Ernst & Young: Public Sector Compensation Review

BC Public Sector
Compensation Review
Septem ber, 2014
Page 2
BC Public Sector Com pensation Review | Septem ber 2014
C
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1
2
3
Executive summary
Objectives and scope
Variations in trends in compensation
4 Variation in philosophies and governance models
3
6
8
16
5 Talent management implications 25
6 Recommendations 30
7 Limitations 43
REPORT
D Spectrum of strategies for Local Government
A Approach to building the evidence base
B Total Public Sector wages
C
Supplementary evidence
45
49
51
81
APPENDICES
Page 3
1. Executive summary
The Mandate
In N ovem ber 2013, the Province of British Colum bia engaged Ernst & Y oung to conduct a review of recent
trends in com pensation across the BC Public Sector and to assess the current m odels for setting m andates
and m anagem ent and executive com pensation
A
. The Province required that the review forem ost consider
the role of taxpayers, as w ell as recognize the need for leadership and talent in the BC Public Sector.
Summary of findings
There is clear variation in m odels used for setting com pensation across the BC Public Sector. Com pared
to the Provincial level of G overnm ent, local G overnm ent com pensation is not coordinated (or
regulated); there are no lim its other than w hat local G overnm ents determ ine the sector can bear; and
there are less transparency requirem ents. This has resulted in a lack of alignm ent in com pensation
betw een levels and also across the Sector. W hile data w as not available to support robust and
com prehensive analysis, available data supported the follow ing observations:
W hile the variation betw een com pensation in the Core G overnm ent and other areas w ithin the Province is of
greatest concern, it is im portant to consider the talent m anagem ent im plications of freezes in com pensation
in the Core, w hich create com pression and retention risk.
Core Government
(Public Service)
Broader Public Sector Municipality
E
x
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v
e
The current governance
structure has enabled Core
G overnm ent to very effectively
hold the lineon executive
com pensation,w ith average
executive salary rem aining flat
from 2009 to 2014
The m ajority of Broader Public
Sector organizations appear to
have broadly held the lineon
executive com pensation from
2009 to 2011
In 2011-12, com pensation
across the m ost senior
leadership roles (e.g. CEO vs.
D eputy M inister) w as higher in
the Broader Public Sector than
in the Core G overnm ent
In 2011, com pensation across the
m ost senior leadership roles (i.e.
City M anagers and Chief
A dm inistrative O fficers of larger
m unicipalities vs. D M s) w as
generally on parity w ith the Core
G overnm ent, and com pensation in
V ancouver and M etro Vancouver
w as higher than the top of the D M
salary range
M
a
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E
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A t the m anagem ent level, Core
G overnm ent com pensation has
been essentially flat since 2009
and there have been virtually no
increases in com pensation
A nalysis of a sam ple of salary
bands indicated that m anagers
in the Broader Public Sector are
typical paid m ore than peers in
the Core G overnm ent but less
than those in M unicipality
A t the m anagem ent level there is no
clear alignm ent betw een Provincial
and M unicipality com pensation, w ith
M unicipality paying higher
com pensation in the m ajority of
cases for com parable roles
B
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A nalysis of settlem ent data indicates that betw een 2001 and 2012, Core G overnm ent em ployees received 19%
cum ulative increase; those in the Broader Public Sector received 24%; and those in M unicipality received 38%.
This in com parison to inflation of 23%
A t the bargaining unit level there is no clear alignm ent betw een M unicipality com pensation and com pensation in
the Core G overnm entand Broader Public Sector. M unicipality are paying higher com pensation in the m ajority of
cases for com parable roles
N ote that given the lack of available data, com pensation of the m ost senior levels of leadership across
G overnm ent w as com pared w ith the intent of providing one potentially insightful com parator. Further inform ation
w ould be required as to responsibilities and spans of control of these groups, in order to enable interpretation of
the above findings
Page 4
Philosophies
A
and models for setting compensation
Significant variation w as found in philosophies and governance m odels for setting com pensation across the
BC Public Sector. This is challenging to understand from the taxpayers perspective-as there is only one
pocketthat pays for these services provided by the Broader Public Sector em ployees. The further
conceptuallyfrom the Core an entity sits, the m ore dim inished the level of control Cabinet and the
M inister have over the setting of com pensation. In practice, for exam ple, the G overnm ent has no direct
oversight or say in com pensation in the Local & Regional G overnm ent. If com pensation is to be aligned
across the BC Public Sector, these philosophies and m odels m ust be standardized and aligned.
A
Philosophies refers to principles, m andates and rules for setting com pensation including alignm ent w ith m arket com parators
B
N ote that BC Ferries and TransLink are not covered by the Public Sector Em ployers A ct.
Core
Broader
Public Sector
Reg. & Local Government
Decreasing level of central
control and increased
variability
Summary of recommendations
There is a need to drive greater alignm ent in com pensation across the Core, Public Service, Broader
Public Sector and M unicipality in order to m eet the expectations of the single taxpayerthat tax dollars
be spent consistently and effectively for com parable resources across all areas of G overnm ent
A lignm ent of com pensation needs to be created through a clearly defined philosophy and governance
m odel and enablers driven from the centre and adopted across the breadth of G overnm ent
The Core G overnm ent had a com pensation philosophy previously approved by Cabinet but w as partially
im plem ented in 2008 due to the fiscal restraints it w as not sustained over tim e. It should be review ed
and updated and could form the basis for the philosophy for the breadth of the BC Public Sector
The Provincial G overnm ents house m ust be in orderbefore the M unicipality can be expected to
follow ; but the G overnm ent should do w hat is necessary to bring M unicipal G overnm ent com pensation
into alignm ent over tim e, including using financial levers if necessary
N ote: Throughout the
docum ent, Core G overnm ent
refers to the public service;
the Broader Public Sector
includes the K-12, social
services, health, university,
college and Crow n
corporation sectors;
M unicipality includes
M unicipal G overnm ent,
Regional G overnm ent, Fire
and Police, BC Ferries and
TransLink
B
Page 5
A key conclusion that w as draw n from this analysis is that Core G overnm ent established a solid philosophy to
guide their approach to com pensation, w hich w as approved by Cabinet in 2008 and partially im plem ented. The
reality is that this w as not sustained because of the realities of fiscal restraint. It w ould be w orth refreshing
this philosophy, updating it as required, then use this to ground com pensation across the BC Public Sector.
Three connected initiatives are recommended
Make model more
sustainable and market
sensitive
Design future state
governance model to enable
alignment of compensation
across BC Public Sector to
Core Government
Refresh Core Government
philosophy for application to
Broader Public Sector
3. Deploy and
sustain
2. Build governance model and processes to
enable alignment across BC public sector
1. Create common
philosophy & enablers
Design strategic approach
to bringing Municipality
under this governance
models and design detailed
transition plan to move to
future state
1.D eploy and m ake sustainable
including:
Execute im plem entation plan
Conduct m arket review s
every tw o years to review
com pensation and adjust
bands as required
M ake ongoing adjustm ents
to m odels through a
standard approval process
Cabinet to approve
philosophy as required
Put process in place to
review and refresh
com pensation philosophy on
a regular and ongoing basis.
1.Com m unicate and set
expectation that Cabinet w ill
set philosophy and direction
across entire BC Public Sector
2.Revisit the role of Crow n
Corporation Boards in
establishing Broader Public
Sector Com pensation and
revisit the rem uneration
categorization for Crow n
corporations and adjust based
on com m on principles
3.Establish responsibilities,
process and procedure for
issuance of a single strategic
directive from Cabinet to align
com pensation across all BC
Public Sector, including
rem oving need for Cabinet role
in day-to-dayprocedure, and
setting consequences for non-
com pliance
4.Finalize current review of
Provincial m odel including need
to align Em ployers
A ssociations in the Broader
Public Sector
5.Enable a com m on bargaining
approach in the Regional &
Local G overnm ent
6.Conduct a review of current
arbitration m odels
7.Select strategy to create
adherence to philosophy and
governance m odel. It is
proposed that:
A s data and benchm arking
capability im proves, educate
and set a fram ew ork of
expectations in order to
provide Regional & Local
G overnm ent w ith the
opportunity to do the right
thingby com plying
W here education and setting
of expectations do not yield
results, use financial levers
to directly encourage
m unicipalities to set
com pensation caps and
G overnm ent to stop
providing funding once cap
has been reached
W ith strategy selected,
design detailed transition
plan to future state,
including setting clear
tim elines as to expectations
for M unicipality
1.Revisit and update the
previously approved
com pensation philosophy for
the Core w here necessary
2.Further develop this
philosophy to create a shared
philosophy for the entire BC
Public Sector, providing
com m on principles, processes
and guidelines
3.Establish standardized
benchm arking tools in Core
and roll out across the BC
Public Sector
4.Invest in m ore accessible and
com prehensive data in the
Core and roll out across the BC
Public Sector
Page 6
2. Objectives and scope
BC is undertaking a Core Review with clearly
defined objectives
British Colum bia is fortunate to not have been as
significantly im pacted by the econom ic dow nturn as
other jurisdictions, due largely to its strong fiscal
policy. H ow ever, continued financial restraint is
required in the face of an econom ic outlook of slow
recovery and prolonged econom ic risk.
In this context, in July 2013, the Province released
the Term s of R eference for its 2013/14 Core
R eview . A s part of its ongoing com m itm ent to fiscal
responsibility G overnm ent has initiated a core
review process w ith a goal to ensure the best
possible use of G overnm ent resources and respect
for the interests of taxpayers. The Cabinet W orking
G roup on Core Review is tasked w ith exam ining all
G overnm ent program s including m inistries, SU CH
sector organizations (school districts, universities,
colleges and health authorities/hospital societies)
and all Crow n Corporations, agencies, boards and
com m issions, w ith a view of positioning the
province for sustained econom ic grow th and
prosperity.
The Core R eview process has six objectives:
Ensure that the program s and activities of
m inistries are focused on achieving
G overnm ents vision of a strong econom y and
secure tom orrow
Ensure that G overnm ent is operating as
efficiently and effectively as possible
Confirm G overnm ents core responsibilities
and elim inate program s that could provide
better service at less cost through alternative
service delivery m odels
Ensure budget targets are achieved
consistent w ith Budget 2013 (June U pdate)
Identify opportunities w here further savings
can be re-directed to high priority program s
Ensure public sector m anagem ent w age
levels are appropriate w hile recognizing the
need for leaders w ho can positively im pact
the effectiveness and productivity of public
sector agencies.
The Core Review has created the mandate to
review variations in compensation
In considering the stated objective of the Core
Review of ensuring appropriate public sector w age
levels, it has been observed by the Province that
variation m ay exist in recent trends in
com pensation across the BC Public Sector. It is
believed that w hile som e areas of the Public Sector
have achieved year on year com pensation freezes,
other have seen significant increases.
This variation gives rise to tw o principle questions
concerning the appropriateness of public service
w ages:
O n the one hand, w hen view ed from a single
taxpayer' perspective, the apparent lack of
correlation betw een the province's econom ic
position and com pensation increases in
certain areas of G overnm ent as w ell as the
m ere existence of inconsistency across
G overnm ent, creates concern that tax dollars
are not being spent consistently and
effectively on com parable resources across
all areas of the BC Public Sector
O n the other hand, the existence of sustained
com pensation freezes m ay lead to significant
talent m anagem ent challenges, given
constraints in attracting and retaining skilled
resources
A s w ell as this issue being a priority for
G overnm ent, num erous com m unities of interest
external to the G overnm ent have recently draw n
attention to the issue of variations in com pensation
betw een com parable parties, including the
Business Council of British Colum bia; the
Independent Contractors and Business A ssociation;
the Fraser Institute; and the provincial press.
Page 7
Scope and approach
The Review focused on the scope outlined in the
diagram below . The Review w as conducted through
analysis of available data, interview s w ith key
stakeholders and through consideration of publicly
available literature w hich in som e cases w as
assum ed to directly or indirectly represent the
opinions of taxpayers (See A ppendix A ).
Core
C
Broader
Public Sector
B
Regional and
Local Government
A
BC Provincial G overnm ent
BC Public Sector
It is within this context that EY has been
engaged to conduct an independent review
The Province of BC has engaged EY to conduct an
objective and independent review of com pensation
across select areas of the Public Sector in order to:
Review of recent trends in com pensation
across the BC Public Sector
A ssess the current m odels for setting
m andates and m anagem ent and executive
com pensation
In conducting the Review , the Province directed EY
to consider forem ost the role of taxpayers as w ell
as recognize the need for continued strong
leadership and talent in the BC Public Sector.
