ARCHIVED - Expenditure Review of Federal Public Sector - Volume Two - Compensation Snapshop and Historical Perspective, 1990 to 2003

• Previous Page
• Table of Contents
• Next Page

This page has been archived.

SECTION ONE ‑ THE CORE PUBLIC SERVICE AND SEPARATE EMPLOYER DOMAIN

1. Introduction

This second volume of the Report on the Expenditure Review of Federal Public Sector Compensation Policy and Comparability provides a detailed analysis of compensation in all its components for the principal domains of the federal public sector.

It is crucial at the outset to be as clear as possible about the scope of the review. At the broadest level, Statistics Canada reported that in March 2003 the federal public sector as a whole employed 455,754 people at a total salary cost of about $22.7 billion. This was approximately 2.9% of employment in Canada at that time, and around 15.5% of public service employment.

In this report, however, we focus on a somewhat narrower set of organizations than Statistics Canada reports on. Specifically, we exclude federal business enterprises and most other Crown Corporations (mainly cultural agencies and port authorities) that normally finance their own operations and manage their compensation with little central government involvement. On this basis, we exclude salary expenditures amounting to about $4.8 billion from our study. We calculate that only about $600 to $700 million of this amount could realistically be considered as a cost to taxpayers through net federal appropriations. While this is a large sum in itself, it is small relative to the domains covered in this review. This fact, combined with the diversity of compensation policies applied by these organizations and the independence of their management, led us to the view that including these entities would greatly increase the Report's complexity, without appreciably enhancing its utility.

The Report therefore deals with five domains employing a total of about 351,000 people in March 2003:

• The core public service (i.e. the main departments and agencies, for which the Treasury Board is the employer), with 168,864 employees in March 2003;
• The separate employers, with 68,156 employees in March 2003;
• The Canadian Forces (including both regular members and active reservists totalling 84,369 in March 2003);
• The Royal Canadian Mounted Police (including both regular and civilian members numbering 18,029^[1] in March 2003); and
• A residual domain of 11,691^[2] people in March 2003 (covering federally appointed judges, parliamentarians, employees of Parliament, Ministerial staff and students).

For most purposes, we deal with the first two domains together. We do this in order to be able to trace changes over the period from 1990–91 to 2002–03. Until they were established as separate employers in the late 1990s, the three largest components of the current separate employer domain (together constituting nearly 90% of employment in that domain) were part of the core public service.

Table 2001, below, summarizes the cost in 2002–03 of both salaries and wages, and total compensation in each of these domains, as well as non‑pension benefits for public service pensioners, a cost category that is not captured elsewhere.

While salaries and wages for the portion of the federal public sector reviewed in this report totalled about $17.9 billion in 2002–03, the corresponding total compensation figure of about $24.8 billion was 39% higher. Adding compensation costs for federal business enterprises and other Crown corporations, of around $600 million to $750 million for 2002–03, the amount that can realistically be considered as financed from general federal revenues, brings our total to about $25.5 billion.

The focus

For each domain, a snapshot of the current compensation picture is described, and a retrospective view is provided on the evolution of compensation within that domain going back in most cases to the 1990–91 fiscal year. Main topics covered are:

• Changes in employment and the total regular payroll in each of the domains.
• Examples of the impact on employee populations of privatization and the devolution or transfer of some federal operations to other governments over the period.
• The relative importance, in explaining growth in employment and the total regular payroll in the combined core public service and separate employer domain, of such factors as Cabinet and Treasury Board approvals of additional personnel budgets, transfers by departments from approved non‑salary to salary budgets, and increases in average salaries.
• The evolution of average salaries in the combined core public service and separate employer domain, and the relative importance in explaining increases in this area, of collective bargaining outcomes (including both economic increases and restructuring increases^[3]), changes in the composition of the workforce, pay equity settlements, and employee movement.^[4]
• Changes in expenditures on other monetary benefits and the use of leave entitlements in the core public service.
• The evolution of policy and employer expenditures and cost‑sharing with employees in the areas of pensions, insurance, and health and dental benefits in the combined core public service and separate employer domain.
• Changes between 1991 and 2003 in employment levels, as well as policy and expenditures on salaries, pensions and all other areas of compensation expenditure for the Canadian Forces domain, the Royal Canadian Mounted Police domain, and the other groups domain.

