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

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SECTION TWO - OTHER DOMAINS

10. Compensation in the Canadian Forces Domain

As of March 2003 total regular armed forces and active reserve forces numbered about 84,400. There were about 62,185 regular members of the armed forces (including 1,120 full-time reserve members on operations), and about 22,250 primary reserve members.^[97]

Total compensation

As of March 2003, regular salaries for the Canadian Forces domain amounted to about $3.7 billion.^[98] The overall estimated cost to the government of all elements of military compensation added up to about $5.3 billion.

Salaries totalled about $3.3 billion for regular armed forces personnel, and about $0.4 billion for primary reserve members. Average salaries were about $52,700, and $17,900 respectively for the two groups.

The basic approach to military compensation blends several perspectives:

• First, the Canadian Forces recognize general federal government compensation principles such as internal and external equity, competitiveness with the external labour market, and affordability.
• Second, compensation must align with the distinctive characteristics of military service. These include emphasis on the need to work as a team, and what is called "posting turbulence." Members of the Canadian Forces may be ordered to re-locate or ordered into battle. They may face prolonged periods of family separation, loss of spousal income and restrictions on personal freedom. Their personal liability to danger is unlimited.
• Finally, the resulting compensation regime needs to ensure that the "profession of arms" enjoys respect such that people will commit to serving with honour for long periods, since military knowledge and expertise cannot be purchased in the marketplace when it is needed.

Base pay

The underlying philosophy of the Canadian Forces approach to pay is a rank‑based team concept. The premise is that knowledge and responsibility increase with rank, and that all members of the same rank contribute equally to the attainment of the mission. In effect, all members with the same rank and experience should earn an amount corresponding to the average value of the Force's work at that level. More value is placed on the profession of arms (sailor, soldier, airmen) than on the supporting occupations. This approach aims to tie military compensation to the realities of today's high-level technology and battle space combat tactics. It also ensures that pay does not fluctuate based on the specific job assignment, which facilitates mobility and working on what needs to be done, as members of a team.

Labour market pressures however, lead the Forces to recognize certain specialties as well.  Two trade groups, Specialists 1 and 2, in addition to special remuneration for pilots and medical, dental and legal officers, assist in addressing skill shortages and retaining critical expertise.

In line with this underlying philosophy, Canadian Forces base pay is organized according to the structure of the armed forces, as follows:

Non-Commissioned Members

These include, in ascending order of rank: privates, corporals, master corporals, sergeants, warrant officers, master warrant officers, and chief warrant officers. For each of these ranks there are three pay levels:

• Standard covers about 73.8% of NCMs,
• Specialist 1, for such jobs as aerospace control operator, or medical technician, affecting about 24.6%, and
• Specialist 2, relating to a small number of jobs such as flight engineer, with about 1.6% of the members.

General Service Officers

This category includes the ranks of officer cadet, second lieutenant, lieutenant, captain, major, and lieutenant colonel.

Senior Officers

Colonels and all ranks of general.

Specialized groups

These include quite different professions at various levels that are distinguished for the purpose of linking pay to the external labour market more closely. Included are:

• Pilots^[99] (paid according to their rank, plus an incentive);
• legal officers (paid at rates corresponding to appropriate levels of the Law group in the core public service);
• medical and dental officers (paid according to the results of surveys of these professions); and
• military judges (generally in line with provincial court judges).

By statute, the Treasury Board is authorized to establish compensation levels for the military. In practice, compensation is managed jointly by National Defence through the Assistant Deputy Minister, Human Resources (Military) and by the Treasury Board Secretariat. DND establishes the actual pay and benefit rates and policies through the Compensation and Benefits Instructions. Treasury Board approves compensation policies affecting the military, as well as any increases in funding.

Each year, a comparison of total compensation is calculated separately for Non-Commissioned Members (NCMs) and for General Service Officers (GSOs) to determine the warranted percentage increase (WPI) for the year. The term "total compensation" in this context refers to a very specific formula that brings together salary, salary-related benefits, certain non-salary benefits, and leave. The basis for comparison for NCMs is a set of Corporal and Master Corporal predominant jobs, numbering 3 to 5 in each of about 80 occupations.^[100] About 55% of these have specified comparators in the core public service. Using these comparators, the overall compensation difference with the public service is calculated to yield the WPI.

For General Service Officers, comparators at the rank of Captain, Major and Lieutenant Colonel are matched to the public service using a modified version of the Hay Plan.  Again a WPI is calculated using a method similar to that for NCMs.

The actual overall percentage increases approved by the Treasury Board do not normally correspond to the WPI.  For 2002–03, because of disagreements over the formula and its calculation, in the interest of a timely decision it was agreed to accept 4.5% for General Service Officers and 4.0% for Non-Commissioned Members, and to conduct a joint review of the method for approving increases in military pay.

Senior officer pay

For senior officers, their pay is tied directly to the pay of Executives in the core public service. Based on an assessment of appropriate benchmarks, the correspondence is set as follows:

• For Colonels the maximum is EX 1 plus 13% of the difference between EX 1 and EX 2.
• For Brigadier Generals the maximum is EX 2, plus 32% of the difference between EX 2 and EX 3.
• For Major General the maximum is EX 3, plus 86% of the EX 3/EX 4 difference.
• For Lieutenant General, the pay range corresponds to that of EX 5.

Using a different pay determination method than for the lower ranks means that at times the Lieutenant Colonel pay rate may approach that of the lowest senior officer rank, that of Colonel. In 2002–03 the gap was only 4.7%.

Included in base pay, in addition to the amount derived from the assessment of comparability are three further components:

• The military factor is equal to 7.5% of pay for NCMs, and 6.5% for GSOs. This is intended to compensate for the increased personal risk and restrictions on personal freedom that are inherent in military life.
• The general provision in lieu of overtime is set at 6% for NCMs, and 4% for General Service Officers.
• The acting pay component is equal to 0.51% for NCMs and 0.66% for GSOs. This element supports members functioning temporarily at a higher rank, without being promoted or getting acting pay per se.
• Senior Officers's pay rates do not include these components.

The resulting standard annual rates of pay for Non-Commissioned Members in 2002–03 ranged from a minimum for privates of $25,968 to a maximum of $71,280 for Chief Warrant Officers. For the most numerous rank of Corporal (which contains almost half of the NCMs), the pay range was from $43,644 to $46,152. Specialist 1 Corporals earn about 9% more at the maximum; for specialist 2 Corporals the difference is about 7% above the Specialist 1 maximum.

For non-specialist officers annual pay rates in 2002–03 went from a low of $42,120 for a new Second Lieutenant, to a maximum of $160,900 for a Lieutenant-General. Pilots earned between $44,580 and $98,688. Medical/dental officers could earn as much as $200,300; legal officers up to $159,700.

The Reserve Force members are paid daily rates that generally correspond to 85% of the comparable pay for a regular member. Those serving less than 30 days receive 9% in lieu of leave. Reserve members who are engaged in operational duty (Class C employment) receive 100% of regular-member pay.

Movement within a pay range to the maximum is achieved through an annual increment known as "incentive pay."  This amounts to 1.5% for Non-Commissioned Members and 2% for General Service Officers. These increases are effectively automatic in that they are implemented unless countermanded by the relevant commanding officer, which is very rare.

Advancement through the ranks is based on performance evaluations and the order of merit established by annual promotion boards. Actual promotions from the merit lists depend on the number of vacancies at each rank. Within a rank, pay rises to the next increment each year until the member reaches the maximum salary. It is worth noting that generally members enter at the bottom, either as Privates or Officer Cadets, and then advance through their career. In contrast, employees may enter the public service directly even at the highest levels.

The general distribution of base pay in the regular armed forces is illustrated in figure 2077. In comparison with a similar display for the core public service, although there are considerably more people earning below $35,000 (about 7,600 or more than 12%), the dividing line between the first and second quartile was considerably higher, at about $45,000.

Figure 2077
Distribution of actual annual salaries in the regular Canadian Forces by $5,000 bands, March 2003

Display full size graphic

On the other hand, only about 1% earned over $100,000, which is about one third of the proportion in the core public service. It must be noted that military base pay includes both the military factor and a component in lieu of overtime, so direct comparisons with public service pay need to be interpreted with this fact in mind.

Table 2078 summarizes military base pay by category. The population, the total base pay salary mass, and the category average salary are given. Within the total salary mass, about $235 million is for the military factor, and about $180 million is for the overtime component.

Table 2078 Military pay by member category, March 2003
Member category	Employees	%	Total base pay ($ millions)	Average base pay
Non-Commissioned Members	48,183	57.0	$2,262.9	$ 46,950
General Service Officers	11,935	14.1	$752.4	$ 63,000
Pilots	1,293	1.5	$108.8	$ 84,150
Legal Officers	120	0.1	$12.6	$ 105,000
Medical/Dental Officers	294	0.3	$44.2	$150,300
Senior Officers	360	0.4	$39.7	$110,300
Subtotal Regular Forces	62,185*	73.6	$3,220.6	$52,700***
Reserve Members	22,249	26.4	$397.9	$17,880
Total	84,434	100%	$3,618.5**
* This total includes 1,121 members of the reserve working full time and considered as Regular Forces. ** This differs slightly from the figure of $3.668 billion reported in Table 2080, because of different estimation methods used. *** Strictly speaking, the figures in Table 2078 yield an average salary of $51,800. We use $52,700 on the basis of the salary total given in Table 2080, which provides comparable data for 1990–91 to 2002–03.