Scope of review
(4) In scope employee groups
(
3
)
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(1) In scope time series
(2) In scope areas of the public sector
2006 2007 2008 2009 2010 2011 2012 2013
Benefits
Performance
incentive or
holdback
Base salary
Bargaining unit
Management &
excluded
Executive
* Federal Crow ns operating in BC w ere
out of scope of this review
It is important for the reader to be aware of
limitations in scope and use of terminology
It is im portant to note that the objective of the
R eview w as not to benchm ark com pensation to the
private sector, Federal G overnm ent com pensation,
or to M unicipality com pensation in other
jurisdictions.
It is im portant for the reader to understand a
num ber of key term s used in this report:
The BC Public Sectoris used to refer to the
Core G overnm ent, the Broader Public Sector
and the R egional & Local G overnm ent
collectively
The Provincial G overnm entis used to refer
to the Core G overnm ent and the Broader
Public Sector collectively
The Public Servicem ay be used to refer to
the Core G overnm ent
A
M unicipality includes M unicipal G overnm ent, Regional G overnm ent, Fire and Police, BC Ferries and TransLink
B
Broader Public Sector includes Crow ns, Schools, Colleges, U niversities, H ealth A uthorities and social services
C
Core G overnm ent includes M inistries and A gencies as w ell as som e sm aller Crow ns
Page 8
3. Variation in recent trends in compensation within the sector
A t the m anagem ent and excluded level, the Core
Public Sector has been essentially frozen on
com pensation since 2009. N o com prehensive data
w as available to analyse how w ell the Broader
Public Sector is holding the lineon m anagem ent
com pensation; how ever, analysis of a sam ple of
m anagem ent level pay bands in use in Broader
Public Sector entities indicates that these bands
are m aterially higher than those used by the Core
G overnm ent. In addition, com paring both the pay
bands and actual com pensation of M unicipality
m anagers to those of peers in the Provincial
G overnm ent indicates that the M unicipality is
paying m ore in the m ajority of cases for
com parable m anagem ent and excluded roles.
A t the bargaining unit level, data indicates that
local G overnm ent em ployees covered under
collective agreem ents have received significantly
higher increases in com pensation than those in the
Core G overnm ent and Broader Public Sector
betw een 2001 -12. In addition, data indicates that
M unicipality is paying m ore than the Provincial
G overnm ent in the m ajority of cases.
It is im portant to note that there is a fundam ental
difference betw een the com pensation governance
of Provincial entities and that of M unicipality. The
Province acts as both the legislator and the
em ployer, thus having m ore control and pow er
over em ployeescom pensation. The m unicipalities
do not have this sam e direct control, and in
additional the services they provide are closer to
the citizenry (e.g. garbage collection, recreation
centres, etc.) and thus councils feel enorm ous
pressure not to disrupt these services. This
fundam ental difference, exacerbated by a lack of
com m on data and processes m ay explain the
increm ental increases w e have observed in
m unicipal com pensation, particularly in the Low er
M ainland region.
It has been a challenge to access sufficient
data to allow a detailed comparison of
compensation
The follow ing section presents findings as to
variations in recent increases in com pensation across
the BC Public Sector and absolute levels of
com pensation. It should be noted that significant
data lim itations w ere encountered in constructing
this analysis, including but not lim ited to: lack of data
across all areas of the BC Public Sector, lim ited tim e
series of data, lack of com parability in term s of the
elem ents of total com pensation included in data
reported, and lack of m eans of identifying job types
w ith com parable roles and responsibilities. In
addition, it should be noted that a num ber of
disparate sources of data w ere collected to construct
this analysis. A s a result, it has not been possible in
all cases to present findings in the m anner of a
consistent and integrated story.
Analysis of trends in compensation
W hile com prehensive data w as not available to
support robust and detailed analysis, available data
suggested a significant lack of alignm ent in
com pensation across the BC Public Sector. It should
be noted that robust data has becom e of increasing
im portance in the m ove to open data and
transparency, but a structure for consistent and
detailed data is not yet available. D ata to support
statutory requirem ents and related policy is in place
in the Provincial G overnm ent. Since local levels of
G overnm ent are not subject to the statutory
fram ew ork for the public sector, com parable data is
not available for the M unicipality.
A t the executive level, evidence w as found that the
Core G overnm ent and to a lesser extent the Broader
Public Sector have effectively held the lineon
com pensation since 2009. Com paring the
com pensation of the m ost senior levels of leadership
for exam ple, indicates that a significant num ber of
Broader Public Sector CEO s are paid m ore than the
average D eputy M inister (D M ) and that total
com pensation across this sector show s considerable
variability. In 2011, som e M unicipality leaders w ere
com pensated at a significantly higher level than
leaders in the Core G overnm ent.
Page 9
D ata suggests that the current governance
structure has enabled G overnm ent to effectively
hold the lineon executive com pensation in the
Core G overnm ent,w ith average base salaries
having been generally flat from 2009.
100
120
140
160
180
200
220
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Average annual base salary of executives in the
Core Government (F07 F14)
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Distribution of total compensation
A
increases for
Broader Public Sector executives (2009-2011)
M ajority of Broader
Public Sector
organizations are
holding the lineon
CEO com pensation
The com pensation of Broader Public Sector CEO s
has also held the line, w ith CEO s typically
receiving 0% increase in com pensation betw een
2009 2011.
It should be noted, how ever, that som e
stakeholders com m ented in interview s that a
num ber of Broader Public Sector entities have
found creative w ays to provide higher levels of
com pensation to their executives due to differing
lines of business. There is a trem endous variability
across the sector, w ith university presidents as
notable outliers, w here different com pensation
m odels apply, including treatm ent of tenure,
housing, and research leaves, w hich can add
substantial am ounts to their total com pensation
packages. If there is a m ove to creating m ore
consistency in com pensation philosophies, a
reduction in the variability should be seen.
N ote that salaries exclude 10% executive holdback paym ent
Increases in executive compensation in the
Increases in executive compensation in the
Core Public Service
A
Com pensation assum ed to include base salary, perform ance incentive and other com pensation
Deputy Minister
AssociateDM
ADM Band D
ADM Band C
ADM Band B
ADM Band A
Source: The Public Service A gency, H istorical A verage
Salaries for Executives and M anagem ent(2013) Source: PSEC, Statem ent of Executive Com pensation
(2013)
Page 10
0
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In 2011-12, the com pensation of 45% of Broader
Public Sector CEO s exceeded the average
com pensation received by D eputy M inisters in the
Province. In the sam e period, 33% of CEO s w ere
paid m ore than the m axim um D eputy M inister
com pensation range.
Distribution of the Broader Public Sector CEO total
compensation
A
(2011-2012)
2
A verage D M salary
& incentive
(~$230K)
1
1
The Public Service A gency, D eputy M inister and A ssistant
D eputy M inister Review : Com pensation U pdate(A pril 2013)
Base of $209k and assum ed holdback paid in all cases of 10%
2
FIA D ata
3
Canadian Taxpayers Federation, Rein in the Crow ns!(2014)
A
CEO Com pensation includes Salary, w ages, bonuses,
gratuities, taxable benefits
In considering that all CEO s of Broader Public
Sector entities are ultim ately accountable to the
Em ployer, taxpayers have indicated that they
expect m ore alignm ent in com pensation betw een
these tw o groups. The Canadian Taxpayers
federation, for exam ple, reports: W hile core
Provincial G overnm ent m inistries w ith the notable
exception of health care have done a reasonably
good job at m anaging labour costs and generating
savings for taxpayers, BCs Crow n corporations
have gone out of control. It is not uncom m on for a
CEO of a Crow n corporation to m ake tw ice w hat a
deputy m inister earns.
3
Salary, w ages, bonuses, gratuities, taxable benefits ($ 000s)
N
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S
e
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t
o
r
Comparison of executive compensation in the
Broader Public Sector to the Core
Government
0 150 300
M etro V ancouver (CA O )
V ancouver (City m anager)
N . V ancouver (CA O )
N . V ancouver (City m anager)
A bbotsford (City m anager)
M aple R idge (CA O )
Coquitlam (City m anager)
Burnaby (City m anager)
Burns Lake (CA O )
W est V ancouver (CA O )
Prince G eorge (City m anager)
Langley (CA O )
Pitt M eadow s (CA O )
M ission (CA O )
W hite R ock (City m anager)
Belcarra (CA O )
A nm ore (CA O )
($ 000s)
A verage D M
salary &
incentive
(~$230K)
1
Compensation
A
of CAOs and City Managers in the
local Government (2011)
4
This data indicates that in 2011, com pensation of
City M anagers and Chief A dm inistrative O fficers of
larger m unicipalities w as on parity w ith the average
salary of D eputy M inisters . The com pensation of
those in V ancouver and M etro V ancouver w as
greater than the m axim um D M com pensation.
W hile it is has not been w ithin the scope of this
review to com pare the spans of control and
responsibilities of these tw o groups to determ ine
the reasonableness of this alignm ent, it can be
observed that som e taxpayer groups have
com m ented that they do not consider the
alignm ent of the com pensation of City M anagers
and D eputy M inisters to be equitable.
5
The rationale
for these concerns should be investigated.
Comparison of executive compensation in the
Regional & Local Government to the Core
D ata is not readily available to assess how w ell the
M unicipality is m anaging com pensation at the
executive level. H ow ever, data w as available on the
salary and perform ance incentivesof a sam ple of
City M anagers and Chief A dm inistrative O fficers in
the Province.
M axim um D M
salary & incentive
(~$299K)
4
EY analysis of FIA data
5
Sources: Canadian Taxpayers Federation, quoted in Tri-city
N ew s, M etro takes hard look at M anagem ent pay levels(2013)
M axim um
D M salary
& incentive
(~$299K)
Source: FIA D ata
Source: FIA D ata
Page 11
A t the m anagem ent level, data indicates that the
Core Public Sector has been effectively holding the
lineon com pensation since 2009.
50
60
70
80
90
100
110
2007 2008 2009 2010 2011 2012 2013 2014
A
v
e
r
a
g
e
b
a
s
e
s
a
l
a
r
y
(
$
0
0
0
s
)
Strategic Leadership
Business Leadership
A pplied Leadership
Average annual base salary excluded management
(F07 F14)
Source: The Public Service A gency, H istorical A verage
salary for executives and m anagem ent(2013)
0 100,000 200,000
City of V ancouver
BC H ydro
Translink
H EA BC
U niversity of British
Colum bia
BC Institute of Technology
BC Lottery Corporation
BC Transit
G overnm ent of BC
BC A ssessm ent
M ax of BC
G overnm ent
salary range
($113k)
A nalysis of Strategic Leadership salary bands
indicates that there is m aterial variation in pay
bands across the BC Public Sector:
Core G overnm ent pays at the low er end, w ith
several entitys m inim um com pensation
exceeding com pensation caps in the Core
Broader Public Sector entities such as BC
Lottery Corporation and BCIT are in the m iddle
of the range
BC H ydro and U BC stand out am ong Broader
Public Sector entities as paying tow ards the top
end of the range
The City of V ancouver is the highest paying
organization of those for w hich data w as
available
Strategic Leadership salary ranges across the BC
Public Sector
Source: The Public Service A gency, Strategic Leadership
Review : Com pensation challenges(2013)
Salary
Comparisons of management and excluded
employees compensation across the sector
D ata is not readily available to support analysis of
increases in com pensation of m anagem ent and
excluded em ployees across other areas of the BC
Public Sector. Som e data, how ever, is available to
enable com parison of absolute levels of
com pensation, including inform ation on salary
bands collected by The Public Service A gency;
Labour Force Survey data; data reported under the
Financial Inform ation A ct; and com pensation
survey data from professional associations.
W hile the num ber of available data points and the
lim ited ability to identify com parable positions m ay
not support robust conclusions, data consistently
indicates that M unicipality typically pays higher
com pensation than the Provincial G overnm ent for
com parable positions.
Comparison of Strategic Leadership level
salary bands across the BC Public Sector
Increases in management compensation in
the Core Public Service
Provincial
Regional and local
K
E
Y
In A ppendix C-24, the salary ranges of four
Strategic Leadership job categories are presented
for a sam ple of BC Public Sector organizations. In
all cases, the BC Public Service is the low est paying.
Page 12
Comparison of Business Leadership level
salary bands across the BC Public Sector
0 50,000 100,000 150,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
BC Transit
A nalysis of the salary bands of a sam ple of
com parable roles in the Business Leadership level
indicates that there is variation in pay bands across
the BC Public Sector and in all cases the BC Public
Service pays at or near the low er end.
IT Manager salary ranges across the BC Public
Sector
Source: Provided by PSEC
0 50,000 100,000 150,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
BC Transit
Budget Manager salary ranges across the BC Public
Sector
0 50,000 100,000 150,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
BC Transit
OHS Manager salary ranges across the BC Public
Sector
Comparison of Applied Leadership level salary
bands across the BC Public Sector
A nalysis of the salary bands of a sam ple of
com parable roles in the A pplied Leadership level
show s m aterial variation in pay bands across the
BC Public Sector. A t this level, the Public Sector
appears to be m ore com petitive in som e instances.
