ARCHIVED - Expenditure Review of Federal Public Sector - Volume One - The Analytical Report and Recommendation

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16. Implementation Framework

Over the course of the Recommendations Section, we have made 77 proposals grouped into 17 sets of recommendations. These proposals vary widely in the difficulty, impact and feasibility required to implement them. Many are interconnected, and would need to be sequenced appropriately. Although the largest number of recommendations falls under the responsibility of the President of the Treasury Board or the Treasury Board Secretariat, several are addressed to other organizations such as the Public Service Human Resources Management Agency, the Department of Finance, or public service managers generally. Substantially complete implementation of the bulk of our proposals would demand sustained attention over many years, in some cases a decade or more.

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. No such thorough review has been undertaken in nearly 40 years, since the implementation of collective bargaining in 1967. Yet, as we sketched at the beginning of this volume, the Canadian workplace and the Canadian public service have changed dramatically in the intervening years, and we can expect continued transformation as phenomena such as information technology, citizen expectations, and globalization intensify their impacts. To remain successful in serving Canadians, the federal public service needs to ensure that its compensation policies and practices support the flexibility and increasing knowledge intensity demanded by changing circumstances.

Getting started

The first step in any implementation program must be to establish a governance and management framework capable of planning, directing, and controlling the process, and even more importantly, of delivering results for a reasonable investment of money and energy. Such a framework should comprise three elements, as follows:

1. Sponsorship by the Treasury Board–The Treasury Board is the committee of Cabinet with ultimate responsibility under the Financial Administration Act for sound management in the federal public service, including most aspects of compensation.^[263] The strategy and timetable for implementation should be approved by the Treasury Board. The Board should also review progress at least annually.
2. Direction by the Secretary of the Treasury Board, advised by a Deputy-Minister level compensation council–The Secretary of the Treasury Board has the greatest responsibility for ensuring the coherence of decisions affecting public service compensation. The Secretary should therefore take the lead in directing implementation planning and arranging for delivery.^[264] To facilitate overall coherence, as proposed in Recommendation 8.3, the Secretary should be supported by a Compensation Council comprised of the most senior representatives of those parts of the federal public service with substantial responsibilities in the compensation field, and any other senior officials selected by the Secretary.
3. A dedicated project management team should be attached to the Compensation Planning and Coordination Secretariat proposed in Recommendation 8.1, with responsibility to design and manage the implementation process. Planning and managing the various inter-related processes entailed in implementing a fundamental review and rethinking of public service compensation will require full-time attention over several years. An Assistant Secretary reporting directly to the Treasury Board Secretary could provide the needed leadership both (a) for the project management team, and (b) for the substantive work proposed for the Compensation Planning and Coordination Secretariat such as preparation of the Annual Report on Federal Compensation. This blend of project and substantive activity will likely prove fruitful and stimulating.

Because of the importance and wide-ranging nature of this Report's recommendations, it would also be necessary to confirm the Prime Minister's support for the plan of action. This implies a need for the Secretary of the Treasury Board to work closely with the Clerk of the Privy Council in finalizing the plan to be recommended to the Treasury Board.

With sound governance in place, the Treasury Board President should make the report public and invite public reaction and discussion. While we have taken care to be objective and to present issues and evidence dispassionately, this Report is clearly written from an employer and, to a considerable degree we hope, a taxpayer perspective. We can expect commentary to range widely, and no doubt controversy will surface. Facilitated roundtables can be used to bring disparate perspectives together and to test viewpoints against each other in debate. These conversations should be taken fully into account in determining how to proceed with implementation.

A suggested framework for phasing implementation

Acknowledging the need for consultation, we nevertheless suggest breaking implementation down into four baskets organized essentially by level of difficulty.