Canadian Forces composition

The distribution of regular members by rank in March 2003, and the average salary for each rank is provided in Table 2079.

From this table it is evident that certain pay differences between ranks are very small, for example between Corporal and Master Corporal, and between Lieutenant-Colonel and Colonel. On the other hand, differences at the maximum are pronounced between Captain and Major (almost 15%), between Private and Corporal (over 20%), and between the various levels of General.

Table 2079 Distribution of regular members of the armed forces, salary range and average salary by rank (excluding special groups), March 2003
	Salary Range
Rank*	Population	Non-specialists	Medical/ dental officers	Legal officers	Pilots	Average salary
Lieutenant - General	14	136,700‑160,900				$158,500
Major - General	18	119,900‑141,100				$138,900
Brigadier - General	42	98,600‑116,000	171,100‑200,300	131,100‑159,700		$113,800
Colonel	302	86,100‑101,300	163,000‑188,800	99,300‑139,000		$104,400
Lieutenant - Colonel	1,054	91,200‑97,100	154,900‑179,400	93,500‑119,200	94,600‑98,700	$97,800
Major	3,162	78,700‑88,200	142,700‑182,900	75,100‑107,800	88,600‑93,600	$86,700
Captain	5,769	58,200‑76,900	102,100‑146,800	54,200‑77,400	62,300‑87,700	$71,350
Lieutenant	699	45,900‑55,200	48,400‑51,500		49,900‑59,300	$48,400
Second Lieutenant	1,083	42,100‑42,700	39,100‑45,200		44,600‑45,200	$44,000
Chief Warrant Officer	645	68,400‑71,300				$70,100
Master Warrant Off.	1,767	61,600‑64,100				$63,800
Warrant Officer	3,642	55,800‑57,900				$58,000**
Sergeant	6,684	50,100‑52,100				$52,500**
Master Corporal	8,442	45,400‑47,900				$49,100**
Corporal	17,363	43,600‑46,100				$46,200**
Private	9,417	25,900‑38,100				$31,500**
Total	60,103
*  These figures do not include the Officer Cadet rank. ** The fact that the average salaries for these ranks exceed the maximum of the salary range is anunexplained anomaly in the data.

Recruitment, promotions and separations

During 2002–03 new recruits numbered about 4,612 NCMs and approximately 1,712 officers. Together, these represented about 10.2% of total strength in March 2003. Applicants totalled about 13,500.

Promotion opportunities emerge as vacancies arise in the various ranks. Over the course of the year, there were about 2,700 promotions among Non-Commissioned Members, about 6% of the population. For General Service Officers, about 690 members were promoted into or within the ranks, also about 6%. During any month of that fiscal year, around 150 members were employed in an acting rank.

Departures in 2002–03 from the armed forces included about 3,130 Non-Commissioned members, and about 470 General Service officers. This constituted about 7 per cent of the total effective strength of serving GSOs and NCMs. Of the NCMs, 1,180 separations were involuntary (about 38% of those leaving), the majority (738) being for medical reasons. An additional 710 were released voluntarily during basic training. There were 1,620 retirees. During the year, 46 members died in service.

Retrospective—Changes in Employment and Compensation

Since the early 1990s, the Canadian Forces have lived important changes in employment and compensation. In a nutshell, this period of 13 years saw four important trends:

1. substantial declines in the number of full-time and reserve members;
2. stability in the proportion of the members in the various ranks, with a small shift from Non-Commissioned Members to General Service Officers;
3. a pattern of salary freezes and later increases in real average salaries which follows fairly closely the trends we noted for the combined core public service and separate employer domains; and
4. some improvements in allowances and benefits.

Changes between 1991 and 2003

The clear pattern of population change in the Canadian Forces has been downward. As set out in Table 2080:

• Regular force members declined in numbers, from over 88,600 in March 1991 to a low of 58,950 in March of both 2000 and 2001. This is a reduction of fully one third. By March 2003, regular members had increased more than 3,000, leaving a net 12-year decline of 30%.
• Active reservists declined by a similar proportion (33.6%) from about 33,500 to around 22,250 between March 1991 and March 2003.^[101]
• The combined population thus fell from 122,140 in March 1991 to 84,369 in March 2003.

In current dollars, the combined payroll for the regular and reserve members of the Canadian Forces^[102] went from about $3.3 billion in March 1991 to a low of $2.9 billion in 1997, and then grew steadily to about $3.7 billion in March 2003. The net current dollar increase between 1991 and 2003 was $360 million, or 11%. If we compare the low point in March 1998 to March 2003, we find a difference of 27%. This is a real (constant dollar) increase of about 13.8%.

The regular forces' pay fell from a total of about $3.2 billion in 1993–94 to a low of $2.6 billion in 1996–97, and has since grown to around $3.3 billion in 2002–03.

In constant 2002–03 dollars, total military pay fell from $4.2 billion in 1990–91 to $3.6 billion in 2002–03. This latter figure is up from a low of $3.2 billion in 1997–98.

Reservist payroll fluctuates according to the amount of time worked and pay rates. There is no time-related trend evident in this area, with the total reservist payroll ranging widely from $202 million in 1990–91 (when the population was greatest) up to $398 million in 2002–03, a year with a relatively low level of active reserves.

Looking at gross average salaries (total payroll for regular members divided by the number of regular members), we see a growth of about $17,700 between 1990–91 and 2002–03, as measured in current dollars. The actual averages were $35,000 in 1990–91 and $52,700 in 2002–03, indicating a current dollar increase of 50.6%.

Table 2080 Change in the Canadian Forces' regular and reserve population and payroll, 1990–91 to 2002–03
Period	Regular Forces population	Regular Forces payroll ($000s)	Reservists population	Reservists payroll ($000s)	Total military population	Total military payroll* ($000s)	Total military payroll* ($000) Constant $
1990‑91	88,629	3,106,375	33,511	202,581	122,140	3,308,956	4,202,403
1991‑92	85,077	3,064,433	33,163	225,732	118,240	3,290,165	4,003,538
1992‑93	81,376	3,135,657	32,905	239,442	114,281	3,375,099	4,041,164
1993‑94	77,125	3,158,001	33,797	233,730	110,922	3,391,731	4,002,337
1994‑95	72,795	3,089,931	28,339	224,761	101,734	3,314,692	3,895,511
1995‑96	67,090	2,771,811	28,040	211,530	95,130	2,983,340	3,432,624
1996‑97	63,495	2,639,667	31,844	214,647	95,339	2,854,314	3,228,093
1997‑98	61,663	2,626,392	30,826	261,669	92,489	2,888,061	3,222,595
1998‑99	59,938	2,724,800	27,443	265,895	87,381	2,990,695	3,306,203
1999‑00	58,950	2,900,052	25,364	312,827	84,314	3,212,880	3,475,465
2000‑01	58,950	3,034,489	23,443	323,564	82,393	3,358,053	3,535,050
2001‑02	60,459	3,110,204	21,749	363,195	82,208	3,473,399	3,576,942
2002‑03	62,120	3,270,799	22,249	397,854	84,369	3,668,653	3,668,653
* Source: Public Accounts, DND

Looking at the same picture in constant 2002–03 dollars, we see growth from $44,500 in 1990–91 to $52,700 in 2002–03, an increase of about 18.4%.

Focusing specifically on the period following Program Review, as we did in analysing the combined core public service and separate employer domains, we see that the current dollar average salary rose from about $42,600 in 1997–98 to $52,700 in 2002–03 or 23.7%. Constant 2002–03-dollar average salaries grew from about $47,500 to about $52,700, or 10.9%. These rates of increase are about 3% to 4% below the increases experienced in average salaries in the combined core public service and separate employer domains during the same five-year period. The Canadian Forces also differed markedly from the core public service and the separate employers in employment change. Whereas employment on the civilian side of the public service grew by about 20% between 1997 and 2003, the active military population continued to shrink after 1997, growing marginally only in 2003, for a net 1997–2003 increase of less than 1% in the regular forces population.

Figures 2081, 2082 and 2083 display graphically these changes in Canadian Forces population and salaries.

Figure 2081
Overview of changes in the number of regular Canadian Forces Members, reservists and total active military population, 1990–91 to 2002–03

Display full size graphic

Figure 2082
Changes in total payroll for the regular members of the Canadian Forces and reservists, separately and combined, 1993–94 to 2002–03

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Figure 2083
Evolution of average salaries in current and constant 2003 dollars for regular Canadian Forces members, 1993–94 to 2002–03

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Tables 2084 and 2085 set out the distribution of regular Canadian Forces members by rank for each year from 1990–91 to 2002–03. In general, the structure has held steady in the sense that the proportion of regular Canadian Forces members at each rank has remained little changed at eight of fifteen ranks reported in the Table: all ranks of General, Colonel, Officer Cadet, and all ranks of Warrant Officer. There was substantial growth in four ranks:

• Lieutenant Colonel (from 1.4% in 1990–91 to 1.7% in 2002–03),
• Major (from 4.4% to 5.1%),
• Captain (8.5% to 9.4%) and
• Corporal (from 23.5% to 28%).