0 50,000 100,000 150,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
BC Transit
HR Consultant salary ranges across the BC Public
Sector
0 40,000 80,000
Public Service
BC H ydro
BC Lotteries
BCIT
U V ic
BC Transit
Executive Coordinator salary ranges across the BC
Public Sector
0 40,000 80,000 120,000
Public Service
BC Lotteries
H EA BC
U V ic
Policy Advisor salary ranges across the BC Public
Sector
Page 13
0 50 100
In order to com pare com pensation for sim ilar
positions across the BC Public Sector, one years
w orth of Labour Force Survey data w as collected
from Statistics Canada. This dataset included
approxim ately one m illion records. A nalysis w as
perform ed on the subset of respondents w ho
identified them selves as being em ployed by the
Provincial and M unicipality in BC. H ourly earnings
w ere calculated for those w ithin this subset w ho
declared them selves to not be a m em ber of a union
or not covered by collective agreem ents. The
results indicate that in m ost cases, M unicipality
pays higher com pensation than Provincial
G overnm ent.
Compensation of management and excluded
employees (J an 2013 to Dec 2013)
# of data points
18
27
47
25
24
38
36
52
74
60
52
59
51
29
Earnings (assum ed to be
base salary only) ($/hour)
Protective
Services
Professionals in
N atural and
A pplied
Sciences
Clerical
A dm inistrative
and Regulatory
O ther M anagers
Specialist
M anagers
Senior
M anagem ent
Comparison of management and excluded
compensation across the BC Public Sector
0 50,000 100,000 150,000
The A ssociation of Professional Engineers and G eoscientists of
BC Report O n M em bersCom pensation A nd Benefits(2012)
Base salary comparison Professional Engineers
and Geoscientists of BC (2012)
# of data points
Regional &
Local
35
Provincial
49
Comparison of compensation for specialized
skills across the BC Public Sector
Stakeholders com m ented that the ability to recruit
and retain em ployees w ith technical expertise such
as law yers, IT specialists, auditors or engineers is
increasingly at risk in the Provincial G overnm ent due
to uncom petitive com pensation packages w hen
com pared to the M unicipality. The hypothesis that
M unicipality pays higher com pensation for
specialized skills w as validated on data available for
professional engineers.
In addition, interview ees w ere able to provide
m ultiple exam ples of specific individuals being
attracted from G overnm ent to w ork in the natural
resources private sector including m ining and LN G .
It w as generally expressed by stakeholders that
areas w ith transferable skills such as Finance, H R, IT
and data adm inistration w ere also vulnerable. N o
specific exit interview data w as available to validate
this assertion.
Salary
Source: Labour Force Survey D ata
Provincial
Regional and local
K
E
Y
Provincial
Regional and local
K
E
Y
Low er quartile H igher quartile
M edian
Page 14
0%
10%
20%
30%
40%
50%
$75,000 $150,000
Percentage of employees receiving between
$75,000 to $150,000
B
Share of total FIA disclosed compensation paid to
those earning more than $75,000
C
0% 50%
A bbotsford
Surrey
Prince George
V ancouver
V ictoria
Kelow na
Kam loops
Provincial
% of total FIA disclosed com pensation >$75,000
P
e
r
c
e
n
t
a
g
e
o
f
e
m
p
l
o
y
e
e
s
r
e
c
e
i
v
i
n
g
b
e
t
w
e
e
n
$
7
5
K
t
o
$
1
5
0
K
A nalysis of FIA data
A
indicates that M unicipality
has a higher percentage of em ployees receiving
higher levels of com pensation than is the case for
the Provincial G overnm ent.
FIA data also indicates that m unicipalities allocate a
higher percentage of total com pensation
expenditure to those earning over $75,000 than is
the case for the Provincial G overnm ent -this m ay
be an issue of high com pensation or it m ay be an
issue of organizational design or m ore likely both.
A
EY analysis of Financial Inform ation A ct data
B
A nalysis provided by PSEC
C
D ata includes salary, w ages, bonuses, gratuities, taxable benefits
Regional &
Local has
higher % of
high earners
Comparison of distribution of salaries between
Regional and Local and Provincial Governments
Salary, w ages, bonuses, gratuities,
taxable benefits
A nalysis prepared by PSEC of H RSD C settlem ent
data for the Core G overnm ent, Broader Public
Sector and M unicipality indicates that M unicipal
G overnm ent em ployees covered under collective
bargaining agreem ents (covering m ore than 500
em ployees ) have had significantly higher increases
in com pensation in recent years than their peers in
the Provincial G overnm ent from 2001 to 2012.
Cumulative percentage wage increase in bargaining
unit compensation vs. inflation (2001 to 2012)
Increase in bargaining unit compensation in the
Provincial and Municipality
Source: FIA D ata
Source: FIA D ata
Provincial
Regional and local
K
E
Y
0%
5%
10%
15%
20%
25%
30%
35%
40%
Core BPS
R egional and Local Inflation
Betw een 2001 and 2012, Core G overnm ent
em ployees received 19% cum ulative increase; those
in the Broader Public Sector received 24%; and
those in M unicipality received 38%. This in
com parison to inflation of 23% over the sam e tim e
period.
Page 15
# of data points
Protective
Services
293
79
Technical
related to
N atural and
A pplied
Sciences
92
92
Professionals
in N atural and
A pplied
Sciences
61
137
Clerical
167
200
A dm inistrative
and
Regulatory
22
117
0 20 40 60
Exam ination of Labour Force survey data betw een
January 2013 to D ecem ber 2013 indicates that for
those em ployees w ho identified as being union
m em bers or covered by collective agreem ents, in
the m ajority of cases, the M unicipality pays higher
com pensation than the Provincial G overnm ent for
com parable roles.
Comparison of compensation of employees covered
by collective agreements (J an 2013 to Dec 2013)
Earnings (assum ed to be base salary only) ($/hour)
Compensation of union members in the
Provincial and Municipalities
The m ajority of m unicipal spending goes to
em ployeescom pensation. The Independent
Contractors and Business A ssociation of BC (ICBA )
estim ates that m ore than 50% of typical m unicipal
budgets goes to w age and benefit costs
1
. A study
also calculated that in V ancouver 67% of operating
spending w ent to w ages, salaries and benefits, on
average, annually betw een 2000 and 2011
2
.
A fter adjusting for inflation, as w ell as population,
real per capita m unicipal spending across M etro
V ancouver grew by 32% betw een 2000-10,
com pared w ith approxim ately 10% in the Provincial
G overnm ent
1
.
Increase in compensation expenditure in
Municipality
95
100
105
110
115
120
125
130
135
R
e
a
l
p
e
r
C
a
p
i
t
a
E
x
p
e
n
d
i
t
u
r
e
(
I
n
d
e
x
e
d
2
0
0
0
=
1
0
0
)
N ote: Excludes capital spending
Source: BCBC, U p and aw ay: The G row th of m unicipal
spending in M etro V ancouver(2012)
Real per Capita Expenditures
municipalities in Metro Vancouver and Provincial
1
ICBA of British Colum bia , Construction M onitor(2012)
2
CFIB, Big City Spenders: A n A nalysis of m unicipal Spending Trends(2013)
G iven that there has been a rapid escalation in
m unicipal per capita expenditure, it is reasonable to
assum e that there has been a correspondingly rapid
increase in com pensation expenditure w ithin the
m unicipal sector.
N ote that additional analysis of 2006 Census data
supports the finding that M unicipality pays m ore for
com parable positions. This analysis is provided in
the appendix. (See A ppendix C-1)
Source: Labour Force Survey D ata
Provincial
Regional and local
K
E
Y
Provincial
Regional and local
K
E
Y
Low er quartile H igher quartile
M edian
Page 16
4. Variations in Philosophies and governance models
Compensation mandate: Cabinet and the M inister
have clear pow ers to set rules around executive and
m anagem ent com pensation and bargaining unit
m andates across the Provincial G overnm ent. In the
R egional and Local m odel, no one party sets the
rules around executive com pensation and collective
bargaining m andates across the entire sector. This
pow er is fragm ented, w ith each m ayor and council
having responsibility for their ow n jurisdiction.
Employers Associations: W hile Em ployers
A ssociations provide sector co-ordination in
response to organized labour in the Provincial
G overnm ent, there is currently duplication of
m andate and a lack of coordination and know ledge
transfer. The M unicipalitys approach to collective
bargaining is highly fragm ented and inefficient.
Crown Corporation Boards: M any public sector
boards m ay not be adequately considering the
interests of their shareholders in setting
com pensation. There are m any different
philosophies in place depending on the
organization.
Collective bargaining models: There is a m ixed
approach to collective bargaining across the
Province, w ith som e pockets of arbitration for
Police and Fire w hich appears to be resulting in
com pensation escalation.
Benchmarking tools and enablers: There is a lack
of consistent classification of job types w ithin and
across areas of the Public Sector w hich lim its the
ability to build alignm ent of com pensation. There
are no consistent benchm arking processes or
standards.
Data: Legislated sources of data cannot feasibly
provide the BC G overnm ent w ith the m eans to
understand variation in total com pensation across
the breadth of the Provincial and M unicipalities,
and the G overnm ent does not currently use all
available sources of inform ation to gain a picture of
com pensation across the breadth of G overnm ent.
In sum m ary, w e conclude that the identified
variations in com pensation are driven by variations
in philosophies and governance m odels for setting
com pensation across the BC Public Sector.
Summary of findings Philosophies
The Core G overnm ent articulated a clear
philosophy for the setting of m anagem ent and
executive com pensation in 2008 w hich w as
approved by cabinet, but only partially
im plem ented due to the fiscal restraints im posed
shortly thereafter. U nderpinning this philosophy
w as a recognition that people are attracted to
public service for the satisfaction and com plexity of
the w ork, not just for the com pensation. The
philosophy also recognized that it w as not generally
relevant to benchm ark against the private sector.
The philosophy contem plated ongoing alignm ent
w ith Federal and Provincial roles in order to sm ooth
the cycle and m ake it m ore predictable. It w as
intended to provide a dynam ic rather than static
fram ew ork, requiring m inim al Cabinet involvem ent
in daily one-off decision m aking.
Specifically, the philosophy m andated that D M
com pensation be set at 83% of equivalent
executives in the Federal G overnm ent; that A D M
com pensation be set at 85% of the BCs D M s; and
that Strategic Leadership com pensation be set at
85% of BCs A D M s. W hile this philosophy w as
im plem ented at the D M and A D M level, it w as not
im plem ented for Strategic Leadership, hence w e
are seeing the current com pression issues, etc.
In contrast, the Broader Public Sector and
M unicipalities are understood to have varied
philosophies. Crow ns often operating m onopoly
services benchm ark to private industry including
m ultinationals to w hich they arguably do not have
com parable scale and com plexity. For exam ple, tw o
stakeholders expressed their concern that som e
Crow ns consider m ultinational organizations such
as Coca-Cola and M cD onalds to be fair
com parators. Instances are also apparent of
Crow ns avoiding benchm arking to organizations for
w hich there is a strong case for direct
com parability. O ne interview ee cited the exam ple of
BC Ferries not benchm arking to W ashington State
Ferries (See A ppendix C-7). In addition, M unicipal
G overnm ent m ay cherry pick peers to benchm ark
against and calibrate to a high percentile w hich
creates invariable ratcheting up.
Summary of findings Governance models
Overview: In sum m ary, the Provincial G overnm ent
m odel for setting com pensation is relatively
centralized w ith Cabinet oversight and legislative
authority, w hereas the m odel in the M unicipality is
decentralized w ith no central oversight (See
A ppendix C-6).
Page 17
4a. Philosophies
Core Government compensation philosophy
Executive: In 2008, Cabinet approved a philosophy
for executive com pensation in the Core G overnm ent.
This philosophy m andated that D eputy M inisters
com pensation be set at 83% of equivalent executives
in the Federal G overnm ent that A ssistant D eputy
M inister com pensation be set at 85% of the
com pensation of BCs D M s. It w as also determ ined
that BCs target position for executive com pensation
in the public sector w as to rank 3rd to 5th highest
am ongst other Provincial G overnm ents. A specific
determ ination respecting the appropriate ranking
w as to be m ade based on consideration of
dem ographic and labour m arket trends, and
econom ic variables.
U nder this philosophy, the critical com parators for
Core G overnm ent executives are the Canadian
provincial and federal jurisdictions. A s a result, w hile
the philosophy explicitly identifies the prim ary
com petitors for talent as including the private
sector, the philosophy m akes it inappropriate to set
com pensation based on private sectorcom parators.