The wide‑angle view

Because each domain has its own unique compensation characteristics, this volume does not conclude with an aggregation of information about the various domains into a summary, or offer a view of compensation in the federal government as a single subject. Nevertheless, a number of interesting and noteworthy points emerge from this detailed examination.

Total Compensation

The approximately $18 billion expended on salaries and wages (regular payroll) for fiscal year 2002–03 constituted about 3.4% of total salaries and wages in Canada. When one factors in additional costs associated with the various elements of total compensation such as pensions and health, dental and life insurance, federal expenditures on compensation amounted to roughly $25 billion in 2002–03. This represents over a third of the amount paid for total direct program spending.

Payroll

The 2002–03 average salary for employees in the core public service was about $53,300. The cost of total compensation per employee averaged about $73,400. For the combined core public service and separate employer domains, the corresponding figures in 2002–03 were $52,800 and $71,700.

Average salaries varied widely between different entities depending on the nature of the employing organization. For example, average salaries at specialized regulatory agencies tended to be significantly higher than at more operationally oriented institutions. Salaries in the Canadian Forces averaged $52,700 ($17,880 for reservists) while the overall average salary for RCMP members was approximately $59,900.

In 2002–03, fewer than 3% of employees in the core public service earned less than $35,000. Roughly the same proportion earned over $100,000. The proportion of those earning less than $35,000 was much higher within the Canadian Forces (12%). Conversely, almost no one earned less than $35,000 at the RCMP (in fact only about 0.7% earned less than $45,000). This was a natural consequence of the fact that the most populous rank, that of Constable, employs about 63% of the regular members, almost all of whom are at the maximum pay rate of $62,497 (average Constable salary is $61,133). As with the Canadian Forces, only around 1.3% earned more than $100,000.

Pensions

Pensions constitute the largest non‑wage compensation expense for the government. For 2002–03, the employer‑paid portion of pension contributions relating to current service in the core public service domain amounted to about $1.29 billion. The ratio of employer to employee contributions was 74% to 26%. This proportion was slightly higher for the Canadian Forces, where employer contributions totalled 77.8% (or $570.7 million), and for the RCMP where it was 75.8% (or $195 million). The government contributed 84% of the annual contributions related to the pension plans for MPs and federal judges.

Insurance

In 2002–03, there were 505,000 members of the Public Service Health Care Plan, including about 227,200 pensioners, who accounted for 55% of claims. In 2002, claims paid and total administrative expenses associated with the Plan amounted to about $446.3 million. Overall, the employer contributed about 81% and the members 19% (most of the contributions were paid by pensioners). The average value of claims per member during the year was about $840.

In 2002–03 there were about 330,000 members of the Public Service Dental Care Plan. Claims and administrative expenses cost the Plan about $167.3 million. The government pays the full cost of the DCP. The average cost of claims per member was about $470 in 2002.

Leave and severance

Employees in the core public service domain used about 7.74 million days of paid leave in 2002–03. This represented an average of about 41.2 days per year. This time not worked had an estimated value of $1.6 billion, or about 18% of the nearly $9 billion salary mass.

Payments for severance in 2002–03 in the core public service domain amounted to about $87.9 million. About $67.9 million was paid into Registered Retirement Savings Plans. Recipients numbered about 4,420, for an average severance payment of nearly $20,000. A total of about $93.8 million was paid out in severance pay and termination benefits for the armed forces, while the RCMP paid out a total of about $19.9 million.

Other cash compensation

Most employers in the federal public sector offer some form of performance pay in the design of their pay plan, particularly for executives. In 2002–03 salary increases related to the Performance Management Program in the core public service totalled about $9 million. Total performance related lump‑sum payments were about $32.1 million. In 2003, over 90% of EXs and DMs in the core public service received performance‑related salary increases or a lump sum payment. The average lump sum payment was about $7,400.

For 2002–03 the total paid overtime in the core public service was about $208 million, equal to about 2.3% of regular pay. Some occupational groups earned amounts of overtime disproportionate to the size of the group. One group in particular, Correctional Service employees (CX), earned overtime at a rate three and one‑half times their proportion of the payroll. Members of the Canadian Forces are not eligible to be paid overtime for actual hours worked; instead they receive an overtime factor as part of their salary—6% for Non‑commissioned Members and 4% for General Service Officers. Overtime pay in the RCMP was substantial, amounting to about $99.1 million, or approximately 9% of regular pay.