Clear declines occurred in the ranks of:

• Lieutenant (from 2.6% to 1.7%),
• Sergeant (from 12% to 10.9%), and
• Privates of all types (from 18.8% to 15.1%).

Using the military's own broad categories of Senior Officer (Colonel and above), General Service Officer (Officer Cadet and up to Lieutenant-Colonel), and Non-Commissioned Members (Warrant Officers and below), we find a striking continuity. The proportion of Senior Officers declined slightly from 0.63% in 1990–91 to 0.61% in 2002–03. The change for General Service Officers was an increase from 20.7% to 22%; Non-Commissioned Members declined, from 78.7% to 77.4%.

Compensation Changes 1990–2003

Consistent with this modest change in the basic structure of the Canadian Forces, we observe an increase of about 2.7% in the average salary cost of the 2002–03 rank distribution compared with that of 1990–91. As in our analysis of the combined core public service and separate employer domains, we used average salaries by rank for 2003 and applied them to the structure of 1990–91 with the result reported above. If we break this period into two segments, with 1997–98, the low point following Program Review as the dividing line, we see two trends: The segment from 1990–91 to 1997–98 saw an increase of about 4.3% resulting from change in the rank structure; the following segment from 1997–98 to 2002–03 experienced a decline of about 1.5%.

Table 2084 Population of regular Canadian Forces members by rank, 1990–91 to 2002–03*
Rank	90‑91	91‑92	92‑93	93‑94	94‑95	95‑96	96‑97	97‑98	98‑99	99‑00	00‑01	01‑02	02‑03
General/ Lieutenant- General	12	14	18	14	16	18	12	11	9	10	11	11	13
Major- General	37	35	30	28	31	25	23	17	18	20	19	19	18
Brigadier- General	101	90	85	76	69	66	59	46	42	42	45	42	41
Colonel	399	386	368	360	331	305	270	244	262	277	280	295	298
Lieutenant- Colonel	1,218	1,243	1,229	1,210	1,147	1,071	942	905	894	934	955	1,011	1,053
Major	3,851	3,864	3,843	3,743	3,584	3,386	3,117	3,015	2,952	2,961	3,017	3,066	3,133
Captain	7,459	7,706	7,921	8,145	7,718	6,887	6,401	6,254	6,062	5,891	5,778	5,783	5,761
Lieutenant	2,239	2,149	1,872	1,567	1,270	1,067	941	775	860	987	1,030	960	1,020
Second Lieutenant	1,136	874	715	580	526	500	418	491	511	542	617	747	892
Officer Cadet	2,172	2,115	1,829	1,835	1,665	1,447	1,334	1,337	1,415	1,371	1,309	1,427	1,569
Chief Warrant Officer	1,054	1,044	1,037	980	912	803	710	602	578	583	598	627	642
Master Warrant Officer	2,712	2,682	2,627	2,504	2,368	2,152	1,947	1,740	1,654	1,628	1,690	1,728	1,764
Warrant Officer	5,255	5,141	5,047	4,907	4,644	4,333	3,958	3,802	3,642	3,579	3,587	3,594	3,638
Sergeant	10,497	10,311	9,999	9,481	8,911	8,164	7,352	7,057	6,773	6,590	6,602	6,604	6,627
Master Corporal	12,401	12,129	11,819	11,116	10,562	9,932	9,414	8,972	8,665	8,437	8,381	8,422	8,340
Corporal	20,595	20,958	21,754	23,095	23,465	21,391	19,139	20,196	19,803	19,326	18,370	17,759	17,124
Private (Trained)	4,484	5,660	5,285	3,725	1,606	1,075	1,583	1,312	1,499	1,547	1,219	1,332	1,582
Private (Basic)	10,929	7,915	3,980	2,160	2,821	3,204	4,187	4,141	3,446	3,296	3,546	4,660	6,122
Private (Recruit)	1,009	674	730	688	421	418	419	171	558	333	554	1,298	1,538
Totals	87,560	84,990	80,188	76,214	72,067	66,244	62,226	61,088	59,643	58,354	57,608	59,385	61,175
* Total populations in Table 2084 differ somewhat from those reported earlier for regular forces members in Table 2080. The figures in Table 2080 are from Statistics Canada and the Treasury Board Secretariat. They are given in a manner compatible with how the related salary mass is reported. The figures in Table 2084 are "actuals" as reported by the Canadian Forces during the process of verification.

The net change of 2.7% in average military salaries between 1990–91 and 2002–03 described here compares with a core public service average salary increase of about 10.6%, attributable to structural changes by group and level. Thus, we conclude that, over the past 12 years, the change in the composition of the Canadian Forces was less than one quarter as significant as was the same factor in raising average salaries in the combined core public service and separate employer domains.

Table 2085 Proportions of regular Canadian Forces members by rank, 1990–91 to 2002–03
Rank	Percentage
	90‑91	91‑92	92‑93	93‑94	94‑95	95‑96	96‑97	97‑98	98‑99	99‑00	00‑01	01‑02	02‑03
General/ Lieutenant- General	0.01	0.02	0.02	0.02	0.02	0.03	0.02	0.02	0.02	0.02	0.02	0.02	0.02
Major- General	0.04	0.04	0.04	0.04	0.04	0.04	0.04	0.03	0.03	0.03	0.03	0.03	0.03
Brigadier- General	0.12	0.11	0.11	0.10	0.10	0.10	0.09	0.08	0.07	0.07	0,08	0.07	0.07
Colonel	0.46	0.45	0.46	0.47	0.46	0.46	0.43	0.40	0.44	0.47	0.49	0.50	0.49
Lieutenant- Colonel	1.39	1.46	1.53	1.59	1.59	1.62	1.51	1.48	1.50	1.60	1.66	1.70	1.72
Major	4.40	4.55	4.79	4.91	4.97	5.11	5.01	4.94	4.95	5.07	5.24	5.16	5.12
Captain	8.52	9.07	9.88	10.69	10.71	10.40	10.29	10.24	10.16	10.10	10.03	9.74	9.42
Lieutenant	2.56	2.53	2.33	2.06	1.76	1.61	1.51	1.27	1.44	1.69	1.79	1.62	1.67
Second Lieutenant	1.30	1.03	0.89	0.76	0.73	0.75	0.67	0.80	0.86	0.93	1.07	1.26	1.46
Officer Cadet	2.48	2.49	2.28	2.41	2.31	2.18	2.14	2.19	2.37	2.35	2.27	2.40	2.56
Chief Warrant Officer	1.20	1.23	1.29	1.29	1.27	1.21	1.14	0.99	0.97	1.00	1.04	1.06	1.05
Master Warrant Officer	3.10	3.16	3.28	3.29	3.29	3.25	3.13	2.85	2.77	2.79	2.93	2.91	2.88
Warrant Officer	6.00	6.05	6.29	6.44	6.44	6.54	6.36	6.22	6.11	6.13	6.23	6.05	5.95
Sergeant	11.99	12.13	12.47	12.44	12.36	12.32	11.81	11.55	11.36	11.29	11.46	11.12	10.83
Master Corporal	14.16	14.27	14.74	14.59	14.66	14.99	15.13	14.69	14.53	14.46	14.55	14.18	13.63
Corporal	23.52	24.66	27.13	30.30	32.56	32.29	30.76	33.06	33.20	33.12	31.89	29.90	27.99
Private (Trained)	5.12	6.66	6.59	4.89	2.23	1.62	2.54	2.15	2.51	2.65	2.12	2.24	2.59
Private (Basic)	12.48	9.31	4.96	2.83	3.91	4.84	6.73	6.78	5.78	5.65	6.16	7.85	10.01
Private (Recruit)	1.15	0.79	0.91	0.90	0.58	0.63	0.67	0.28	0.94	0.57	0.96	2.19	2.51
Totals	100	100	100	100	100	100	100	100	100	100	100	100	100

Increasing Salary Levels

Accordingly, we turn our attention to increases in salary levels for the various ranks as the predominant explanation of the increase in average salaries. Since the late 1970s, at the direction of the Treasury Board, military pay (in theory at least) is determined through a process of benchmarking to public service pay known as Total Compensation. This process of detailed comparison of numerous components of compensation yields the warranted pay increase. In the end, however, the approved salary increase is decided by the Treasury Board in the context of many considerations, and does not necessarily follow the calculated warranted pay increase. The total compensation approach emerged from two factors. First, following the unification of the Canadian Forces in the 1960s, there was a search for an appropriate comparator group to which military pay could be tied. In the end it was agreed that the public service was the appropriate comparator. Second, the Treasury Board Secretariat was increasingly concerned that compensation policy take full account of all forms of compensation.