U nder this philosophy, ranges for executives w ere
last set in A ugust 2008. W hile Cabinet approved that
executive salary ranges w ill be periodically review ed
subject to changes in executive com pensation in the
federal G overnm ent, there have been no
adjustm ents to the salary ranges since
im plem entation because of the restraint m easures
subsequently im plem ented.
Management: The Strategic Leadership
com pensation w as m andated to be set at 85% of the
com pensation of BCs A D M s; how ever, w hile this
philosophy w as im plem ented at the D M and A D M
level, it w as not im plem ented for Strategic
Leadership due to fiscal constraint.
Bargaining unit: Cabinet has the prerogative to set
philosophy in the form of m andates for increases in
unionized em ployee com pensation. Since 1993,
bargaining w ithin the Core G overnm ent has been
governed by m andates established by the
G overnm ent. (See A ppendix C-2).
Broader Public Sector compensation philosophy
The G overnm ent sets certain param eters for Broader
Public Sector executive com pensation. CEO
com pensation m axim um s are set by PSEC across the
Broader Public Sector in accordance w ith a
classification structure for entities that w as last set in
2008 (See A ppendix C-3). M any Crow ns perceived
the classification categories to be illogical and
inconsistent. In addition to CEO caps, in 2012, the
G overnm ent introduced a policy to cap executive
com pensation in Crow ns at no m ore than 85% of CEO
salary.
Each organization develops and applies its ow n
philosophy to create an executive com pensation
w ithin these param eters. A nalysis indicates little
consistency in the philosophies applied by Broader
Public Sector entities to develop com pensation plans
(See A ppendix C-5). CEO salaries tend to be set at
the top of the available ranges.
A t the bargaining unit level, Cabinet has the
prerogative to set philosophy in the form of m andates
for increases in com pensation across the Broader
Public Sector (See A ppendix C-4). Since 1993,
bargaining w ithin the Broader Public Sector has been
governed by the sam e m andates that have applied to
the Core G overnm ent. (See A ppendix C-2).
Municipality compensation philosophy
A sam ple of 10 local G overnm ents w as investigated.
O nly one G overnm ent reported publicly on its
com pensation philosophy. The com pensation
philosophy for the one reported instance that of the
City of R ichm ond is to ensure that em ployees
receive a base salary w ithin the 75
th
percentile of the
defined external m arketplace. It is assum ed that
m aterial variation m ay exist in the com pensation
philosophies applied across M unicipality.
(See R ecom m endation 2.1).
Page 18
4b. Compensation Mandate
Under the Provincial Government model, the
Cabinet and Minister have powers to set the
compensation mandate across the Provincial
Government
The Cabinet m ay set m andates and rules for the Core
G overnm ent. The Public Sector Em ployers A ct also
provides the M inister w ith the authority to: (1) direct
public sector em ployers to prepare com pensation
plans consistent w ith the M inisters direction; (2)
requires that em ployee com pensation plans and
contracts be approved by the M inister responsible
for the A ct prior to im plem entation; (3) em pow ers
the M inister to direct parties to provide specific
inform ation including inform ation on the
m ethodology used in devising plans, and (4)
com parisons of actual com pensation provided to
persons em ployed in the sam e or sim ilar sector,
position or occupation. The M inister also has the
pow er to issue m andates covering public sector
bargaining.
1
There are a number of exceptions in the
Provincial model
A num ber of G overnm ent entities are excluded from
the provisions of the Public Sector Em ployersA ct
and the Public Service A ct that are not directly
controlled by the centre, e.g.: BC Investm ent
M anagem ent Corporation, British Colum bia Ferry
Services and TransLink.
W hile not explicitly covered by G overnm ent rules and
m andates, these entities are ultim ately accountable
to the G overnm ent, and generally claim to follow
G overnm ents guidelines in setting em ployee
com pensation. For exam ple, a recent TransLink
spokesperson com m ented: w hile w e are not a
Crow n corporation, w e operate prudently w ithin
G overnm ent guidelines." W ith a 14% increase in the
num ber of em ployees m aking over $100,000 dollars
in TransLink in 2012, a num ber of com m unities of
interest have expressed doubts about the validity of
such claim s.
2
In sum m ary, the additional levels of
com pensation autonom y have led to som e
em barrassm ent for G overnm ent over one-off or
overly rich com pensation for executives.
In the Municipality, no one party sets mandates
and rules across the entire sector. This power
is fragmented
In the M unicipality, there is no entity, policy or
procedure across the sector that is intended to
support the establishm ent of sector w ide rules on
executive com pensation and m andates for bargaining
unit com pensation.
A uthority for setting com pensation is held by
individual m ayors and councils, w hich have the
prerogative to set direction for their region only.
W hile there are indications that m unicipal
expenditure constraints exist, (e.g. M etro V ancouver
regional G overnm ent scrapped plans to raise taxes
and fees by 12%, and set a new target that lim its the
increase for each household to a m axim um of 2.5% in
2013), stakeholders generally pointed out concerns
around the lack of governance to enable setting of
consistent m unicipal m andates to constrain
com pensation grow th. W ithout such governance,
unions can focus efforts on m unicipalities w here
outcom es are m ore likely to be favourable and use
the resulting agreem ents to ratchet up increases in
other m unicipalities. N o evidence w as found,
how ever, of other jurisdictions in Canada setting
consistent regional m andates and rules apart from in
the face of extrem e fiscal pressure (See A ppendix C-
9).
In conclusion, the variation in m odels for setting
m andates and rules across the three groups results in
a lack of alignm ent in com pensation across the Public
Sector. (See Recom m endation 2.1) .
1
BCPSEA , Public Sector M anagem ent & Executive Com pensation Freeze Policy(2012)
2
N ew sleader, TransLink staff earning 6-figure salaries(2013)
Page 19
4c. Strategic advice, coordination and enforcement
Strategic coordination is provided to the Core
G overnm ent by the Public Service A gency and to the
Broader Public Sector by the Public Sector
Em ployers Council (See A ppendix C-10). BCs
Provincial m odel is one of the m ost coordinated
across Canada indeed a num ber of other
jurisdictions are looking to m ove to the PSEC m odel
and this is reflected in a relatively low Provincial
G overnm ent / private w age differential.
The Regional and Local jurisdictions do not have a
com parable PSEC or the Public Service A gency to
provide strategic advice, co-ordination and
enforcem ent. N o evidence w as found that other
Canadian jurisdictions have in place a governance
m odel that supports strategic advice, coordination
and enforcem ent across the m unicipal sector.
(See A ppendix C-13)
-5% 0% 5% 10% 15%
BC
perform ance
Y ukon
N W T
N ew foundland
PEI
N ova Scotia
N ew Brunsw ick
Q uebec
O ntario
M anitoba
Saskatchew an
A lberta
British Colum bia
There has been controversy and confusion around
the m andate to set executive com pensation w ithin
the Broader Public Sector, w ith variation on w hat is
contained and reported as part of total
com pensation. W hile greater consistency has been
driven, there have still been exam ples of exceptions
to the rule. In som e cases the breach had been
approved by PSEC. In addition, in som e cases, there
m ay be legitim ate reasons for this variation
including, for exam ple, severance pay or additional
com pensation for unused vacation. PSEC reports
that action has been taken m ore recently to bring
CEO com pensation back into line.
(See A ppendix C-12).
Provincial Government / private wage differential
Source: CFIB, W age W atch(2008)
BC is, how ever, the only Canadian jurisdiction to have
an A uditor G eneral for the Local G overnm ent (See
A ppendix C-10). W hile A G LG plans to conduct a
perform ance audit of M anaging the Inherent R isks of
Lim ited H um an Resources w ithin Sm all Local
G overnm ents, it does not currently have a publicly
stated plan to review com pensation as a specific
issue.
The initiative to create A G LG has been w idely
applauded, but som e parties suggest that A G LG could
be m andated to focus on com pensation, and to go
beyond validating if policy has been applied, to
investigating w hether outcom es are fair and
equitable. (See R ecom m endation 2.3).
0% 10% 20%
N ew Brunsw ick
Q uebec
V ictoria
V ancouver
N ova Scotia
British Colum bia
M anitoba
O ntario
A lberta
Saskatchew an
N ew foundland
Prince Edw ard Island
N W T
Y ukon
BC
perform ance
Municipality / private wage differential
Source: CFIB, W age W atch(2009)
Page 20
4d. Employers Association
The Public Service A gency provides employers
association services to the Core Government
U nder the Public Service A ct, the Public Service
A gency has the responsibility to act as the
bargaining agent on behalf of the G overnm ent, w ith
those unions w hich represent em ployees directly
em ployed by the G overnm ent.
Six Employers Associations provide services
to the Public Sector
The purposes of an Em ployersA ssociation are to
coordinate the follow ing w ith respect to the sector
for w hich they are responsible:
1
Com pensation for em ployees w ho are not subject
to collective agreem ents
Benefit adm inistration
H um an resource practices
Collective bargaining objectives . N ote that an
Em ployersA ssociation m ay bargain collectively
on behalf of its m em bers if authorized to do so
In addition, it is the purpose of an EA to:
Foster consultation betw een the association and
representatives of em ployees in that sector
A ssist the council in carrying out any objectives
and strategic directions established by the council
for the em ployers' association
W hile Em ployersA ssociations provide sector co-
ordination in response to organized labour in the
Provincial G overnm ent, stakeholders com m ented
that there is currently duplication of m andate and a
lack of coordination and know ledge transfer.
(See Recom m endation 2.4) .
At the local Government level, there is
disparity in the power of those at the table
A t the sm aller local G overnm ent level, elected
officials are often unw illing to delegate bargaining to
professionals, despite the lack of skills of their
negotiating team s com pared to their union
counterparts.
2
N o evidence w as found of
coordination in sm aller m unicipalities in BC.
V ancouver and V ictoria have built m ore co-ordinated
responses to organized labour in the form of the
Labour R elations departm ent of M etro V ancouver
and the G reater V ictoria Labour Relations
A ssociation. H ow ever, the co-ordination of labour
relations in the Low er M ainland, is increasingly
fragm ented w ith m em bers leaving the association.
The im plications of the lack of co-ordination are
clear. The vast m ajority of m unicipal w orkers are part
of large and sophisticated unions. Even local
G overnm ent unions, for exam ple, are local chapters
of the Canadian U nion of Public Em ployees, w hich is a
m em ber of the Canadian Labour Congress. CU PE
provides even sm all local unions w ith sophisticated
assistance for bargaining and contract negotiations.
(See A ppendix C-15).
A s Langley Tow nship Councillor, Bob Long
com m ented: It w ould be nice if w e w ere all m em bers
[of the Bureau]. W e dont have the resources in m y
tow nship [to bargain on our ow n] but the reality is
the big players w ant to leave. W e w ish them the best,
but w ere all going to be paying for it.W ithout a co-
ordinated response to organized labour, there is a
real risk, that unions can divide and conquer. A s one
stakeholder observed in interview , unions can target
a given m unicipality w hich exhibits a m ore favourable
attitude tow ards union interests and use that factor
to secure a favourable outcom e at the bargaining
table.This then sets the precedent for negotiations
w ith other m unicipalities. A s Port M oody M ayor Joe
Trasolini com m ented: N obody can tell m e any
contract negotiating in one city is not going to be
part and parcel of the negotiations in another
m unicipality.
3
In conclusion, the M unicipality approach to collective
bargaining is highly fragm ented and inefficient.
1
G overnm ent of BC, Public Sector Em ployers A ct(2013)
2
R.L. Bish, Local G overnm ent in British Colum bia(2008)
3
V ancouver Sun, Labour Relations broken(2011)
Page 21
4e. Crown Corporation Boards
Most entities in the Broader Public Sector
have their own boards
The Boards have responsibility for setting
com pensation philosophy, approving com pensation
plans, and ensuring that executive com pensation
paid is w ithin approved plans. In the case of Crow ns
and school districts, there are boards of directors,
and in the case of universities, there are boards of
governors.
O ne of PSECs intended roles is to provide a control
on the risk for excessive executive com pensation, at
the sam e tim e, there is an expectation that Boards of
D irectors act in the interests of their shareholders
(i.e. the G overnm ent and population) and act to keep
executive com pensation costs at reasonable levels
and follow G overnm ent guidelines.
Crow n com pensation categories w ere established in
2006, am id significant controversy. Each
organization w as placed in a specific category, and
these w ere not subsequently updated. Crow n
com pensation categories have subsequently been
replaced by CEO com pensation m axim um s the
m axim um sets the highest level for the rest of the
organization. Boards spend significant tim e and
energy in determ ining com pensation for their
executive and em ployees, but are given little in the
w ay of standard tools, benchm arking guidelines,
com parable data and processes to support their
decision m aking.
