked the departmental manager for compensation to replace the damaged eyeglasses. The manager investigated the matter and determined that the damage was the result of an accident that occurred during the performance of the consultant's duties, and that the consultant's request for compensation should be treated as a claim (refer to section 4 the Guide to Claims for more information).
Proposed payment is not being used to fill a gap in another instrument
As part of the process to validate whether another governing instrument applies, managers must also ensure that ex gratia payments are issued only when they are not filling perceived gaps or compensating for the apparent limitations in another governing instrument, as required under subsection A.2.2.3.1.1 of Appendix A to the Directive on Payments.
In other words, if a particular situation is governed by another instrument and that instrument does not provide for the proposed payment, no ex gratia payment under the directive can be issued.
For example, a former employee was asked to attend a ceremonial event organized by a department. A canon was shot at the event, and the former employee's hearing was damaged. There was an insurance policy in place that offered compensation for hearing damage above a certain threshold. The damage to the former employee's hearing did not meet the policy's threshold for compensation. Issuing an ex gratia payment in this instance would be perceived as filling a gap in an insurance policy, and therefore would not be compliant under the Directive on Payments.
3.5 Considerations for issuing an ex gratia payment under ministerial authority
As agents of the Crown, ministers may be able to exercise the Crown's authority to authorize ex gratia payments in relation to matters falling within their mandates.
When issuing an ex gratia payment under ministerial authority, the department's CFO should confirm that:
- departmental legal services have determined that the proposed ex gratia payment falls within the department's mandate
- the Office of the Comptroller General has been consulted and has provided comments on applicable financial management policies and procedures
The minister should notify the President of the Treasury Board in writing when the ex gratia payment has been made. In this letter to the President, the minister should explain why the ex gratia payment was made, to whom it was made, and the amount and nature of the payment.
3.6 Considerations for issuing an ex gratia payment under the authority of the Treasury Board or Governor in Council
The use of the following mechanisms should be assessed on a case-by-case basis:
- Treasury Board authority: the department may ask the Treasury Board to authorize the payment pursuant to the Ex gratia Payments Order, 1991, [(P.C. 1991-8/1695) September 1991] (see the Appendix to this guide) by means of a Treasury Board submission
- Governor in Council order: the department may seek authority for the payment through a specific Governor in Council order by means of a Governor in Council submission
The appropriate program sector at the Treasury Board of Canada Secretariat should be consulted before and during the development of the Treasury Board submission or the Governor in Council submission for an ex gratia payment.
3.7 Determining the amount of an ex gratia payment
In determining an appropriate amount for an ex gratia payment, managers should consider the following:
- the underlying costs of amounts paid under comparable situations
- what is fair under the circumstances
- any contributing factors, including any actions or omissions by the potential recipient
The delegated departmental manager should also consider whether funds are available to the recipient from other reasonable means of compensation, such as:
- federal or provincial statutes
- private or public programs
- contract provisions
- commercial insurance or recovery from third parties
3.8 Reporting
All ex gratia payments are reported in the Public Accounts of Canada in the fiscal year when they were issued to the recipient, in accordance with the Receiver General Manual, "Public Accounts Instructions." Under subsection 3(l) of the Privacy Act, ex gratia payments are discretionary benefits and are not considered personal information.
4. Honorariums
4.1 Definition
An honorarium is a voluntary payment for services to an individual who is not a government employee, and to whom payments are not legally or traditionally required. Honorariums are not meant to be used frequently or as a mechanism to deliver a program, particularly on an ongoing basis. Examples of honorariums are tokens of appreciation for volunteer speakers or when engaging in consultations with Indigenous groups.
Honorariums are not an appropriate mechanism to procure services. In general, honorarium payments are issued by departments to show appreciation. They have low individual value and can be issued in a monetary form or as goods. Special authorities must be sought in advance whether the honorarium is issued in a monetary form or as goods. When they are issued in a monetary form, they may be issued under a transfer payment program.
In summary, honorariums:
- do not represent a service contract
- are not an entitlement, as there is no expectation of payment in exchange for the service rendered
- are not recurring payments to the same individual
4.2 Choosing the right mechanism
Figure 1 is a decision tree to help departments decide on the most appropriate payment mechanism to use for the payments in question. Information on determining the appropriate payment mechanism to use is detailed in the following subsections.