Basket 1––Most essential

The first basket comprises those recommendations that can have a substantial benefit at relatively low cost, and which are primarily in the discretion of the Treasury Board or the Treasury Board Secretariat. In this we would group the following 10 recommendations:

• Recommendation 8 on central analytical and strategic leadership. This is the prerequisite for further progress.
• Recommendation 1, on the Annual Report to Parliament on Federal Compensation. This is likely our single most potent recommendation. Regular tracking of key trends in federal compensation will raise questions that will require answers. To the extent that the answers raise concerns, greater management attention will be directed to managing compensation trends.
• Accepting Recommendation 1 implies a need to act on Recommendation 3, on defining rigorously each data element included in the Annual Report, and investing in the systems and analytical capacity necessary to estimate and report consistently on the key compensation data elements. A project feasibility plan would need to be developed to ensure the soundness of the investments proposed for this purpose.
• For related reasons, Recommendation 4, on compensation research capable of tracking credibly trends in the broader Canadian labour market, also needs early attention. However, since this requires collaboration with the new Public Service Labour Relations Board and the public service unions, the timetable will be shaped in dialogue with these partners. The critical point, however, will be for the federal public service employer not to miss the boat by failing to invest at the beginning in developing the definitions, standards and methods that will govern this work for years to come.
• Recommendation 5 on the proposed compensation policy framework for the federal public service should also be put into place as soon as possible. The framework has already been the object of broad consultations, primarily in 2003. Approval has in effect been awaiting the results of this Report. There is no longer any reason to delay approving the framework.
• Because compensation costs are strongly affected by the size of the federal public service, early action is warranted on Recommendation 6, regarding the management of salary budgets. Increasing the mark-up price on transferring money from approved non-salary budgets to salaries will send an important signal regarding the real cost of such conversions. After confirming the appropriate new mark up––we propose going from the current 20% level to 30%, the Treasury Board Secretariat should implement this change as early as 2007–08. Preparing the protocols and system capacity to track and report on trends in salary budgets and their rationale will take some time. The more complete reporting proposed in Recommendation 6.4 will take longer to put in place but the decision to do so can be taken soon.
• As noted later, the process of modernizing public service classification standards, although long delayed, can be expected to take many further years in practice. In the meantime, it is important that the Public Service Human Resources Management Agency focus on helping departments to manage the existing standards pragmatically, as proposed in Recommendation 11.2.
• Early consideration would be appropriate for Recommendation 13.4, on establishing a Canadian Forces Compensation Advisory Committee, modelled generally on the United Kingdom Armed Forces Pay Review Body. Given the increasing importance accorded by the Government to the role of the Canadian Forces, it would make sense to move soon to put the determination of military compensation on a sounder foundation.
• The review proposed in Recommendation 13.5, of how the RCMP Pay Council measures total compensation and what considerations other than comparability ought to be weighed in determining RCMP compensation, should be undertaken soon.
• Recommendations 15.8 and 15.9 are in effect common sense admonitions to public service management to take care in appointing and training management representatives on benefit plan boards, to encourage the use of annual leave as an organizational and individual health measure, and to pay overtime as it is earned.

These recommendations could likely be implemented in large part by the end of 2006–07, with more complex technical or systems aspects to follow at the earliest feasible time according to an agreed work plan.

Basket 2––More in-depth reviews and reforms

The second basket involves critical but more difficult subjects that would require setting up some kind of advisory processes to develop more specific options and recommendations for later decisions. In these areas the public consultations will be especially useful in deciding whether and in exactly what way to pursue this Report's recommendations. In each case, the Treasury Board Secretariat and the other key public service agencies involved will want to consider carefully whether, in principle, to open up the subject. Following that decision, determining how best to proceed in setting up the required advisory processes will be the next priority.

It will of course also be necessary to plan carefully the sequencing of such processes, and how to manage the connections among the processes. Rigour is required in this planning to ensure that all participating parties dedicate the needed intellectual and leadership talent and resources to bring these processes, both individually and collectively, to an orderly conclusion within the timeframes established.

A general caveat deserves attention regarding this second basket. First, most of these subjects are difficult and will be controversial. The temptation will be to let the cup pass; to avoid the risk of bogging down in endless process. However, each of these areas is in its own way urgently in need of attention, if we are to renew our compensation regime to support our human resources needs as the great generational shift from the baby boom generation to its successors occurs over the next decade. A clear view of what is needed, and a determination to act will overcome the undeniable obstacles. The Treasury Board Secretariat should consult actively, but in the absence of consensus it still bears the responsibility to act in the interests of the long-term health and sound management of the public service.