W hile Boards can be replaced, there are few other
m echanism s to hold Boards accountable for
decisions that they m ake w ith respect to
com pensation. There is a w ide variation in skill sets
and com pensation expertise on Crow n broads, as
w ell as confusion as to their role in establishing
com pensation. There is concern that Boards do not
alw ays consider the interests of their shareholders in
proposing and setting com pensation; one senior
interview ee com m ented that they m ay even be
being held captive by their executiveson the
m atter of com pensation. A num ber of com m unities
of interest have also highlighted this concern.
A num ber of stakeholders com m ented that Boards in
both the Provincial and M unicipalities m ight benefit
from retraining as to their fundam ental roles and
responsibilities including ethics, operating values and
codes of conduct. It w as suggested that such efforts
are already underw ay on the Provincial G overnm ent
side.
There are exam ples of the use of com pensation
com m ittees in the Broader Public Sector. U BCs
board of directors, for exam ple, delegates
responsibilities for executive com pensation to its
M anagem ent Resources Com pensation Com m ittee. It
appears som e m unicipalities m ay have such
com m ittees. H ow ever, other sm aller m unicipalities do
not have com pensation com m ittees.
In conclusion, w hile Boards have internal guidelines
and standards for determ ining com pensation, those
guidelines are not necessarily consistent across the
public sector. Furtherm ore, they m ay not be
adequately considering the interests of their
shareholders in setting com pensation, nor be aw are
of their fundam ental responsibilities.
Page 22
4f. Benchmarking tools
The approach to benchmarking is also highly
fragmented in Municipality
In addition, evidence from individual m unicipalities
outside of the Low er M ainland suggests that they
initiate their ow n benchm arking studies to support
com pensation setting. It is not apparent that
centralized benchm arking sources are available to
m unicipalities in BC. This is in contrast to O ntario,
w here every year M ercer and the O ntario m unicipal
H um an Resources A ssociation (O M H RA ) an
organization created to enable the sharing of
inform ation and ideas betw een m unicipalities in the
Province issues the O ntario m unicipal
Com pensation Survey:
The survey consists of 222 benchm ark jobs
for m unicipalities across O ntario
In addition to com pensation data,
participants are also be able to access
inform ation on pay policies and practices
such as job rate adjustm ents, perform ance
pay, attraction and retention, hours of w ork,
overtim e, vacation entitlem ent, autom obile
benefits and m ore
M ercer also offers a sm all m unicipalities
report, w hich includes data for 32 of the 222
survey positions
1
It can be considered that the approach in O ntario
w ould potentially:
O ptim ize the efficiency of benchm arking
Increase the population considered for
com parison
Increase the reliability of analysis
In conclusion, there are no standardized tools and
support for benchm arking across either the Broader
Public Sector or the M unicipality (See
recom m endation 1.3).
1
M ercer, O ntario m unicipal Com pensation Survey(2012)
No evidence was found of a comprehensive
mapping table across the BC Public Sector
In order to enable m eaningful com parisons betw een
organizations, a m apping of job types across
organizations of som e sort is required. W hile a full
m apping table is the 'holy grail' across all
jurisdictions, no evidence w as found that BC has a
standard approach to com parators, that w ould
enable m eaningful analysis of a single source of a
single source of truthdataset. The lack of a
standardized m apping tool restricts the ability to
im plem ent philosophies effectively.
Broader Public Sector entities conduct their
own benchmarking
Typically Broader Public Sector entities conduct their
ow n benchm arking generally through the hiring of
third party consultants. There is no consistent use of
com parators -som e Crow ns use private sector
m ultinationals, for instance. There are, how ever
som e exceptions to this. For exam ple, V IH A , PH SA
and Interior H ealth rely on H EA BC to develop salary
ranges based on 50
th
percentile of the blended
healthcare and external m arket pay policy guidelines.
Page 23
Unions may have undue influence in the
collective bargaining process at the
Municipality level
The m odel of collective bargaining w as originally
adopted by the Public Sector from the private
sector. It is now held as a basic principle in m ost
areas of the Public Sector that em ployees and
em ployers should voluntarily agree the conditions
of em ploym ent, w ith either side having the right to
w ithhold agreem ent through strikes or lockouts.
H ow ever, as m uch academ ic and com m unity of
interest literature on the topic argues, this m odel
has tw o key potential im plications for m ost public-
sector activities that are fundam entally different to
the im plications in the private sector:
Influence of strikes on political players:
W hen w ork ceases in the public sector,
services cease to be available w hich causes
significant inconvenience for citizens. The
inconvenience m ay potentially cause the
electorate to w ithhold support or deliberately
vote against elected officials in pow er at the
tim e of the w ork-stoppage at future elections
Political influence of unions: U nion m em bers
m ay contribute to cam paigns or w ork on
behalf of elected officials w ho prom ise to
provide them w ith m ore generous settlem ents
or to increase services and m ay w ork against
those w ho prom ise to cut taxes or reduce
services. (See appendix C-16)
Som e stakeholders interview ed speculated that this
pressure m ay be m ore acutely felt at the m unicipal
level, w here m unicipal em ployees m ay have a
strong influence on election results, if they decide
to organize. Stakeholders com m ented that turnout
at m unicipal elections is m uch low er than at the
Provincial level w hich gives such political action a
greater im pact on outcom es. U nions m ay therefore
be able to influence com pensation policy in
advance.
3
In addition, unlike the Provincial
G overnm ent, M unicipality cannot legislate
em ployees back to w ork, and faces higher
pressure due to the im m ediacy of the services at
risk, such as refuse collection. A num ber of
stakeholders sum m arized this as m unicipalities
being m ore prone to union capture
4
.
See recom m endation 2.5).
1
Labour Relations Board BC, G uide to the Labour Relations
Code Province of BC (2014)
2
JIBC, Police Com pensation/ N egotiation of Contracts
video(2013)
3
4
The Fraser Institute, W age board: The solution to reining
in public sector com pensation(2012)
4g. Collective bargaining models and processes
There is a mix of arbitration and collective
bargaining models in the Municipality
In BC, legislation requires em ployers and unions to
m aintain certain essential services to the public w hen
they take job action in a labour dispute. Essential
services are those related to the health, safety or the
w elfare of BC residents, or to the provision of prim ary
or secondary education program s and specifically
include Fire and Police Services.
1
U nder the Fire and Police Services Collective
Bargaining A ct, strike action is not perm issible for
Fire and Police services and in the event of a failure
to reach a collective bargaining agreem ent the
dispute m ust be referred to an arbitrator.
There is a belief am ongst som e parties that
arbitrators m atch outcom es to those of recent
settlem ents already established in the larger cities.
For exam ple, the D eputy Chief O fficer of A bbotsford
Police D epartm ent argues that police com pensation in
BC is largely set by aligning com pensation to the Big
12police services boards in O ntario. W hen one of the
Big 12boards w ill reach negotiated settlem ents and
this becom es the benchm ark or standard for
everyone else.
2
A s a result, a num ber of parties are
attem pting to change the current arbitration system
in BC. (See appendix C-17).
It is interesting to note, how ever, that under current
legislation, the BC G overnm ent already has the right
to specify specific term s of reference for arbitration.
This could be used to lim it the range of outcom es.
Indeed, academ ic studies suggest that if arbitration is
set up to consider a range of factors, it w ill have
com parable outcom es to m ediation.
(See appendix C-17).
In conclusion, there is a m ixed approach to collective
bargaining across the Province, w ith som e pockets of
arbitration for Police and Fire w hich stakeholders
believe m ay be resulting in com pensation escalation.
(See recom m endation 2.6).
Page 24
The BC Government does not currently use all
available sources of information to gain a
picture of compensation across the breadth of
Government
There are legislated requirem ents for the public
reporting of public sector com pensation in British
Colum bia. There are also a num ber of aggregate
data sources available from Statistics Canada and
other sources (See A ppendix C-18).
The BC G overnm ent has m ade initial efforts to use
these sources to begin to understand variation in
com pensation across the breadth of the Public
Sector. N ot all sources are currently used, how ever.
For exam ple, data reported under the Financial
Inform ation A ct is not currently collected,
aggregated or analysed by the G overnm ent. W hile
the data m ay be available on organizations
respective w ebsites, to collect this data w ould take
considerable tim e and effort. This is com pounded
by the fact that m any organizations report their
data in scanned hard copy, lim iting the ability to
extract and m anipulate data. It is w orth noting that
the V ancouver Sun has collected and aggregated
this data in electronic form at over the last six years,
through Freedom of Inform ation requests subm itted
to individual organizations across both the
Provincial and M unicipalities. This dataset is, in
turn, m ade available in searchable form to the
public.
In addition, available sources of data cannot
feasibly provide the BC Government with the
means to understand variation in total
compensation across the arms of the Provincial,
Municipalities.
O ne of the m ajor constraints identified in
conducting this Review w as the availability and
com parability of com pensation data of em ployees
across the BC Public Sector. In order to
dem onstrate this, in the appendix three prim ary
sources are reconciled against a num ber of key
fundam entals required to provide m eaningful
com parisons across organizations w ithin the BC
Public Sector including: data being available for all
areas of G overnm ent; reported for em ployees;
including all elem ents of total com pensation;
including inform ation on FTEs; including job
descriptions and provided w ith regular frequency in
electronic form at. (See A ppendix C-19).
4h. Data
The lack of standardized data creates
significant limitations
The lack of m eans to build a single com pensation
dataset m eans that entities w ithin the BC Public
Sector lack a key foundational dataset to enable
com parison and setting of com pensation. In addition
the BC G overnm ent does not have at its disposal the
evidence baseto identify and analyse (and thereby
potentially oversee and control if so desired)
com pensation across the different arm s of
G overnm ent, including considering com parability
across the Public Sector and understanding and
m aking trade-offs as required.
In the absence of a single dataset collected through
legislated requirem ents, stakeholders are required to
supplem ent data through creative and m ore tim e
intensive m eans m ost notably through the use of
surveys.
The absence of an aggregated dataset m eans that it
is not possible to m eaningfully investigate, validate or
refute the analysis by com m unities of interest or
academ ics of public sector com pensation built on
other aggregate data sources such as Census data or
the Labour Force Survey. (See recom m endation 1.4).
Page 25
5. Talent management implications of recent trends in compensation
Summary of findings
W hile the variation betw een Core G overnm ent and other areas w ithin the Province is of greatest concern, it
is im portant to consider the talent m anagem ent im plications of freezes in com pensation in the Core.
D ata indicates that at the Strategic Leadership level, BC is not achieving its target philosophy of paying the
50
th
percentile of the BC public sector. A nalysis of com pensation ranges of a sam ple of 10 other BC Public
Sector entities suggests that the Core G overnm ents Strategic Leadership pay band is 25% low er than the
50
th
percentile and as a result BC is the second low est paying jurisdiction in Canada. The top of the band
w as never adjusted to 85% of the A D M range, and thus is too low to be com petitive. W hile data indicates
that this issue has not yet led to high levels of attrition, there is a risk that the Strategic Leadership group
could be draw n to seek em ploym ent in the Broader Public Sector and the M unicipality as a direct result of
com pensation. The private sector, especially in the natural resource industries. is also considered to be an
increasing draw for talent.
D ata show s that com pression betw een em ployees covered under the collective agreem ents and m anagers
in the Provincial G overnm ent is real. Stakeholders com m ented m any unionized em ployees are reluctant to
be prom oted on the grounds that they w ill receive less com pensation w hile being given additional
responsibilities.
Executive holdbacks are poorly understood by the public, considered punitive by internal em ployees, and
there is increasing concern am ongst stakeholders that they are not an effective m eans of driving desired
perform ance outcom es.
0 50 100 150 200 250 300 350
Bargaining unit
A pplied leadership
Business leadership
Strategic leadership
A ssistant D eputy M inister Band A
A ssistant D eputy M inister Band B
A ssistant D eputy M inister Band C
A ssistant D eputy M inister Band D
D eputy M inister
D eputy M inister of the Prem ier
Compensation ($000)
Key issues mapped to prescribed salary ranges within the Core Government
A
Issue #3: Com pression exists betw een Bargaining unit and
m anagem ent, created by lack of increase in m anagem ent
com pensation from 2009 and restrictions on m ovem ent of
individuals w ithin m anagem ent bands
Issue #2: Because the 2008 com pensation philosophy
w as never im plem ented at Strategic Leadership level,
the top end of this band is too low and thus pay is
uncom petitive
Issue #1: The BC
G overnm ent is not
m aking full use of its
existing com pensation
bands at D M /A D M level
The years of compensation freezes within the Core Government have led to a number of
talent management issues
Interview s w ith stakeholders suggested three hot spotsw ith respect to talent issues in the Core
G overnm ent and to a lesser extent the Provincial G overnm ent. These issues are outlined and explored in
m ore detail below .