Implementing this approach proved to be "simple in the abstract, excruciatingly detailed in its application."^[103] Every conceivable benefit was reviewed to determine which to include. Then followed the development of means to evaluate each element in dollar terms. Finally it was necessary to identify suitable salary benchmarks. For the Non-Commissioned Members (NCM) category, about 60 occupations were evaluated against the relevant public service classification standards, mainly for traditional blue-collar jobs. This analysis yielded salary comparisons at the Corporal level. The salary structure for more senior NCM ranks was established to allow for a smooth progression to the higher ranks. Pay rates for Privates were based on a ratio of apprenticeship and journeyman rates of pay in the Ontario Apprenticeship Program.

Because General Service Officers (GSOs) tend to be employed in non-occupation-specific roles, it proved impossible to agree on suitable benchmarks. As a result, GSO pay was linked to an index of salary increases for officer-type positions in the core public service.

Discontent with the process and a critical Auditor General Report in 1990 led to a joint review in 1992 by a Treasury Board/Canadian Forces Advisory Group on Military Compensation. As a result, a more comprehensive method dubbed "Total Compensation Comparability" was adopted. The specific issue of how to benchmark GSO salaries was resolved through the adoption of a modified Hay plan that had previously been applied by the British army. A randomly selected sample of Canadian Forces officer jobs and officer-type jobs in the public service were assessed, with the independent assistance of Hay Associates.

The Advisory Group recommended pay increases of 14.7% for General Service Officers (9.32% resulting from application of the modified Hay plan to clarify relativities to the public service, and the remainder representing the net effect of changes to other elements of total compensation), and 6.7% for Non-Commissioned Members. These recommendations were overtaken by the pay freezes imposed throughout the federal government under the Public Sector Compensation Act and subsequent Budget Implementation Acts. An exception was made for a 2.2% increase for NCMs in 1996 that had been recommended prior to the freeze.

Table 2086 below provides a summary of pay range increases for Canadian Forces personnel since 1991. The incentive pay column refers to increments applied annually to advance through the pay range for a given rank until the member reaches the salary maximum. The comparability increase refers to the phasing in of the increases that had been recommended in 1992 by the TBS/DND Advisory Group on Military Compensation. These were seen as being owed to Canadian Forces members once the pay freeze ended in 1997.

The economic increases are those increases that are approved annually by the Treasury Board, which in theory (but not often in practice) correspond to the warranted pay increase derived from the total-compensation-comparability methodology. In fact, since 2000 the Treasury Board Secretariat and the Canadian Forces have been discussing how to put the process of determining military pay increases on a more sustainable foundation. The economic increases for Senior Officers correspond to the increases approved for Executives in the civilian public service.

From Table 2086 we can see that the cumulative economic salary increase to Non-Commissioned Member pay ranges between 1996–97 and 2002–03 was 24.7% in current dollars. Taking account of the phased-in comparability increase of 6.8%, the total general range increase over seven years was 33%. For General Service Officers, economic increases amounted to a cumulative salary range increase of 20.5% from 1997–98 to 2002–03. The comparability increase added a net 14.7% for an overall increase of about 37.7%.

For Senior Officers, the economic increase amounted to about 21.4%. In addition to the economic increases applied to Executives generally in the public service, the equivalency of senior officer rank in the Canadian Forces to Executive (EX) levels in the public service was re-evaluated effective April 1999. Colonels moved up from direct equivalence to the EX 1 level, to EX 1 plus 13% of the difference between EX 1 and EX 2; Brigadier Generals advanced from EX 2 equivalent to EX 2 plus 32% of the difference between the EX 2 and EX 3 ranges; Major Generals moved from EX 3 plus 50% of the difference between EX 3 and EX 4 to EX 3 plus 86% of that difference. Lieutenant Generals remained at equivalent to EX 5 salaries.

Table 2086 History of salary increases for the Canadian Forces, 1991 to 2003
Year	NCMs			GSOs			Senior Officers
	Incentive pay	Economic increase	Comparability increase	Incentive pay	Economic increase	Comparability increase		Performance pay	Economic increase
1991	Yes	0	0	Yes	0	0		Yes	0
1992	Yes	3.00%	0	Yes	3.00%	0		Frozen	3.00%
1993	Yes	0	0	Yes	0	0		Frozen	0
1994	Frozen	0	0	Frozen	0	0		Frozen	0
1995	Frozen	0	0	Frozen	0	0		Frozen	0
1996	1.5%	0	2.20%	2.0%	0	0		5.0%	0
1997	1.5%	2.24%	2.11%	2.0%	1.59%	3.53%		5.0%	0
1998	1.5%	2.23%	1.20%	2.0%	2.21%	3.53%		4.0%	4.51%
1999	1.5%	8.93%	1.13%	2.0%	5.23%	7.02%		5.25%	2.01%
2000	1.5%	2.73%	0	2.0%	3.00%	0		4.4%	8.00%
2001	1.5%	2.50%	0	2.0%	2.50%	0		Yes	3.10%
2002	1.5%	4.00%	0	2.0%	4.50%	0		Yes	2.30%
Total		24.68%	6.80%		20.54%	14.70%			21.44%
Grand total			32.95%			37.68%

The average salary for all Canadian Forces regular members grew by 23.7% in nominal dollars between 1997–98 and 2002–03. This outcome is lower than might have been expected in view of the range increases implemented in the previous paragraphs.  However, staff turnover could well have served to mitigate the effect of range increases on the overall average salary for the Canadian Forces domain.

From Table 2086 we note as well that unusually large economic increases were approved for 1999–2000: 8.93% for NCMs and 5.23% for GSOs. This occurred in response to recommendations from the House of Commons Standing Committee on National Defence and Veterans' Affairs (SCONDVA). The two main components of these changes were:

1. an increase in the military factor component of base pay from 4% to 7.5% for Non-Commissioned Members and to 6.5% for General Service Officers, and
2. a re-evaluation of comparability with the public service.

For NCMs, the major changes were to increase by about 10% the entry-level salary for Privates; for GSOs entry-level salaries were raised by over 5% for Second Lieutenants and Lieutenants, and by about 11.5% for Officer Cadets.

The rationale for increasing the military factor related primarily to greater recognition of personal limitation and liability (increased from 0.5% to 3% for NCMs and 2.5% for GSOs).

Specialist officers such as legal officers and medical/dental officers receive salaries linked to their area of expertise. In the case of legal officers, military lawyers' pay is benchmarked to that of members of the Law (LA) group in the regular public service. The 6.5% military factor was approved for legal officers effective April 2000. For medical and dental officers there was an important policy change adopted in 1999 to shift from benchmarking against public service medical and dental officers to basing pay on surveys of average net incomes for full-time general medical practitioners and dentists in private practice. This shift was motivated by an increase in attrition at the end of compulsory service from a historical rate of 50% to around 80%. The new approach led to salary increases between 1998 and 2002 of around 50% in the maximum salary for medical/dental Canadian Forces members.

By way of summary on average salary increases between 1997–98 and 2002–03, we would make these points:

• Between these years, the average salary of regular Canadian Forces members rose from about $42,600 to around $52,700, an increase of $10,100.
• This difference amounts to about 23.7% in current dollars, which is equivalent to around 10.9% in constant 2003 dollars.
• We estimate that changes in the distribution of members across the ranks, and of the relative salaries between ranks accounted for only about 2.7% of the 23.7% reported above, or less than one eighth of the total.
• The vast bulk of increases in average salaries over the period resulted from decisions to raise salary ranges for the various ranks.

This leaves the question of how the salary increases were financed. Focusing on the period following Program Review and the salary freezes (i.e. from 1997–98 to 2002–03) we note that the salary mass for the Canadian Forces increased from $2.89 billion to $3.67 billion, a difference of $0.78 billion. This was financed principally by a net transfer of about $612 million from the Treasury Board compensation reserve.^[104] The remainder was financed mainly by transfers initiated by the Department of National Defence, both through the Annual Reference Level Update (about $77 million net between 1997–98 and 2002–03) and net in-year transfers from other approved budgets into salaries, amounting to about $185 million. Over this period, the process for approving salary budget increases to support approved policies yielded a net decrease for the Canadian Forces totalling around $44 million.^[105]

Recruitment, promotions and separations

For the years reported, we observe several points of interest in Table 2087. First, recruitment has been renewed in earnest only since 2000. Second, promotions fell by three quarters from 1990–91 to 1996–97. Since then promotions have increased, but remain below half the level of 1990–91. Voluntary separations are relatively low at 3.4% in 2002–03, but still higher than in the regular public service.