The 12 main subjects falling into this basket are these:

• A rational approach to managing compensation requires action on Recommendation 10 regarding the development of a revised occupational and bargaining structure that appropriately combines employees with common interests and working conditions, and that facilitates compensation comparisons with the external Canadian labour market. Because changes risk upsetting at least some unions, it will be important to get third party help as suggested in Recommendation 10.1. Failure to get the basic workforce structure right will continue to compromise sound management of compensation in the public service.
• Recommendation 11, on deciding on the most appropriate approach and sequence for developing gender-neutral classification standards is essentially a corollary of Recommendation 10. Modernizing these standards has been the object of frustrating and generally unsuccessful efforts over more than two decades. While completing this work is overdue, it must dovetail with the results of the proposed review of the occupational group structure. Note also Recommendation 12.8 which suggests that advice should be obtained on whether any new appropriate occupational group structure should include regional pay for any of the proposed groups.  
• It is essential that separate employers, if they have not done so to a satisfactory degree already, carry out their own versions of Recommendations 10 and 11. Note also recommendation 9.3. It would be prudent to coordinate the timing of these exercises in order to avoid overloading public service unions, or other partners' capacity.
• Recommendation 13.1 proposes that the Treasury Board President ask the Advisory Committee on Senior Level Retention and Compensation to recommend executive compensation more comparable to that offered in the broader Canadian economy, but with a more restrictive definition of who is an executive, and easier provisions for executives to be dismissed for inadequate performance. Executive pay is always controversial, but greater comparability with the private sector––especially at the levels of Assistant Deputy Minister and Deputy Minister––in return for more rigorous accountability should promote sounder management. Recommendations 13.2 and 13.3 are closely connected, covering performance pay, and the application of any changes affecting public service executives, to Heads of Crown corporations, and others appointed by Order-in-Council.
• Recommendation 14, proposing revisiting the option of a form of shared union-employer governance and responsibility for the public service pension plan, should be considered if the current union lawsuit on the pension surplus is resolved. As we point out in this Section, the logic of shared responsibility for surpluses is powerful. However, it would be wise to assess carefully the accumulating experience in other Canadian jurisdictions with such joint boards. This review would permit a well-informed evaluation of whether on balance this track deserves another try, and what the nature of a preferred model would look like.
• Recommendation 15.7 makes a similar proposal in relation to the governance of public service benefit plans, to the effect that joint union-management governance should entail joint responsibility for the plans' financial health.
• Whatever is decided about joint governance of the public service pension plans, it is critical to pursue the proposal in Recommendation 14.1 to review the suitability of the existing plan's design in meeting the needs of current and future employees. Changes in families, a growing interest in working beyond the period of eligibility for a pension, and a likely increase in the proportion of employees who may enter and leave the federal public service over the course of their career, perhaps several times, all point to the wisdom of taking a fresh look at how the plan works.
• In a similar vein, Recommendation 15 proposes a series of measures to review and renew the insurance, health and dental benefits available to federal public servants. The same sort of demographic and social forces highlighted above in relation to the Public Service Pension Plan call into question the appropriateness of the existing plans. So a joint review including experts with experience on both the union and management sides of benefits design and management should be undertaken. No such rethinking has been undertaken for decades, and what exists has simply emerged from incremental adjustments over the years.
• Recommendation 7 on how to expand the scope of normal collective bargaining to provide more explicitly for trade-offs across the full range of compensation elements, and Recommendations 15.2 and 15.3 on the idea of an annual benefits allowance with a range of benefit plan choices for purchase by employees from their allowance, are closely related. Broadening the scope of bargaining has various strategic and practical pros and cons that would need to be weighed carefully. The suggested advisory panel would assist in exploring the feasibility of the suggested approach, from a balanced management and union perspective. In preparation for deciding to pursue these recommendations, the Treasury Board Secretariat would be wise to develop and evaluate possible scenarios internally first.
• Recommendation 15.4 suggests a specific review of the complex set of plans and policies relating to sickness and disability. This topic could be included in the broader benefits review proposed above. However, given the specialized and likely controversial nature of the issues, it could make more sense to undertake a distinct process for this purpose.
• Recommendation 15.6 on reviewing the financial requirements of the Supplementary Death Benefit account, in light of its growing actuarial surplus, and of any changes to its purpose and design as a result of the broader benefits review proposed in Recommendation 15.1, is essentially a technical issue that requires the kind of objective assessment that the Office of the Superintendent of Financial Institutions is well placed to provide. Any amounts in excess of what is required could factor into broader discussions with the public service unions on the future of benefits plans.
• Recommendation 15.10 proposes reassessing the appropriate level of employer contributions to life insurance, health and dental benefits for public service pensioners. This is an area that has received relatively little attention over the years, although the stated employer liability for such benefits in the Public Accounts is substantial.