A
N o salary bands for Bargaining unit em ployees data indicates range of actual com pensation
Page 26
Issue 1 Use of ADM/ DM bands
Com parisons of m axim um achievable executive
salary ranges to those in other jurisdictions indicate
that the Core is close to m eeting its philosophy of
m axim um achievable com pensation being ranked
3rd to 5th highest. BC is currently ranked 2
nd
for
m axim um achievable D M com pensation. H ow ever, it
is im portant to note w hile the ranges exist they are
not being fully used. BC is also currently ranked 3
rd
for m axim um A D M com pensation bands.
0 200
Federal
British Colum bia
O ntario
N unavut
Q uebec
N ew foundland
N ew Brunsw ick
Cross-jurisdiction ranking of maximum ADM level
executive salary ranges (2013)
Source: The Public Service A gency, D M and A ssistant
D eputy M inister Review : Com pensation U pdate(2013)
Salary (000s)
(inclusive of any bonuses and incentive paym ents)
0% 20% 40% 60% 80% 100%
Executives
O verall Public Service
Work Environment Survey: I am fairly paid for the
work I do Executive responses
Percentage of respondents
Source: The Public Service A gency, D eputy M inister and
A ssistant D eputy M inister Review : Com pensation U pdate
(2013)
Indeed, the philosophy on executive com pensation
appears to be being successfully applied in the Core
G overnm ent at the A D M level w here good use is
m ade of available salary ranges (See A ppendix C-
20). A t the D M level, how ever, w hile the philosophy
is being applied for m axim um ranges, the lack of
use of the ranges puts BC in 6
th
place in term s of
actual average base salary paid w ell short of the
philosophy objective. Based on public accounts
available, other jurisdictions com pensate at or near
the m axim um of the range w hile BC com pensates
around 75% of the range m axim um .
Stakeholders provided m any exam ples of individual
executives w ithin the Core G overnm ent being
attracted to positions in the Broader Public Sector
and M unicipality. In considering the findings
outlined in the previous section of com parable or
greater levels of executive com pensation in other
areas of the BC Public Sector w hen com pared to
the Core G overnm ent, the incidence of individuals
m oving is not surprising.
A s the The Public Service A gencys Deputy Minister
and Assistant Deputy Minister Review:
Compensation Update(April 2013) concluded,
Based upon the data available, there is no
im m ediate need to adjust salary ranges for
executives w ithin the BC public service.It m ay,
how ever, be appropriate to exam ine how the
ranges could be better utilized, as the flexibility
exists to do so.
Survey results indicate high levels of satisfaction
w ith com pensation am ongst the executive group as
a w hole w hen com pared to levels of satisfaction
across the overall public service.
D ata indicates, therefore, that Core G overnm ent
executives in BC have the potential to be relatively
w ell com pensated.
Page 27
Issue 2 - Competitiveness of Strategic
Leadership pay
The Core G overnm ent previously developed a
philosophy of paying excluded m anagers at the 50th
percentile of other m angers in the BC Public Sector.
A s a result of the econom ic crisis, how ever, this
com pensation philosophy w as not fully im plem ented
nor sustained. Indeed, analysis of com pensation
ranges of a sam ple of 10 other BC Public Sector
entities suggests that the Core G overnm ents
Strategic Leadership band is ~25% low er than the
50th percentile.
D ata analysis indicates that this group is not aligned
to Canadian peers in a m anner com parable to the
approach taken for Core G overnm ent executives.
W hile D M s and A D M s salary band m axim um s rank 2
nd
and 3
rd
highest in Canada respectively, Strategic
Leadership, for exam ple, is receiving the second
low est m axim um achievable com pensation in
Canada.
0 200
N W T
Q uebec
Federal
N unavut
A lberta
N ova Scotia
Y ukon
O ntario
Saskatchew an
PEI
N ew foundland
N ew Brunsw ick
British Colum bia
M anitoba
Cross-jurisdiction ranking of maximum achievable
Strategic Leadership salary range
Salary ($000s) (unknow n constituents)
It is im portant to note that w hile m ost Public Sector
w orkers indicate they are m otivated by factors other
than com pensation, there is clear evidence that
uncom petitive com pensation can cause Public
Service w orkers to leave their em ployer.
In a recent exit survey of BC Public Service
em ployees w ho resigned, 51% of those w ho resigned
said that they w ere leaving the BC Public Service for
another em ploym ent opportunity: 50% of those w ent
to another public sector organization and 66% of
those w ho left for other em ploym ent indicated that
com pensation w as one of the factors that attracted
them to new em ploym ent.
In addition, uncom petitive com pensation has clear
im plications for recruitm ent. It is interesting to note
that, out of 288 em ployees w ho w ere hired in
Strategic Leadership positions over the last five
years, 232 w ere internal redeploym ents. The
stakeholders stressed concerns that the Public
Service has not been successful in recruiting
external candidates in part due to com pensation
freezes.
In sum m ary, there is a grow ing concern am ongst key
stakeholders that the Province is at risk of losing
highly talented strategic leaders to opportunities
outside of the Core G overnm ent.
Page 28
Issue 3 - Compression between Bargaining unit and management
D ata show s that com pression betw een em ployees covered under the collective agreem ents and m anagers in
the Provincial G overnm ent is real. Stakeholders com m ented m any em ployees are reluctant to be prom oted
to m anager on the grounds that they w ill receive less com pensation w hile being given additional
responsibilities.
1,258
1,592
2,115
2,767
5,657
4,909
4,104
1,626
463
108
36
4
0
1,000
2,000
3,000
4,000
5,000
6,000
<
1
0
1
0
-
2
0
2
0
-
3
0
3
0
-
4
0
4
0
-
5
0
5
0
-
6
0
6
0
-
7
0
7
0
-
8
0
8
0
-
9
0
9
0
-
1
0
0
1
0
0
-
1
1
3
>
1
1
3
Salary (unknow n constituents) (000s)
M in M ax
Strategic 80,767 113,074
Business 69,998 95,843
A pplied 48,460 81,844
Distribution of bargaining unit actual earnings fiscal 2012/13
Bargaining unit em ployees infringing into
and even exceeding m anagem ent salary
bands w ith 4 bargaining unit em ployees
earning m ore than the m axim um
Strategic M anagem ent band
N
u
m
b
e
r
o
f
e
m
p
l
o
y
e
e
s
Business
Leadership
A pplied
Leadership
Strategic
Leadership
A num ber of stakeholders speculated that this m ay be due in part to legitim ate reasons, including, for
exam ple, em ployees covered under collective agreem ents w orking significant am ounts of overtim e. In other
instances, how ever, the rationale m ay be less justifiable. Som e stakeholders speculated that at the low er
levels, Core G overnm ent em ployees m ay be over com pensated w hen considering com parable roles for the
w ork they perform . It has not been w ithin the scope of this review to validate this hypothesis. H ow ever,
previous studies conducted across Canada of public/ private w age differentials support this hypothesis.
(See A ppendix C-23) It m ust also be considered that com pression results from constraints and freezes in
m anagem ent level pay bands, w ith the last increase to the top of the salary range for excluded m anagers
occurring in M arch 2009.
W hile no data w as available to investigate talent m anagem ent im plications in the Broader Public Sector,
given com pensation freezes in Crow ns , it m ay be reasonable to assum e that these organizations are also
experiencing com parable issues of com pression.
Source: The Public Service A gency, Strategic Leadership Review : Com pensation Challenges(2013)
Page 29
Adopting the salary holdback model for
executives
In the direct Core G overnm ent, the Executive
H oldback plan w as developed w ith the intent to
rew ard achievem ents of goals and targets relating to
specific perform ance objectives. In 2008/2009, the
m axim um salary holdback subject to perform ance
w as increased from 5% to 10% of salary. For the
broader public sector, em ployers have offered a
variety of perform ance pay m odels. A m ongst
Crow ns, incentive pay has been com m on, w hile in K-
12 and the post-secondary sector, perform ance pay
is uncom m on. In 2012, the M inister responsible for
the Public Sector Em ployersA ct, Kevin Falcon
directed Crow n Corporations to replace incentive pay
and bonuses w ith non-pensionable holdbacks of up
to 20% tied to financial and business results. The
im plem entation of this directive is currently
underw ay, w ith the m ajority of Crow ns now in
com pliance w ith this approach.
U nder the executive com pensation disclosure
guidelines, em ployers are expected to report on how
paym ent of salary holdbacks for the top five
executives relates to the organizations perform ance
targets.
Stakeholders have com m ented that the holdback
m odel is seen to be a punitive system of
com pensation and that it doesnt drive different
behavior nor affect perform ance results.
Issues associated w ith holdbacks include that:
The holdback system becom es problem atic and
m eaningless if the perform ance goals and targets
are too easy to achieve. A ccording to BC Ferries
disclosure statem ents, the Presidentand CEO s
bonus perform ance m easurem ents include:
im plem enting the recom m endations of the
independent safety review report,fostering
effective relationships w ith key organizationsand
collaborating w ith the Provincial G overnm ent on
a long-term vision for coastal ferry services.
These perform ance targetsare perceived to be
m andatory requirem ents for a presidents position
that should be m et as a m inim um expectation
regardless of the holdback plan:
Since m any executives in the Broader Public
Sector have perform ance targets that are difficult
to quantify, m ost end up receiving the full payout
The public view s holdbacks as being the sam e as
bonuses. Indeed, the holdback m odel sim ply raised
the base salary of Crow n corporations executives
by the four year average of their recent bonuses.
N o evidence w as found of other jurisdictions using
executive holdbacks
H oldbacks are not deem ed pensionable for
em ployees in the Core G overnm ent, but are
deem ed pensionable for those in the Broader
Public Sector
In considering the above, as G overnm ent updates its
com pensation philosophy, it m ay w ish to consider
w hether the executive holdback m odel is an effective
m eans of driving perform ance.
See Recom m endation 1.1 for a discussion of the potential resolution to the talent m anagem ent issues
outlined in this section
Page 30
There is an opportunity to drive greater alignm ent in com pensation across the
Core, Broader Public Sector and M unicipality in order to m eet the expectations of
the single taxpayerthat tax dollars be spent consistently and effectively for
com parable resources across all areas of G overnm ent.
A lignm ent of com pensation needs to be created through a clearly defined
philosophy and governance m odel and enablers driven from the centre and
adopted across the breadth of G overnm ent.
The Core G overnm ent had a com pensation philosophy previously approved by
Cabinet but never fully im plem ented and sustained due to the fiscal restraints
im posed. It should be refreshed and could form the basis for the philosophy for
the breadth of the BC Public Sector.
The Provincial G overnm ent should take the opportunity to fix its provincial issues
before the M unicipality can be expected to follow ; but the G overnm ent should do
w hat is necessary to bring M unicipal G overnm ent com pensation into alignm ent
over tim e, including using financial levers if necessary.
6. Recommendations
Roll out from Core to
Provincial and
Municipality
Three connected initiatives are recommended
Init iat ives 1.1 t o 2.7 are explored in
more det ail on t he f ollowing pages
Make model more
sustainable and market
sensitive
Design future state
governance model to enable
alignment of compensation
across BC Public Sector to
Core Government
Refresh Core Government
philosophy for application to
3. Deploy and
sustain
2. Build governance model and processes to
enable alignment across BC public sector
1. Create common
philosophy & enablers
Design strategic approach
to bringing Municipality
under this governance
models and design detailed
transition plan to move to
future state
1.Deploy and m ake sustainable
including:
Execute im plem entation plan
Conduct m arket review s every
tw o years to review
com pensation and adjust
bands as required
M ake ongoing adjustm ents to
m odels through a standard
approval process
Cabinet to approve philosophy
as required
Put process in place to review
and refresh com pensation
philosophy on a regular and
ongoing basis.