Table 2087 Overview of recruitment, promotions and separations in the Canadian Forces, 1990–91 to 2002–03
Year	Recruitment		NCMs		Separations				Deaths
					Voluntary		Involuntary
	NCMs	GSOs	Promotions	GSOs	NCMs	GSOs	NCMs	GSOs
1990‑91	n/a	n/a	18,939	3,662	n/a	n/a	n/a	n/a	n/a
1991‑92	n/a	n/a	13,448	3,001	n/a	n/a	n/a	n/a	n/a
1992‑93	n/a	n/a	13,017	2,545	n/a	n/a	n/a	n/a	n/a
1993‑94	n/a	n/a	10,895	2,244	n/a	n/a	n/a	n/a	n/a
1994‑95	n/a	n/a	7,033	1,791	n/a	n/a	n/a	n/a	n/a
1995‑96	n/a	n/a	5,154	1,543	n/a	n/a	n/a	n/a	n/a
1996‑97	n/a	n/a	4,700	1,216	n/a	n/a	n/a	n/a	n/a
1997‑98	2,473	641	4,880	1,777	1,611	334	1,192	215	25
1998‑99	2,006	761	4,645	1,280	2,103	434	1,166	189	49
1999‑00	2,036	673	6,240	1,339	2,070	387	1,120	165	40
2000‑01	2,692	695	7,052	1,477	1,990	326	1,324	188	43
2001‑02	4,574	816	7,570	1,538	1,681	249	1,243	167	33
2002‑03	4,650	1,080	8,226	1,515	1,847	301	1,297	228	44

Performance pay and incentive allowances

Senior officers, medical/dental officers with the rank of Lieutenant-Colonel and above, and legal officers above the rank of Colonel are eligible for performance awards, essentially on the same terms as for executives in the core public service. Legal officers below Colonel benefit from a performance pay system modelled on that for excluded and unrepresented non-executives in the core public service. For senior officers in 2002–03, the total lump sum variable pay awards amounted to about $2.6 million, approximately equal to the 7% guideline. The average award was about $7,350. Salary increases for senior officers based on performance on ongoing commitments totalled about $0.2 million.

For all other eligible officers, the total value of lump sum performance pay in 2002–03 was about $0.8 million, and related in-range salary increases were about $0.4 million.

Retrospective—Performance pay

Consistent with the link to public service models, the availability and level of performance pay has varied over the years.

Table 2088 Comparison of performance pay awards for regular members of the Canadian Forces, 1990–91, 1997–98 and 2002–03
Type of payment	1990‑1991 ($M)	1999‑2000 ($M)	2002‑2003 ($M)
Senior and Specialist Officers
Lump sum variable pay	n/a	n/a	2.6
In-range salary increases based on performance assessment	n/a	n/a	0.2
Other Eligible Officers
Lump sum performance pay	n/a	n/a	0.8
In-range salary increases based on performance assessment	n/a	n/a	0.4
Total	2.0	2.3	4.0

From the figures in Table 2088 it is evident that performance pay grew substantially in the Canadian Forces since 1999–2000. This is entirely consistent with the comparable experience of core public service Executives. The in-range increases seem low, although apparently Lieutenant-Colonels are at or near the maximum pay of Colonels on promotion.^[106]

Recruitment allowances

The armed forces offer several recruitment allowances. The total value for 2002–03 was about $4.9 million. About $3.5 million went for Non-Commissioned-Member recruitment, for example for those with a post-secondary diploma or certificate in an under-strength military occupation ($1.5 million). About $1.05 million went for officer recruitment, and $335,000 to attract those with medical/dental qualifications. The only retention or terminable allowance, that for pilots, ran out in July 2003 and was not renewed. No payments were made in 2002–03.

Retrospective—Recruitment and retention allowances

During the late 1990s the Canadian Forces implemented selective recruitment and retention allowances to assist in meeting operational requirements. Recruitment allowances for skilled Non-Commissioned Members amounted to $3.5 million in 2002–03, and nil in the early 1990s.

As of 1999, the shortfall of qualified doctors in the Canadian Forces was 21 Captains and Majors against target strength of 173, with a similar gap for dentists. The situation was expected to deteriorate. In response, a Medical and Dental Direct Entry Officer Recruitment Allowance was introduced. This provided a lump sum, after successful completion of three months of basic officer training, of $80,000 per direct entry medical officer and $25,000 per direct entry dental officer.

For pilots, the main issue was retaining trained personnel. By 1998, the attrition rate of 12% was double what had been the annual norm for pilots, mainly as a result of competition from the airlines. Accordingly, from 1998 to 2003^[107] re-enlisting pilots could receive special incentives ranging from $50,000 to $75,000. Between late 1999 and 2003 approximately $10.2 million was spent on such retention bonuses.

Other pay, allowances and leave entitlements

Members of the Canadian Forces are entitled to receive other allowances such as the hardship allowance or the submarine allowance. They also receive pay in lieu of overtime, severance pay and statutory benefits such as the Canada Pension Plan. This section examines the nature and cost of these benefits and allowances, along with provisions for leave.

Other forms of allowances amounted to $180.5 million in 2002–03. Table 2089 summarizes the major types of allowances.

Table 2089 Major allowances in the Canadian Forces by category, 2002–03
Allowance	Amount ($M)	%
Hardship allowance	17.2	10%
Foreign service premium	28.3	16%
Risk allowance	8.8	5%
Hardship allowance bonus	0.3	0%
Post Combat Reintegration Allowance	5.8	3%
Subtotal: Operations Allowances	60.4	33%
Sea duty allowance	15.8	9%
Air Crew allowance	8.5	5%
Field Operations	6.5	4%
Submarine allowance	1.4	1%
Paratroop allowance	1.2	1%
Other environment allowances	2.0	1%
Subtotal Environment Allowances	35.4	20%
Post living differential	64.8	36%
Isolated Post/Northern Allowances	2.3	1%
Maternity/Parental Allowance	17.6	10%
Total	180.5	100%

The principal such allowance is the Post Living Differential (PLD),which attempts to maintain a reasonably predictable cost of living for Canadian Forces members and their families, no matter where in Canada the member is posted. Based on a private sector survey, the PLD provides a monthly allowance that varies by geographic location. The amount is calculated for 52 locations where National Defence has facilities. In February 2003, the allowance went from a low of zero in Kingston, Charlottetown and Corner Brook, to a high of from $863 a month to $1,138 in different parts of greater Toronto. Ottawa-Gatineau was $124. If two spouses are in the Canadian Forces, each receives 75% of the applicable PLD. As noted Table 2089, the total cost in 2002–03 was $64.8 million.

The second largest area, environmental allowances, cover over a dozen distinct types of activities that involve adverse environmental conditions or hazards to which members are not generally exposed. These include such activities as serving as a paratrooper, as a diver, on a submarine, or as a member of Joint Task Force 2. The total value in 2002–03 amounted to $35.4 million.

The third broad area is that of operational allowances, which amounted to $60.4 million over the year. These essentially aim to assist members on deployments, compensating them for the difficulties and hardships associated with particular postings. The level of assistance is generally graded to the hardship of the assigned location. These tax-exempt allowances are based on the Post Differential Allowance element of the public service's Foreign Service Allowances. Also included is a Post-Combat Reintegration Allowance.

Finally, maternity and parental allowances cost about $17.6 million in 2002–03.

Retrospective—Other allowances

Other allowances increased in total value from about $133.2 million in calendar year 1990 to $180.5 million in 2002–03. As a middle reference year, we determined that $114.7 million was paid in 1997–98 in taxable allowances for Canadian Forces members. We were unable to obtain details on the level of expenditures for particular allowances in earlier years. The main apparent differences in total expenditures over time were the introduction of the Post Living Differential, and the increasing value and use of the maternity/parental allowances.

In policy terms, the principal change in allowances since 1990 was the introduction of the Post Living Differential (PLD) in 2000–01. This replaced the previous Accommodation Assistance Allowance (AAA), which provided financial aid to Canadian Forces members renting private housing. The new allowance was designed to reduce for eligible Canadian Forces members the variation in standard of living inherent in moving from one community to another across Canada, in view of the significant differences in the cost of living in various centres. The amount paid in each centre is based on an independent survey, with the amount increased so that in effect, the taxes payable on such a benefit are covered. In its last full year of operation, 1999–2000, the AAA cost about $3.9 million.^[108] The PLD paid out approximately $49.2 million in its first year of operation in 2000–01, increasing to around $64.8 million in 2002–03.

Based on 2002–03 expenditures, the second main category of allowances was environmental allowances. These date back to the former mid-1960s navy, army, and air force allowances. They aim to compensate Canadian Forces members for military duties that involve sporadic or continuous exposure to adverse environmental conditions and risks not normally experienced by Canadian Forces members in general. These allowances remain the result of a "force-fit" adjustment to the amalgamation of the armed forces in the mid-1960s with some subsequent ad hoc adaptations. It is unfinished business to ensure that, in relation to the degree and duration of exposure, all Canadian Forces members are equitably treated, regardless of their sea, land or air affiliation.

Up to 2002–03, 18 specialized allowances remained in place. There was little in the way of change over the period under review from 1990–91 to 2002–03, other than regular increases in the level of the allowances. During the freeze period from 1992 to 1996, the allowances remained unchanged; from 1997 to 2003 the rates generally increased by about 29% to 30%, more or less in line with the increase in salary levels.