Figure 1: decision tree to determine the appropriate payment mechanism
Figure 1 - Text version
Figure 1 starts with an initial question, “Is the payment monetary or in the form of goods?”
If the answer is monetary, the next question is “Is the purpose of the transaction to pay for services?” If the answer to this question is yes, consider using a contract.
If the answer to this question is no, the next question is “Can the payment be issued under a transfer payment program?”
If the answer to this question is yes, the payment is an eligible expense under the terms and conditions of a transfer payment.
If the answer is no, consult departmental legal services on authority to issue honoraria payments. This authority may be found in program or departmental legislation, or obtained via an Order in Council or Treasury Board submission
If the answer to the initial question is goods, the next question is “Can the payment be issued under an existing gift bank?”
If the answer to this question is yes, establish a memorandum of understanding with the other department in order to access their gift bank and have the good or goods transferred.
If the answer is no, an order-in-council may be required to transfer public property to the recipient or recipients (see subsection 61(2) of the Financial Administration Act).
4.3 Honorarium in the form of goods
Departments providing payments in the form of goods (for example, gifts) are subject to section 61 of the Financial Administration Act relating to transfers of public property. As a result, departments must obtain approval for the transfer through:
- an order-in-council to transfer public property
- an existing gift bank (a memorandum of understanding is required if another department has the relevant gift bank)
4.4 Monetary honorariums
Monetary honorariums should be considered only after examining the appropriateness of proceeding with a service contract. A service contract should be established where there is an expectation that compensation will be provided for a service rendered even where the payment may be nominal. Service contracts should also be considered where there is an ongoing or recurring nature to the payment (for example, the same individual is receiving repeated payments). Departmental managers should consult the Contracting Policy and their procurement functions to determine the appropriate form of contract (verbal or written).
Honorarium payments should always be gratuitous. The decision to provide an honorarium should have no influence on the decision of the individual to participate or volunteer their time. There is no legal obligation to make the payment, and the recipient has no legal right to the payment.
The authority to issue honorarium payments can be found in program legislation or departmental legislation, or some other special approval such as Order-in Council. Departmental managers may want to consult with their legal services to ascertain the authority to issue honorarium payments.
Honorarium payments may also be issued under a transfer payment program where such an expenditure is listed as an eligible expense under the terms and conditions (refer to the Policy on Transfer Payments).
5. References
Legislation
Related policy instruments
Other
- Employers' Guide: Payroll Deductions and Remittances
- Ex gratia Payments Order, 1991 [(P.C. 1991-8/1695) September 1991]
- Form R105, Regulation 105 Waiver Application
- Receiver General Manual
6. Enquiries
Members of the public may contact Treasury Board of Canada Secretariat Public Enquiries if they have questions about this guide.
Individuals from departments should contact their departmental financial policy group if they have questions about this guide.
Individuals from the departmental financial policy group may contact Financial Management Enquiries for interpretation of this guide.
Appendix: Ex gratia Payments Order, 1991 [(P.C. 1991-8/1695) September 1991]
P.C. 1991-8/1695
September 5, 1991
HIS EXCELLENCY THE GOVERNOR GENERAL IN COUNCIL, on the recommendation of the Treasury Board, is pleased hereby to revoke the Ex gratia Payments Order, 1974, made by Order in Council P.C. 1974-4/1946 of September 3, 1974, and to make the annexed Order(1) respecting ex gratia payments, 1991, in substitution therefor.
(1) ORDER RESPECTING EX GRATIA PAYMENTS, 1991
Short Title
1. This Order may be cited as the Ex gratia Payments Order, 1991.
Authorization
2. The Treasury Board may authorize any ex gratia payment.
3. The Treasury Board may designate the deputy head of any department or departmental corporation named in Schedule I or II to the Financial Administration Act or of any other division or branch of the public service of Canada, including a commission appointed under the Inquiries Act, that is designated by the Governor in Council as a department for the purposes of the Act, and the Judge Advocate General, to authorize ex gratia payments.
4. The Treasury Board may authorize any deputy head designated pursuant to section 3 to designate an employee of the deputy head's department, division or branch to authorize ex gratia payments on the deputy head's behalf.