1.Com m unicate and set expectation
that Cabinet w ill set philosophy
and direction across entire BC
Public Sector
2.Revisit the role of Crow n
Corporation Boards in
establishing Broader Public
Sector Com pensation and revisit
the rem uneration categorization
for Crow n corporations and
adjust based on com m on
principles
3.Establish responsibilities, process
and procedure for issuance of a
single strategic directive from
Cabinet to align com pensation
across all BC Public Sector,
including rem oving need for
Cabinet role in day-to-day
procedure, and setting
consequences for non-com pliance
4.Finalize current review of
Provincial m odel including need
to align Em ployersA ssociations
in the Broader Public Sector
5.Enable a com m on bargaining
approach in the R egional & Local
Governm ent
6.Conduct a review of current
arbitration m odels
7.Select strategy to create
adherence to philosophy and
governance m odel. It is
proposed that:
A s data and benchm arking
capability im proves, educate
and set a fram ew ork of
expectations in order to
provide Regional & Local
Governm ent w ith the
opportunity to do the right
thingby com plying
W here education and setting
of expectations do not yield
results, use financial levers to
directly encourage
m unicipalities to set
com pensation caps and
Governm ent to stop providing
funding once
W ith strategy selected, design
detailed transition plan to
future state, including setting
clear tim elines as to
expectations for M unicipality
1.R evisit and update the previously
approved com pensation
philosophy for the Core w here
necessary
2.Further develop this philosophy
to create a shared philosophy for
the entire BC Public Sector,
providing com m on principles,
processes and guidelines
3.Establish standardized
benchm arking tools in Core and
roll out across the BC Public
Sector
4.Invest in m ore accessible and
com prehensive data in the Core
and roll out across the BC Public
Sector
Page 31
Recommendations > Principles used to select options
Principles underpinning recommendations
There are a num ber of recom m endations that are offered to support the closer alignm ent of com pensation
across the BC Public Sector and to put in place a sustainable m odel going forw ard. The follow ing principles
underpinned the recom m endations:
Recom m endations m ust respect the objectives of the Core R eview that G overnm ent operate as
consistently and effectively as possible i.e. there should be alignm ent in com pensation across the BC
Public Sector
Recom m endations m ust respect the Core R eview objective of ensuring public sector m anagem ent w age
levels are appropriate w hile recognizing the need for leaders w ho can positively im pact the effectiveness
of and productivity of public sector agencies -i.e. com pensation costs should be kept to reasonable levels
w hile enabling the Public Sector to be adequately resourced
O rganizations should be given the opportunity to do the right thingand G overnm ent should consider
that sunlight is the best disinfectantA , but w here historical actions suggest such an approach w ont
w ork, m ore centralized directives should be applied
Existing review s should be finalized
M ake use of existing entities and practices to the greatest extent possible
W here adequate inform ation is not currently available, collect additional inform ation before m aking a
decision
Page 32
Recommendations > 1. Create common philosophy & enablers
1.1. Refresh the compensation philosophy for the Core where necessary and make it
applicable to share with Broader Public Sector
Recommended actions:
Review and update as necessary the Core
philosophy, w hich w as approved by the Cabinet
in 2008
D evelop com m unication approach for key
stakeholders highlighting issues and challenges
of current com pensation fram ew ork
Conduct m arket based review of current total
com pensation w ithin the Core G overnm ent
against other Canadian provincial and federal
jurisdictions by level using revisited philosophy
Based on review results, revise as necessary
m anagem ent com pensation w ithin the Core
G overnm ent: including re-evaluation of pay
bands and adjust w here current pay is above/
below m arket (e.g. consider increasing $113k
cap for Strategic Leadership band) (See
A ppendix C-20)
Consider w hether holdbacks should be the
preferred m odel for the Core G overnm ent,
considering in particular that holdbacks are
punitive and rem oval w ould provide greater
flexibility w ithout needing to increase ranges
A llow em ployees to m ove through bands based
on perform ance rather than tenure
Consider using the flexibility that the Province
currently has in term s of utilizing the breadth of
existing executive pay bands
D efine process for regular adjustm ents based on
m arket data
Implications
Based on the m arket review s, it is possible that
som e of the low er levels (e.g. adm inistrative
positions) m ay be above m arket and could
require adjustm ent dow nover tim e. This is an
assum ption not based on analysis of BC data but
on a literature review of typical public/ private
benchm arking in Canada, and com m ents from
stakeholders in BC.For exam ple, a study by
W atson W yatt and H ay associates, found higher
pay for low er classifications but low er pay at the
executive level of the federal public service,
com pared to the private sector
It is believed that the Strategic Leadership group
and other key m anagem ent roles are
com pensated at a low er level than Canadian and
Federal peers, and it is therefore anticipated that
bands w ould need to be adjusted up
The issue of executive holdbacks as a
perform ance m anagem ent tool is generally
poorly understood, but needs to be handled w ith
sensitivity nonetheless
The role of Cabinet in com pensation decisions
needs to be carefully considered. If BC m oved
tow ards a standard m arket based process, w ith
no exceptions, it w ould enable Cabinet to largely
rem ove itself from day to day decision m aking.
Cabinet w ould retain authority over approving
the philosophy, fram ew ork and processes
W hile the variation betw een Core G overnm ent and other areas w ithin the Province is of greater concern, it
is im portant to consider how to first resolve any issues w ithin the Core in order to enable sustainable
alignm ent to other areas going forw ard.
Page 33
1.2. Further develop the Core philosophy to create a shared philosophy for the entire
BC Public Sector
G ood w ork w as done several years ago on defining a com m on com pensation philosophy for the Core
G overnm ent. W e w ould recom m end revisiting this and refreshing it as necessary. This philosophy w ould then
be expanded and built out to create a com m on com pensation philosophy across the BC Public Sector,
including the Broader Public Sector and M unicipality.
D uring this exercise, G overnm ent m ay w ish to consider som e of the follow ing questions:
H ow is alignm ent reached across BPS through the use of caps?
Is the current categorization of rem uneration categories for Crow n Corporations appropriate?
If leadership com pensation is tied to the Federal G overnm ent, how is ability to payfactored in?
Can bargaining unit em ployees m ake m ore than m anagem ent level?
Caps in benefits as a percentage of base salary?
H ow to ensure a no exceptionsculture?
H ow to balance / align com pensation against varying local m arket conditions (e.g. labour rates in
V ancouver vs. Sm ithers)?
Should Broader Public Sector/ local leaders be paid m ore than m ost senior Core G overnm ent leaders (e.g.
CEO vs. D M com pensation)?
Consider linkages to G D P forecast?
Page 34
1.3. Establish benchmarking guidelines in the Core, and roll out across Broader Public
Sector and Municipality
There is no clear and consistent fram ew ork or
guidance for benchm arking m ethodology and
approach across either the Provincial G overnm ent
or the M unicipality
Recommendation: Create standardized
benchm arking processes and guidelines on how
com parators should be selected and design rule of
thum btool to enable com parison of sim ilar
occupations (considering, for exam ple, span of
control, responsibilities, etc.). Com m unicate clear
expectations for com pliance.
Implication: This w ould create greater alignm ent
in com pensation but w ould require training and
im plem entation support
Page 35
1.4. Invest in more accessible and comprehensive data in the Core, and roll out across
the Broader Public Sector and the Municipality
The BC G overnm ent does not currently use all
available sources of inform ation to gain a picture of
com pensation across the breadth of G overnm ent. It
should also be noted that the current legislated
sources of data cannot feasibly provide the BC
G overnm ent w ith the m eans to understand
variation in total com pensation across the arm s of
the Provincial and M unicipalities. It w ill also ensure
the various G overnm ent entities have access to
com parable data to support their decision m aking.
The follow ing actions are recom m ended:
1. Build, analyze and use a single com pensation
dataset that covers the BC Public Sector based on
total com pensation (e.g. use at the bargaining
table; in designing trade-offs; im prove
transparency to the public). Core G overnm ent
w ould be the stew ards of this data.
2. R equire the regular electronic reporting of
com pensation of all BC Public Sector em ployees,
including inform ation on all elem ents of total
com pensation, full tim e equivalency and job
descriptions by individual em ployee.
3. D evelop processes and expectations to support
sharing data and best practices across the BC
Public Sector, including the Broader Public Sector
and the M unicipality.
4. Consistently collect and analyse exit interview
data to enable identification of talent m anagem ent
risks.
This w ould require an investm ent in processes
and system s to develop this capability for the
Province. Com m unications w ill be im portant to
ensure consistent inputting and utilization
Page 36
Recommendations > 2. Build governance model to enable alignment
2.1. Establish a model for establishing a harmonized compensation philosophy for the
Municipality
In the Regional and Local m odel, no one party sets
the rules around executive com pensation and
collective bargaining m andates across the entire
sector. This pow er is fragm ented, w ith each m ayor
and council having responsibility for their ow n
jurisdiction. The follow ing options w ere considered:
Option 1: Provincial G overnm ent to issue general
com pensation guidelines and share expectations
around a com m on philosophy that m unicipalities
are expected to adhere to.
Provide standard benchm arking guidelines,
associated tools and processes and access to
data to support a consistent approach
There is no enforcem ent m echanism for non
com pliance
Option 2: Em pow er and create a M unicipality
com pensation Cabinetincluding representatives
from M unicipality and representation from the
Provincial G overnm ent to establish consistent
com pensation philosophy for the m unicipalities
This M unicipality Com pensation Cabinetm ay
believe and end up acting on the belief that it
has greater pow ers and prerogative beyond the
scope of setting com pensation directives that
w ould ultim ately create conflict w ith the
Provincial G overnm ent
It w ould be challenging to determ ine equitable
m eans for selection of this Cabinet
N o certainty that philosophy w ould reflect and
align w ith that in the Core G overnm ent and
Option 3: Establish responsibilities for developm ent
and issuance of single philosophy by Provincial
Cabinet to align com pensation to the greatest
extent possible across the entire BC Public Sector
at all levels w ith associated consequences for non-
com pliance.
Provide standard benchm arking guidelines,
associated tools and processes and access to
data to support a consistent approach
The m andated fram ew ork w ould require
enforcem ent m echanism s as w ell as oversight
through a body such as the A uditor G eneral for
Local G overnm ent
This w ould require significant levels of change
and w ould face m aterial resistance from the
M unicipality and unions to the extent that it
m ight not be feasible to im plem ent such an
option w ithout strong political w ill
Enforcem ent could be im plem ented through the
use of budget caps or other financial levers if
education w asnt effective
Recommendation:
O ption 1 is recom m ended follow ed by O ption 3 if the local G overnm ents dont adopt the provincial
approach. W e believe that providing inform ation, data, tools and setting expectations for a
com m on approach w ill m otivate m ost m unicipalities to com ply, w ithout requiring a heavy handed
approach. It allow s those leaders a chance to do the right thing.
Page 37
2.2. Revisit the role of Crown Corporation boards in establishing Broader Public Sector
compensation
Recommendation:
The G overnm ent m ay w ish to start w ith O ption 2 w ith the clear potential to m ove to O ption 3 if
there is a lack of com pliance / co-operation from the system
The boards of Crow n Corporations lack a consistent
approach and discipline in establishing
com pensation, particularly for the executive ranks.
There m ay be a lack of understanding in term s of
their m andate and direction on behalf of the
shareholder.
The com pensation classification categories that
w ere established in 2007 need to be revisited and
updated.
Option 1: Establish good governance practices for
boards in setting com pensation and provide
m andatory onboarding for all new board m em bers
and retraining of existing boards in term s of their
responsibility to the shareholder and com pensation
fram ew ork (See A ppendix C-21)
G iven the m ix of current director experience,
this approach lacks enforceability
Option 2: In addition to onboarding and expectation
setting process, deploy clear directives around a
shared com pensation fram ew ork and philosophy
and provide tools and access to data to support the
boards in their duties. This includes independent
review and enforcem ent processes
Boards w ill still be seen as involved in
com pensation decisions. There are
consequences for non-conform ance
Option 3: G ive Crow n Corporation com pensation
responsibilities to an independent w age board (e.g.
PSEC), rem oving it from board responsibilities
This w ill rem ove issue of challenges faced by
boards in know ing how to set com pensation and
reduce risk of board capturefrom executives
This reduces pow er of boards and independence
of organizations and w ould require m ore
significant change m anagem ent
This relies on the assum ption of being able to
establish an independent and effective w age
board
Page 38
2.3. Establish a consistent framework to support the implementation and enforcement
of compensation philosophy in the Municipality
Recommendation:
O ption 2 is recom m ended. It is preferable to provide m unicipalities w ith the chance to do the
right thing. If there isnt the expected cooperation, a m ore directive choice could be
considered.
The Regional and Local m odel does not have a
com parable PSEC or the Public Service A gency to
provide strategic advice, co-ordination and
enforcem ent. BC is the only Canadian jurisdiction to
have an A G LG . This initiative has been w idely
applauded, but som e parties suggest that A G LG
could be m andated to focus on com pensation, and
to go beyond validating if policy has been applied,
to investigating w hether outcom es are fair and
equitable. The follow ing options w ere considered:
Option 1: Encourage A G LG to review com pensation
and provide it w ith greater teethin term s of
enforcem ent
This could encourage greater conservatism in
com pensation but w ould not necessarily create
alignm ent
It is still early daysfor A G LG and m ay be
prem ature to m ake significant changes to its
m andate
This w ould face significant opposition from
m unicipalities and unions
Option 2: Em pow er and create a PSEC equivalent
body covering M unicipality to provide strategic
advice, coordination and enforcem ent of a com m on
com pensation fram ew ork
Provide access to data, tools and com m on
process fram ew orks
This m ight encourage greater alignm ent of
com pensation
H ow ever, w ithout central G overnm ent oversight,
there is no certainty that this entity w ould
enforce alignm ent and w ithout robust
governance could be pressured by M unicipality
Option 3: Establish centralized responsibilities,
process and procedures for im plem entation and
enforcem ent of a coordinated directive by
Provincial Cabinet to align com pensation to the
greatest extent possible across the M unicipality
(e.g. through extending PSEC to cover M unicipality
and considering use of Pay Czar) (See A ppendix C-
22)
This w ould create alignm ent and consistency in
approach to com pensation
This w ould require significant levels of change
and w ould face resistance from the
M unicipalities and unions
Page 39
2.4. Simplify governance by aligning Employers Associations in the Broader Public
Sector
Recommendation:
Before taking any action, finalize current review of Provincial governance m odel. W e believe
there is an opportunity to stream line and sim plify the current structure.