Operational allowances compensate for hardship, risk, and cost-of-living differentials in operational settings, normally outside Canada. Prior to the 1991 Gulf War, Canadian Forces personnel serving abroad were entitled to a Foreign Duty Allowance (FDA). In theory, this matched the Post Differential Allowance (PDA) provided to civilians serving abroad under the Foreign Service Regulations. In practice, the FDA lagged the PDA, offering only one third to one half of the monetary value by 1991. After various ad hoc changes to compensate members assigned to the Gulf and later to operations in the former Yugoslavia, Cambodia, Somalia, Rwanda and Haiti, the present system was approved in 2003. To reflect the nature of military assignments, for example, the Hardship Allowance Bonus is in six-month increments. The amount spent in this area has been roughly estimated^[109] at about $2.8 million in 1990–91 and $36 million in 1997–98. The amount paid for all operational allowances in 2002–03 was around $60.4 million.

Finally, steps were taken during the period under review to make maternity and parental allowances available for Canadian Forces members on the same basis as for public servants in the core public service. Effective 1999, it was agreed that maternity leave would be counted as time qualifying for severance pay. In line with the increased length of maternity and parental leave resulting from changes in the Employment Insurance program in 2001, the amount paid for these benefits had reached $17.6 million by 2002–03.

Retroactive pay is not applied in the case of the Canadian Forces. Salary increases are effective April 1 of each year, and implemented expeditiously. By Treasury Board policy, no approved increase is retroactive to previous years.^[110]

Overtime

As previously noted, overtime per se is not paid based on actual hours worked. Instead, a percentage of the pay established through comparability with the core public service is included in base pay as a general provision for overtime. The understanding is that over the course of a member's career, this approach is equitable.

On various occasions studies have indicated that the incidence of overtime is greater than this allowance recognizes. Recommendation 10 of the 1998 report of the Standing Committee on National Defence and Veterans' Affairs on Quality of Life in the Canadian Forces reiterated the need to re‑evaluate the overtime factor to reflect the workloads experienced by military personnel. Up to 2002–03, however, the allowance remained unchanged.

Severance pay

As in the regular public service, retiring members of the armed forces are eligible for severance pay equivalent to one week's salary at the member's current rate for each year of service up to 30 years. To be eligible at all, members must have at least 10 years' service; between 10 and 20 years the severance is paid at half the full rate. In 2002–03 a total of about $93.8 million was paid out in severance pay and other termination benefits for the armed forces. The severance pay portion amounted to about $63 million for Regular Forces members. Assuming everyone departing was eligible for severance pay (which is certainly not true for literally everyone), the average value of severance pay per departing member was about $18,000. About $21.5 million was provided to assist departing members and their families to move to their intended place of residence.

Retrospective—Severance pay

Entitlement for severance pay and termination benefits remained unchanged during the period under review. The actual amounts paid have fluctuated with the level of departures from the Canadian Forces, as shown below.

Year	Severance Pay and Termination Benefits ($ millions)*
1993‑1994	75.9
1994‑1995	362.2
1995‑1996	190.1
1996‑1997	56.3
1997‑1998	41.6
1998‑1999	56.5
1999-2000	60.6
2000-2001	71.3
2001-2002	70.3
2002-2003	69.9
*  These figures include Regular Forces Severance and (after April 1997), the Reserve Force Retirement Gratuity.

The two years of substantially greater payouts for severance and termination benefits, 1994–95 and 1995–96, corresponded to the years of greatest decline in the population of regular members of the Canadian Forces.

Statutory Benefits

As is required of all employers in certain provinces, the government pays statutory premiums and payroll taxes in relation to the Canadian Forces:

• Canada Pension Plan employer contributions totalled $153.5 million in relation to the armed forces and the reserves in 2002.
• Employment Insurance—The cost to the employer in relation to the armed forces domain was $69.7 million.
• Provincial Health Plan Premiums—These charges, limited to Alberta and British Columbia totalled $3.5 million.
• Health Payroll Taxes—These amounted to about $56.7 million.

Retrospective—Statutory Benefits

Statutory premiums and payroll taxes relating to the Canadian Forces have increased in some areas and decreased in others, as for other employers. The principal items are listed below.

Canada Pension Plan

Canada Pension Plan employer contributions were $80.9 million in 1993–94, and remained in that range until 1998–99 when they began to increase, reaching $153.5 million in 2002–03.

Employment Insurance

Employment Insurance employer contributions conversely declined steadily, reflecting both the population decrease and the reductions in premium rates through the period. Total employer contributions for Employment Insurance in 1993–94 were about $144.7 million; by 2002–03 they amounted to $69.7 million. A small EI rebate is paid to Canadian Forces members. This rose from about $0.67 million in 2000–01 and $0.78 million in 2002–03.^[111]

Provincial Health Plan Premiums

These charges were levied during the period only in Alberta and British Columbia. They totalled about $2.8 million in 1993–94 and in 2000–01, and $3.5 million in 2002–03.

Health Payroll Taxes

These added up to around $44.9 million in 1993–94, $39.4 million in 1998–99, $51.8 million in 2000–01, and $56.7 million in 2002–03.

Pay equity

Pay equity has affected Canadian Forces compensation only indirectly, through the comparability formula relating public service to military pay on a total compensation basis. In 1999, an increase of 0.63% was applied as part of that year's warranted percentage increase for Non-Commissioned Members as a result of implementing the settlement with the Public Service Alliance in the core public service domain. There was no element of retroactivity in the case of the Canadian Forces.

Leave entitlements

Annual leave entitlements were:

• 20 days for regular members with up to four years' service (about 21% of the population),
• 25 days for those with 5 to 27 years of service (73%), and
• 30 days with 28 or more years of service (6%).

Members also receive the 11 statutory holidays recognized in the public service, plus 2 additional days at Christmas.

Retrospective—Leave entitlements

Entitlement to leave among members of the Canadian Forces has remained essentially unchanged during the period since 1990. One exception was the increase in maximum annual leave to 30 days after 30 years in the early 1990s, reduced to 28 years in 2002. Also, as previously noted, maternity and parental leave was improved as a result of changes in policy on Employment Insurance in 2001.

We were unable to obtain information on payouts in lieu of leave for active members and for those leaving the Forces.

Sick leave

Sick leave is only recorded for members when a physician approves such leave. For cases requiring less than 48 hours of sick leave, the member's Commanding Officer may authorize it. In 2002–03, about 185,000 sick days were recorded affecting 6,680 members, an average usage of about 27.7 days for these members. For the remainder of the Canadian Forces incidental sick days are not recorded, so any estimate of total usage would lack an empirical base.

Other leave

Various other forms of leave may be granted to members of the Canadian Forces. Examples include:

• Short leave—This covers miscellaneous absences. It is entirely discretionary and therefore varies according to circumstances and the outlook of the supervisor. It is not to exceed two days per month.
• Leave prior to and post deployment, as well as a mid-deployment break—At each of these deployment stages there can be a week or two of leave.
• Maternity and parental leave—This is in line with practice in the broader public service. At the end of March 2003, 81 members were on maternity leave, and about 609 on parental leave.

A gross approximation of time not worked would be 15%. This is based on assuming all members took their full annual leave entitlement and all statutory holidays, plus the two extra days at Christmas, and adding only the recorded sick leave days. Overall, we could expect leave usage to be somewhat higher, since the calculation takes no account of other forms of leave. Using the 15% in any case, the value of days not worked would be at least $498.8 million, based on the average salary cost per day across the Canadian Forces of about $205.

Canadian Forces Pension Plan

In most respects, the pension arrangements for the armed forces mirror those for the core public service domain.^[112] The major difference has been that members have generally been able to retire with an unreduced pension at younger ages than in the regular public service. For example, members with an intermediate engagement may retire after 20 years of service, without a penalty.^[113]

Members who are on an indefinite period of service may be subject to a reduction in their pension. For Non-Commissioned Members this is the lesser of 5% times the number of years they are younger than 55, or 5% times the number of years by which their service is less than 25 years. For officers committed to indefinite service, the same basic principles apply but the reductions relate to the lesser of the years they are short of the applicable retirement age (normally 55), or of the years of service required for their rank (28 years below Colonel and 30 years for senior officers). As a result of these arrangements, we find that as at the end of March 2002, there were about 20,650 military retirement pensioners under age 55, about 28% of the total.

Member contributions were the same in 2002–03 as for the main plan: 4% of earnings up to the maximum pensionable earnings under the Canada Pension Plan, and 7.5% above that level of income.^[114] The total value of member contributions in 2002–03 was about $162.8 million, around 22.2% of total contributions. The government made up the difference in the required contributions, namely $570.7 million (77.8%). Contributions relating to current service since April 2000 are transferred to the Canadian Forces Pension Fund to be invested by the Pension Investment Board.

For context, pensions and retiring allowances paid during the year amounted to about $1.9 billion. Interest credited to the Canadian Forces Superannuation Account was valued at $3.2 billion in 2002–03. An amount of about $940 million was credited to the government's bottom line as part of an ongoing amortization of actuarial gains and losses under accrual accounting of pension benefits for Canadian forces members, past and present.

Retrospective—Pensions

The only fundamental difference between the pension plans for the public service and the military has to do with the normal age of eligibility for an unreduced pension. The public service plans emphasize a minimum age as well as years of service in establishing eligibility; military plans have based eligibility mainly on a minimum of 20 years of service. This distinction has been driven by the view that the military needs to retire its members relatively early in order to maintain an appropriately young workforce capable of handling the rigours of military duty. Indexation of benefits to changes in the cost of living only starts at age 60 unless the retiree is at least 55 with a minimum of 30 years of service.