Basket 3––Possible changes to the legislative framework

The third basket includes the two areas of statutory framework affecting compensation in the federal public service: collective bargaining and pay equity. We argue at some length in Chapter 14 that the laws governing these areas are flawed and deserve deeper rethinking. We have not attempted the huge task of suggesting specific amendments to the Public Service Labour Relations Act (PSLRA) or the Canadian Human Rights Act. Nevertheless, we do propose two directions for reform that we believe have the potential to prove fruitful for all interested parties.

• On collective bargaining, Recommendation 16 essentially suggests that now is the time to launch a more fundamental search for a viable alternative dispute resolution model that could replace the existing conciliation/strike and arbitration options under the current Public Service Labour Relations Act. While the present options have not worked too badly, despite relatively frequent recourse to legislative overrides of the process, the basic premise of resolving union-management disagreements by either a trial by combat through a strike, or by unregulated arbitral discretion, seems incompatible with an underlying policy of comparability of public sector compensation with what prevails in the broader Canadian private sector.
  
  Sponsoring a dialogue on new models will be controversial, but holds the potential of advancing public sector collective bargaining to embrace a new model more suited to balancing the interests of taxpayers and employees. Action in this area is not urgent, but it is important for the longer term credibility of federal public sector compensation management. An appropriate timeframe for exploring new models is the period between now and the parliamentary review of the Public Service Labour Relations Act (PSLRA) mandated in the legislation for 2010 (i.e. five years after the proclamation of the PSLRA in 2005).
• On equal pay for work of equal value, Recommendation 17 argues that the 2004 Pay Equity Task Force Report does not offer an adequate foundation for amending the legislation governing pay equity in the federal labour jurisdiction. Our argument is that the Report's recommendations do not really come to terms with certain fundamental issues with the interpretation of the principle of equal pay for work of equal value that have become increasingly problematic over the nearly three decades since the Canadian Human Rights Act was passed in 1977.
  
  At this stage, we suggest that it makes more sense to pursue a pragmatic, proactive approach to identifying and eliminating male/female wage differences resulting from gender-based discrimination. Acting on our administrative proposals will require the Treasury Board Secretariat and the Public Service Human Resources Management Agency to invest in developing fully the suggested methodology and starting to apply it systematically over the next two to three years. Doing so should be a priority, we suggest, in view of the fact that the federal public service employer has not yet adopted a systematic approach to fulfilling its obligations in this area under the existing Canadian Human Rights Act. Without this building block properly in place, the stability of the entire federal public service compensation system is at risk.

Basket 4––Proposals to other Authorities

The final basket is a fairly small set of proposals that are clearly in the discretion of authorities outside the Treasury Board portfolio. Essentially the only action incumbent on the Treasury Board Secretariat is to bring these recommendations to the attention of those responsible. These include the following six suggestions:

• Recommendation 2 suggests that the Department of Finance include in the annual federal Budget an expected track for total Personnel spending. Such a global amount would reinforce the idea of planning and accountability for compensation spending.
• Recommendation 4.3 urges the leadership of the Public Service Labour Relations Board to consult actively in establishing a credible compensation research function, as authorized by the new Public Service Labour Relations Act.
• Recommendation 9.1 raises the possibility of establishing further separate employers with a view to improving organizational performance by aligning human resources management practices, including in particular compensation, with each employer's business needs. Decisions on machinery of government are of course a prerogative of the Prime Minister, assisted by advice from the Privy Council Office.
• Recommendation 10.3 recognizes the role of the Public Service Labour Relations Board in determining the appropriate bargaining unit structure in relation to the new occupational group structure proposed to be developed and proclaimed in recommendations 10.1 and 10.2.
• Recommendations 13.6 and 13.7 suggest actions for consideration by the Minister of Justice and the Canadian Federal Judges Association regarding the appropriate comparators for determining compensation levels for federally appointed judges; and by Parliament regarding the possible establishment of a mechanism for reviewing parliamentary compensation periodically.
• Recommendations 17.1 and 17.2, on possible legislative changes to the framework for applying equal pay for work of equal value in the federal labour jurisdiction, would need to be considered by the Minister of Justice and the Minister of Labour.

By working through each of the four baskets of recommendations systematically, implementation of this Report can be tailored to the Government's priorities and to the resources available for improving compensation management in the federal public sector.

 

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