In 2002–03, a variety of recruitment and retention allowances (so‑called "terminable allowances"), adding up to about $77.4 million were paid to a total of about 15,500 employees in the core public service domain.

In each domain there is a series of additional allowances designed to address specific employee needs. In the core public service these totalled about $382 million (equivalent to about 4.9% of regular pay). In the Canadian Forces these allowances amounted to $180.5 million in 2002–03 (4.8% of regular pay) and dealt with issues such as compensation for deployment overseas and compensation for exposure to hazards or adverse environment. In the RCMP these allowances amount to about $76.7 million over the year (7.0% of regular pay) and covered issues such as isolated posts pay and a senior constable allowance.

In 2002–03, the estimated ongoing salary costs relating to pay equity for the core public service domain were in the order of $225 million (about 2.5% of overall payroll). For the relevant groups this amounted to about 15% of the current payroll.

Other compensation costs

As an employer, the Treasury Board is required to contribute to payroll taxes in the same way as any other employer. In 2002–03 a total of $459 million in contributions were paid for the core public service domain, relating primarily to three programs: Canada Pension Plan/Quebec Pension Plan ($265.6 million); Employment Insurance ($183 million); and Provincial Health Plans in Alberta and British Columbia ($10.3 million). The Canadian Forces employer contributions total $228 million, while the RCMP's employer contributions totalled $56.4 million. In addition, the Treasury Board paid $194 million in payroll taxes in Manitoba, Newfoundland, Ontario and Quebec.

Retrospective — Overall expenditures on salaries and wages, and total compensation 1990–91 to 2002–03

Table 2002 distils an overview of the growth of salaries and total compensation in the federal public sector by domain, excluding federal business enterprises and other Crown corporations as discussed earlier.

As the Table shows, we estimate that total salaries and wages fell from about $13.7 billion in 1990–91 to about $12.5 billion in 1997–98 (the "low point" after Program Review). Over the next five years, expanding population, changing workforce composition and increasing average salaries drove the total to around $17.9 billion in 2002–03.

Looking at "total compensation", we see a similar decline from around $17.8 billion in 1990–91 to $16.6 billion in 1997–98. By 2002–03, the total had reached about $24.8 billion.

An interesting perspective on these figures is the ratio of total compensation to total salaries and wages. In effect, this ratio tells us what percentage of cost must be added to the salary base to cover all aspects of total compensation. Table 2003 gives the result of this calculation.

Table 2002 Overview of the growth of combined salaries, and total compensation, for the principal domains of the federal public sector, 1990–91, 1997–98 and 2002–03
Domains	Salaries and Wages (Billions)			Total  Compensation
	1990‑91	1997‑98	2002‑03	1990‑91	1997‑98	2002‑03
TB and separate employers	9.1	8.2	12.5	11.6	11.0	17.0
CF	3.3	2.9	3.7	4.5	3.8	5.3
RCMP	.9	.9	1.1	1.3	1.2	1.6
Other (judges, MPs, students, etc.)	.4	.5	.6	.4	.5	.7
Non‑pension pensioners' benefits	‑‑	‑‑	‑‑	.04	.07	.2
Total	13.7	12.5	17.9	17.8	16.6	24.8
Note: These totals do not include relevant amounts for Crown corporations. There is little available data upon which to base sound estimates.

 

Table 2003 Ratio of total compensation to total salaries and wages, 1990–91, 1997–98, and 2002–03
Domains	1990–91	1997–98	2002–03
TB and separate employers	1.27	1.34	1.36
CF	1.36	1.31	1.43
RCMP	1.44	1.33	1.45
Total	1.30	1.33	1.39

As the Table sets out, the overall ratio grew from 1.3 in 1990–91, to 1.33 in 1997–98, to 1.39 in 2002–03. For the combined Treasury Board as employer and separate employer domains, the pattern was 1.27 in 1990–91, 1.34 in 1997–98, and 1.36 in 2002–03. This indicates that non‑salary compensation has been growing as a share of total compensation.

We now turn to a description of the main focus of this Report, compensation in the core public service and separate employer domains.

 

• Previous Page
• Table of Contents
• Next Page