A second important distinction is that pension credits accrued under the CFSA are only transferable to other federal government organizations, whereas under the Public Service Superannuation Act (PSSA) credits may also be transferred to provincial and municipal entities and to many private sector employers.

Otherwise, the changes in benefits, contribution rates and financial arrangements for the PSSA apply to the CFSA as well. One change specific to the CFSA provided in 1992 that CFSA members in receipt of a pension, who accept employment in the reserves on continuous Class B or Class C service for a year or more, began to be deemed to have re-enrolled in the military pension plan. Previously, such annuitant-reservists found that their pension simply ceased after one year of reserve service.

Part of the basic similarity of the CFSA to the PSSA plan is the history of integrated contributions to the Canada Pension Plan (CPP) and to the CFSA plan, until 2000 when the contributions were de-coupled for both plans. Thus the CFSA member contribution rates are those set out for PSSA members in Chapter 7 of this Volume.

Essentially, members contributed 7.5% of salary from 1977 to 1999, covering both CPP and the CFSA. After 2000, the CFSA member rates have been 4% on that portion of salary up to the year's maximum pensionable earnings (YMPE) under the CPP ($39,900 in 2003), with the current CPP contribution rate (4.95% in 2003) added on top of that. Above the YMPE, CFSA members contribute 7.5% of salary.

Appendix Q^[115] gives a complete history of contributions under the Canadian Forces Superannuation Act. This Appendix includes information on CFSA contributions in relation both to current service (contributions covering pension credits earned in the year in question) and to elective service (past service).

We focus on contributions in relation to current service, since this is the clearest expression of the place of pension costs in total compensation in a given year. Table 2090 provides details on employer and member contributions relating to service during the year in question between 1990–91 and 2002–03. Again, as with the PSSA regime, employee contributions are determined according to the rates specified in Table 2058 in Chapter 7 of this Volume. The Government then contributes the additional amount needed to cover the pension credits earned in that year, according to the current actuarial assessment of these costs.

Table 2090 Details of employer and member contributions to the Canadian Forces pension plan for current service, 1990–91 to 2002–03
Year	Employer share ($M)				Members' share ($M)				Total contribution ($M)
	CFSA	RCA	Total	%	CFSA	RCA	Total	%
1991‑92	392	0.0	392	68%	184	0	184	32%	576
1992‑93	414	0.0	414	69%	182	0	182	31%	596
1993‑94	424	0.0	424	71%	173	0	173	29%	597
1994‑95	426	0.0	426	72%	164	0	164	28%	590
1995‑96	398	0.6	398.6	73%	148	0.1	148.1	27%	546.7
1996‑97	379	2.3	381.3	74%	134	0.1	134.1	26%	515.4
1997‑98	391	1.7	392.7	74%	135	0.1	135.1	26%	527.8
1998‑99	382	2.0	384	74%	132	0.2	132.2	26%	516.2
1999‑00	548	9.3	557.3	80%	140	0.7	140.7	20%	698
2000‑01*	496	10.5	506.5	78%	141	0.8	141.8	22%	648.3
2001‑02*	509	10.7	519.7	78%	145	0.9	145.9	22%	665.6
2002‑03*	549	14.5	563.5	78%	155	1.1	156.1	22%	719.6
*  Contributions to the Canadian Forces Pension Fund (CFPF)

Employer contributions in respect of Canadian Forces pensions were quite stable through most of the 1990s, remaining generally in the range of $400 million. Only two years, 1993–94 and 1994–95, were materially higher at about $425 million. At the end of that decade, however, employer contributions increased to over $500 million, going as high as $557 million in 1999–2000. Throughout the period under review, member contributions have stayed between a low of $132 million in 1998–99 and a high of $184 million in 1991–92.

Reviewing these figures in light of contemporaneous changes in the population of the Canadian Forces modifies the perspective somewhat. The downward trend in employee contributions from 1991–92 to 1998–99 paralleled the reduction in members; the subsequent increases reflect salary increases as reported earlier. On the employer contribution side, the increases starting in 1999–2000 result mainly from lower expectations for real interest rates and increased forecasts for salary growth. If the military population had not declined as well, employer contributions would have needed to be substantially larger.

The ratio of employer to member CFSA contributions has grown fairly steadily through the period from 1991–92 to 2002–03, increasing from about 2.13:1 in the former year to about 3.54:1 in the latter. The portion of current service costs borne by the employer went up over the same period from about 68% to 78%, leaving employee contributions to decrease as a proportion of total costs from about 32% to 22%.

Two important points of context are warranted, however. First, from a long-term historical viewpoint, the share assumed by the employer is not particularly unusual for this Plan. As set out in Appendix Q, the employer paid a minimum of 80% of costs in at least 17 of the 45 years prior to 1991–92 that are covered in the Appendix. Second, as noted earlier in this section, the view has been that Canadian Forces members should retire relatively early so that the military can retain a relatively young workforce. This implies early retirement and higher costs for the employer, if contribution rates for members are to remain in line with public service norms.^[116]

As was the case for the public service pension plan, the ratio of employer to employee contributions for the Retirement Compensation Arrangements Account (covering pensions relating to that part of salary above the limit in the Income Tax Act) is strongly in the members' favour. During the period under review the employer share was never less than 90% in relation to current service costs.

The value of benefits paid under the CFSA was about $1.11 billion in 1991–92; by 2002–03, this had risen to about $1.9 billion. The number of beneficiaries, including retired members as well as surviving spouses and children, rose from about 82,700 in 1991–92 to about 104,200 in 2002–03. Of the retired members, in the order of 30% were younger than 55.

Insurance, health and dental benefits

Active members of the armed forces participate in the Supplementary Death Benefit Plan on terms similar to those applying generally in the public service except that the phasing down of coverage occurs five years earlier than for regular public servants. Retired members may elect to continue participation. The coverage is two times annual salary, declining by 10% per year starting at age 61, to a minimum of $5,000 at age70.

Members contribute monthly at the rate of $0.05 per $250 of annual salary. Total contributions from participants under the Canadian Forces Superannuation Act in 2002–03 added up to about $12.4 million. The government provided about $2.6 million, or just over 17% of the total.

Like the analogous account for the public service, the Regular Forces Death Benefit Account has a growing balance, albeit at a much slower rate. Interest credited to the account was about $15.7 million; benefits paid added up to about $29.6 million.

Regular and retired members have access to group term life through the Service Income Security Insurance Plan (SISIP) at their own expense.

Senior Officers and Legal Lieutenant-Colonels are covered under SISIP by additional life insurance arrangements identical to those provided to Executives in the core public service. The premiums, which amounted to about $0.4 million in 2002–03, are fully paid by the government. Long-term disability premiums for these officers were also covered by the employer at a cost of $0.6 million during the year.

In recognition of their commitment to a dangerous way of life with unlimited liability, Canadian Forces members are provided with comprehensive medical and dental care. The Canadian Forces Health Service (CFHS) provides medical and dental services for members, at military installations across Canada and overseas, either directly or through cooperative arrangements with civilian health care suppliers. Essentially these services are intended to meet the needs of serving members, both those needs addressed by provincial health insurance, and those covered for public servants by the Public Service Health Care Plan and the Dental Care Plan.^[117] The CFHS cost for 2002–03 was about $363 million excluding the cost of infrastructure maintenance and other indirect support costs. This amounts to about $6,000 per regular member of the armed forces.

For Regular Force members who become incapacitated such that they cannot serve as a soldier and must be released, there are three measures to protect their income:

• First, such members become eligible for an immediate annuity (pension) corresponding to their years of service, if the member has at least 10 years of Regular Force service.
• Second, for service-related illness, injury or death, there are benefits payable under the Pension Act, which is administered exclusively by Veterans Affairs Canada. The Government Employees Compensation Act (workers' compensation) does not cover members of the Canadian Forces. The Pension Act is separate from the CFSA. No contributions are made and the benefits are not dependent on average pay or years of service. Benefits payable under the Pension Act are estimated through actuarial valuations, in a manner similar to the liability for public service workers' compensation. While the Public Accounts report a total liability of $27.5 billion as of March 2003 in relation to these benefits, the main portion related to war veterans and to the cost of events that have occurred in the distant past. Nonetheless, estimation is made annually for the cost of new events in relation to current military activities. This amount represents the net present value of all future payments to be made as a result of incidents that have occurred during the year, including those incurred but that will be reported only at a later date. In 2003, the Public Accounts reports this annual cost of current service at $504 million.
• Third, they benefit from a long-term disability plan as part of SISIP. Coverage is similar to that provided to the regular public service (although benefits are at 75% of salary, with annual inflation indexing limited to a maximum of 2%. This plan is jointly funded by contributions from members and the government. Employer premiums for 2002–03 amounted to $35.6 million (85%) for the Canadian Forces. Total member premiums were about $6.8 million (15%). Coverage for the reserves (100% government-paid) was about $3 million. Any other annuity or disability income is deducted from the amount payable under SISIP's long-term disability plan, as in the core public service.

Beginning in early 2003 and retroactive to 1972, the Canadian Forces Accidental Dismemberment program provides a lump sum benefit of up to $250,000 to regular and primary reserve members of the Canadian Forces, for injuries attributable to military service. For 2004, the first full year of coverage, the employer cost was $450,000.

Reservists who serve full time for a minimum of 180 days consecutively are entitled for the duration of their service to health and dental support on the same basis as regular Canadian Forces members. Other reservists serving in some capacity with the Canadian Forces, and dependants of Regular Forces members are covered by the Public Service Health Care Plan. The costs, which are fully paid by the government, amounted to $19.2 million. About 40,100 individuals were estimated to be covered.

The general public service Dental Care Plan has sub-plans specifically for dependants of regular military members, and for primary reservists^[118] and their dependants. In 2002–03 the Canadian Forces dependants' plan covered about 40,900 people (based on the actual number of claimants), and the reservists' plan covered about 20,700, as reported to Great West Life by National Defence. Dental plan costs for the two sub-plans, fully reimbursed by the government, added up to $18.2 million over the year, including $1.8 million for reservists.

Retired members of the armed forces, who are in receipt of an annuity, and their dependants, are eligible for the Public Service Health Care Plan, and the Pensioners' Dental Services Plan. The government also continues life insurance coverage for Canadian Forces Senior Officer retirees at a cost in 2002–03 of about $0.2 million.

Retrospective—Insurance, Health and Dental Benefits

The Supplementary Death Benefit Plan is principally funded by the members of the Canadian Forces. Total participants' contributions were around $10 million per year from 1991–92 to 1997–98. Since 1998–99 contributions by members have increased steadily to reach $12.4 million in 2002–03, paralleling the increase in salary mass during these years. The Government has generally contributed each year between $2.2 and $2.8 million.

The actuarial surplus credited in the Regular Forces Death Benefit Account has increased from year to year, growing from $137.8 million in 1991–92 to $193.1 million in 2002–03. However, the annual surplus of contributions and interest credited versus the value of benefits paid has been falling, as demands on the Account have grown. In 1991–92, for example, total revenues exceeded benefits by over $15 million; by 2002–03, revenue exceeded benefits by only about $1.1 million.

Regular and retired Canadian Forces members can purchase at their own expense further group term life insurance through the Service Income Security Insurance Plan (SISIP). Since 1993, the employer has contributed 85% of the cost of long-term disability coverage, as for the core public service.^[119] The monthly premium rate was 0.25% of salary from 1971 until 1980, when it rose to 0.40%. In 1997 it was increased to 0.54%, and in 1999 to 1.395% to cover the cost of the definition change described in the next paragraph.

The cost of this coverage for regular members and reservists has grown from about $9.6 million in 1993–94 to around $38.2 million in 2002–03, based on claims experience. In large measure the increase resulted from a change in the definition of disability away from requiring that a member be disabled for "any occupation" in order to qualify for coverage. This closed a gap in coverage whereby a disabled member might be discharged from the armed forces for medical reasons, but be ineligible for disability insurance coverage. Under the new definition such a member would receive insurance benefits for 24 months. (With at least 10 years of service, the member would also receive a pension without penalty.)

Another source of the increase in the total cost was the decision implemented in 1999–2000 to fully include reservists in the coverage. Costs relating to reservists grew from about $12,000 in 1993–94, to $1.4 million in 1999–2000, to over $2.4 million in 2002–03.

Since 1990, Senior Officers and legal Lieutenant-Colonels have received additional life insurance and disability insurance at the employer's expense since 1990. The employer cost for this coverage has been reasonably steady, rising from $0.6 million in 1993–94 to about $1 million in 2002–03.

To provide medical and dental services for Canadian Forces members at military installations, up to the late 1980s the Forces maintained six fully functioning hospitals to satisfy most in-patient services required by military personnel. As the number of members declined in the 1990s, however, it became apparent that this system was unsustainable. Progressively through that decade, all Canadian Forces hospitals were closed. The plan was to rely mainly on the general Canadian health care system for "in-garrison medical care." However, it became apparent that the general health care system in Canada was itself under stress. The Forces consequently developed the Designated Provider Plan. Through a memorandum of understanding with Veterans Affairs, the Canadian Forces participate in a Blue Cross claims processing system that allows members to access specialized health care services within the civilian sector.

Continuing concerns with the health care arrangements and their cost led in 1999 to a further review and a new plan in 2000. Most notably, this process led to the Third Party Contracting initiative, whereby Med Emerg International Inc. provides health services personnel for service within Canadian Forces health care facilities. Off-base fee-for-service care is still provided through the partnership with Veterans Affairs and Blue Cross.

As with medical and dental costs generally in Canada, expenditures in this area have increased since 1990. The available historical data is sketchy. However, in 1989–90, costs for the Canadian Forces hospitals were reported at $233 million.^[120] By 1993–94, when the four main hospitals had closed, costs are reported to have been $309 million, excluding infrastructure costs. By 1998–99 the costs are reported to have been $250 million. For 2002–03, this total had increased to about $363 million.

Primary reservists (except for class C reservists who are treated as regular members) and dependants of members of the armed forces are covered by the Public Service Health Care Plan, as described in Chapter 8. The Government covers 100% of the costs of this Plan. Claims in relation to primary reservists and regular members' dependants have grown from about $7.4 million in 1996 to around $19 million in 2003.

Components of the regular Public Service Dental Care Plan are designed specifically to cover dependants of regular Canadian Forces members and of RCMP members, and for primary reservists and their dependants. The number of Canadian Forces regular member dependants covered under the plan was estimated at 48,500 in 1995, declining to around 41,000 in 2000, 2001 and 2002. This decline is broadly in line with the decrease in the number of regular members. The reservists' component only came into effect in 1991, and figures on the number of people covered were estimated consistently at 28,300 until 2002 when the actual figure was reported as 20,654.

Expenditures on these two components evolved with no particular trend, as follows:

Year	Canadian Forces/ RCMP dependants ($ millions)	Reservists ($ millions)
1993	$21.1	$1.7
1994	$22.4	$1.9
1995	$22.5	$1.8
1996	$22.5	$1.8
1997	$21.0	$1.8
1998	$21.8	$2.7
1999	$22.1	$1.8
2000	$23.0	$1.9
2001	$23.6	$1.9
2002	$24.8	$2.0

As previously noted, retired members of the Canadian Forces in receipt of an annuity, and their dependants, may elect to participate in the Pensioners' Dental Service Plan. We cannot conveniently attribute costs in this plan according to what part of the federal government an individual pensioner retired from

Historical overview—Canadian Forces compensation.

Table 2091 pulls together the historical picture on total compensation for the Canadian Forces by setting out as best we can the components of spending in 1990–91, 1997–98 and 2002–03, as we did previously for the combined core public service as employer and separate employer domain.

Canadian Forces total compensation followed the same general pattern as for the combined core public service and separate employer domains, i.e. a decline from 1990–91 to 1997–98, followed by an increase by 2002–03 to a higher level than in 1990–91. However, for the Canadian Forces, the decline was more pronounced, and the recovery much less pronounced than for the core public service and the separate employers. As well, salaries and pension contributions explained only two thirds of the increase in total compensation, versus at least 85% in the combined core public service and separate employers. Other important increases were in the areas of allowances and premiums, and health services costs.

Table 2091 Summary of the evolution of total compensation* for the Canadian Forces domain— 1990–91, 1997–98 and 2002–03
COMPONENT Canadian Forces		EMPLOYER COST $ millions
		1990‑91	1997‑98	2002‑03
1.	Salaries and wages (Regular payroll)	3.30	2.90	3.70
2.	Performance pay—lump sums only	0.02	0.02 (99–00)	0.03
3.	Recruitment and retention allowances, and other allowances & premiums	0.13	0.12	0.19
4.	Overtime premiums**	n/a	n/a	n/a
5.	Payroll deductions for CPP/QPP, EI, provincial health premiums	0.23 (93–94)	--	0.23
6.	Pensions	0.39 (91–92)	0.39	0.57
7.	Life and disability insurance (Supplementary Death Benefit; SISIP Life and Long-term Disability insurance)	0.01 (93–94)	--	0.04
8.	Health and dental plans (CF Health Services, Provincial health payroll taxes, Public Service Health Care Plan, Dental Care Plan)	0.32***	0.33 (98–99)	0.46
9.	Severance pay	0.08 (93–94)	0.04	0.09
	Totals	4.48	3.77	5.25
* Some of the figures included are for the closest years for which we have data. Most pertinently, various 1990–91 numbers are in fact data relating to 1991–92, 1993–94, or in one case, 1989–90. ** Flat rate of 6% or 4% included in base pay *** This sum reflects available data from the closest years possible. CF Health Service data is taken from 1989–90 and other components from 1993–94.

We now shift our focus from the Canadian Forces' experience in the area of compensation over the past decade or so to compensation changes affecting the Royal Canadian Mounted Police.

 

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