W hile Em ployersA ssociations provide sector co-
ordination in response to organized labour in the
Provincial G overnm ent, there is currently
duplication of m andate and a lack of coordination
and know ledge transfer
Option 1: Encourage closer coordination and
know ledge sharing betw een all Em ployers
A ssociations and other entities
Option 2: Collapse the current Em ployers
A ssociations into a single body if possible, or at
least a sm aller num ber
W e recognize that there are other initiatives
exam ining the overall governance m odels
affecting com pensation. W e w ould encourage
this review to look for w ays to sim plify and
stream line the structure, ideally reducing the
num ber of discrete organizations involved
Page 40
2.5. Enable a common bargaining approach in the Municipality
Recommendation:
Com plete current review of governance m odel and look for opportunities to sim plify and align
across jurisdictions.
The M unicipalitys approach to collective bargaining
is highly fragm ented and inefficient. There is an
opportunity to better stream line and coordinate
these processes. The follow ing options w ere
considered:
Option 1: Expand existing entities (Labour
Relations D epartm ent of M etro V ancouver and
G reater V ictoria Labour Relations A ssociation)
to cover all M unicipality
Current trend is one of fragm entation rather
than consolidation and grow th this w ould need
to be turned around. This w ould m aintain
m unicipal autonom y and thereby increase
m unicipal buy in. If the Provincial EA s are to be
consolidated, how ever, this results in a
fragm ented system
Option 2: Provincial G overnm ent to provide
optional Em ployersA ssociation services to
M unicipality
U nlikely to be taken up am ong m unicipalities
given sense of m unicipal autonom y
Option 3: Provincial G overnm ent to m andate use of
either R egional and Local EA services or use of
Provincial provider
G reater coordination in response to organized
labour
Risk of creating a divided system
Option 4: Provincial G overnm ent to m andate use of
Provincial Em ployersA ssociations / consolidated
function
Creates coordination in response to organized
labour. If the Provincial EA s are to be
consolidated, this option w ould result in one
single organization w hich could ensure
coordination across the entire BC Public Sector
Loss of control over com pensation by
M unicipality w ill be strongly resisted, even
though it m eans rem oving duplicated costs and
inefficiencies from the system . Strong
com m unications w ith both internal and external
w ill be required
Page 41
2.6. Evaluate collective bargaining models for the Municipality
Recommendation:
Before taking any action, conduct a m ore detailed review of the current arbitration m odels.
O ption 1 is then recom m ended w ith the potential to m ove to a m ore drastic change if there isnt
cooperation.
There is a m ixed approach to collective bargaining
across the Province, w ith som e pockets of
arbitration for Police and Fire w hich stakeholders
believe m ay be resulting in com pensation
escalation
Option 1: A llow arbitration exceptions to continue
but m ake greater use of ability of Core G overnm ent
to provide specific term s of reference for an
arbitration in order to align outcom es to Provincial
m andates
This w ould create greater com pensation
alignm ent to Provincial m andates
Subject to legal opinion, it is believed that this
w ould require no change in existing legislation
Option 2: Elim inate the arbitration process and
bring Police and Fire under the sam e fram ew ork as
the Broader Public Sector or potentially an
adjudicationm odel
This w ould create greater com pensation
alignm ent to Provincial m andates
This w ould require significant changes in
legislation and w ould create greater resistance
from the Police and Fire services and their
unions
Page 42
2.7. Select strategy to create adherence to philosophy and governance mode
In detailed design, the strategy pertaining to M unicipality, w ill need to be selected from the spectrum
outlined below .
Select level of central Government involvement (See Appendix D for further information on options)
1.
Educate and set
framework of
expectations that is
clearly
communicated
2.
Support parties in
undertaking their
own review
processes
3.
Use financial levers
4.
Legislate changes
Current efforts
focus m ore on total
expenditure than
com pensation
Educating and
setting a fram ew ork
of expectations are
highly restricted in
the Province by data
availability
Before taking any
direct actions,
G overnm ent should
and is expected to,
com m unicate its
expectation
Consider
encouraging the
M unicipality to
initiate and
operate its ow n
review process as
to m odels for
setting
com pensation and
trends in
com pensation, in
order to enable
the sector to
reach its ow n
conclusions
This approach
m ight only serve
to cause delay and
confusion as to
G overnm ent
expectations
There are a
num ber of
financial levers
available:
Tax and
expenditure law s
U nconditional
grant funding
could be m ade
conditional
Zero base
budgeting could
be explored
Fundam entally,
though, evidence
suggests
m unicipalities w ill
take all other cost
reduction
strategies before
cutting salaries
The Province m ay
am end or issue
prim ary legislation
to supersede the
Com m unity
Charter in order to
provide a m eans
to directly control
the issue of
m unicipal
com pensation
Such an approach
w ould m eet high
levels of
resistance from
unions and
m unicipalities
It is proposed that:
A s data and benchm arking capability im proves, increase in education and opportunities to set
a fram ew ork of expectations provide R egional & Local G overnm ent w ith the opportunity to do
the right thingby com plying
W here education and setting of expectation do not yield results, use financial levers to directly
encourage m unicipalities to set com pensation caps and G overnm ent to stop providing funding
once cap has been reached
Page 43
7. Limitations
This report is confidential. It has been prepared by
Ernst & Young LLP, Canada (EY ) solely for the
G overnm ent of British Colum bia for the purpose
stated and should not be used for any other
purpose. This Report is subject to the term s and
conditions outlined in the engagem ent letter
betw een EY and the G overnm ent of British
Colum bia.
This report should not be provided to any other
third party w ithout the prior w ritten consent of EY .
N one of EY, Ernst & Young G lobal Lim ited, any
other m em ber of the global netw ork of Ernst &
Young, nor their subcontractors, m em bers,
shareholders or directors, officers, partners,
principals or em ployees (collectively EY persons)
w ill accept any responsibility for loss occasioned to
any person acting or refraining from action as a
result of any m aterial in this report.
A ll the inform ation and data w e have received from
the G overnm ent of British Colum bia or its
representatives is the responsibility of the
G overnm ent of British Colum bia. W e have not
sought to establish the reliability of inform ation
given to us except as specifically stated in this
report.
W e w ish to place on record the assistance w e have
received from stakeholders w ithin the BC Public
Sector in preparing this report.
Page 44
A
p
p
e
n
d
i
c
e
s
D Spectrum of strategies for Local Government
A Approach to building the evidence base
B Total Public Sector wages
C
Supplementary evidence
45
49
51
81
APPENDICES
Page 45
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1
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e
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9
D
e
c
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D
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d
a
y
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r
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Week # >> 123456789
1
0
1
1
1
2
Project planning & launch
Build R ound 1evidence base
R ound 1interview s
R ound 1data collection & analysis
Light jurisdictional review
Synthesis & validation w ith SC
Build R ound 2evidence base
R ound 2interview s
R ound 2data collection & analysis
D etailed jurisdictional / lit.review
O pportunity / im provem entanalysis
V alidation of findings w ith SC
D rafting of finalreport
Appendix A. Approach to building the evidence base
The evidence base presented in this Review w as built through data collection and analysis, research,
benchm arking and a series of interview s. The R eview w as conducted betw een N ovem ber 2013 and
February 2014. The w ork-plan below indicates at a high level how the project w as executed.
10
th
D ec
28
th
Jan
EY
SC
K
E
Y
(1) SC = Steering Com m ittee; PSEC = Public Sector Em ployersCouncil; A G LG = A uditor G eneral
for Local G overnm ent; SM A s = Subject M atter A dvisors; CFIB = Confederation of Independent
Business; PSA = Public Sector A gency; FIA = Financial Inform ation A ct
PSEC
Public Service A gency
M inistry of Finance
A G LG
Local G overnm ent D ep.
EY G lobal SM A s
PSEC data
FIA data
PSA data
Stats Canada data
G overnm ent of BC
BCBC
G overnm ent of O ntario
EY G lobal SM A s
A dditional PSEC data
Public sources
SC
M eeting
Page 46
K ey stakeholders w ere interview ed in order to gain insights into current state and opportunities for
im provem ent. Interview s w ere conducted w ith the follow ing key stakeholders in order to understand:
current m odels for setting com pensation in BC and other jurisdictions, recent trends in com pensation, and
to identify potential areas of opportunity in BC for further research and consideration.
Organization Name Role
M inistry of Finance
Cheryl W enezenki-Y olland
A ssociate D eputy M inister, M inistry of
Finance
D oug Foster A D M , Strategic Initiatives
Public Service A gency Lynda Tarras
D eputy M inister of the Public Service
A gency
A uditor G eneral for
Local G overnm ent
Basia Ruta A uditor G eneral
M ark Tatchell D eputy A uditor G eneral
Public Sector
Em ployersCouncil
Secretariat
Lee D oney CEO
Christina Zacharuk Executive D irector
Tim Jah
D irector, Com pensation D ata and
R esearch
Jonathan Fow eraker M anager, Com pensation D ata & Research
Tom V incent V ice President
D epartm ent for Local
G overnm ent
Julian Paine A D M for Local G overnm ent
G lobalSubject M atter
A dvisors
Jam es Lahey
A uthor of: Controlling Federal
Com pensation Costs
M ark Phillips
H ead of EY s A sia Pacific H um an Capital
Practice
Charles-A ntoine St-Jean Form ercom ptroller general of Canada
G overnm ent of British
Colum bia
John D yble
D eputy M inister to the Prem ier and
Cabinet Secretary and H ead of the Public
Service, O ffice of the Prem ier
British Colum bia
Business Council
G reg D A vignon Presidentand CEO
Jock Finlayson
Executive V ice President and Chief Policy
O fficer
G overnm ent of O ntario LaurelBroten Form er M inisterof Education in O ntario
Page 47
BC M inistry of Com m unity Services, Prim er of Regional D istricts in British Colum bia(2006)
BC Public Service A gency, D eputy M inister and A ssistant D eputy M inister Review : Com pensation U pdate
(2013 b)
BC Public Service A gency, Strategic Leadership Review : Com pensation Challenges(2013 a)
Bennion (2010), A Com parison of O perational Perform ance: W ashington State Ferries to Ferry O perators
W orldw ide (2010)
Business Council of British Colum bia, Policy Perspectives, U p and A w ay: The G row th of m unicipal
Spending in M etro V ancouver(2012)
Canadian Coalition for G ood G overnance, Best Practices in Executive Com pensation R elated Inform ation
(2009)
Canadian Federation of Independent Businesses, Big City Spenders: A n A nalysis of m unicipal Spending
Trends w ith a Focus on V ancouver, Toronto and M ontreal(2013)
Canadian Federation of Independent Businesses, British Colum bia m unicipal Spending W atch(2008)
Canadian Federation of Independent Businesses, BC m unicipal Spending W atch 2013: Trends in O perating
Spending, 2000-2011(2013)
Canadian Taxpayers Federation, Rein in the Crow ns! 2014-15 Pre Budget Subm ission, British Colum bia
Select Standing Com m ittee on Finance and G overnm ent Services,(2013)
Canadian U nion of Public Em ployees, Battle of the W ages: W ho gets paid m ore, public or private sector
w orkers?(2011)
Cullw ick (2005), Com pensation G overnance: w hat m unicipalities need to change(2005)
D .Lew in, The N ew G reat D ebate about U nionism and Collective Bargaining in U .S. State and Local
G overnm ents(2012)
D ave M itchell & A ssociates, Colum bia Shusw ap Regional D istrict Fire Services Review : G overnance,
Structure and A dm inistrative System s(2009)
Federation of Canadian m unicipalities International Centre for m unicipal D evelopm ent, Your G uide to
m unicipal Institutions in Canada(2006)
Federation of Canadian m unicipalities, Tow ards Equity and Efficiency in Policing: A Report on Policing
Roles, Responsibilities and R esources in Canada(2010)
I.Cullw ick (2005), Com pensation G overnance: W hat m unicipalities N eed to Change(2005)
ICPS, m unicipal O rganization in Canada, Tradition and Transform ation V arying from Province to
Province(2003)
In addition, a review w as conducted of Com m unity of Interest literature w hich in som e cases w as taken to
directly or indirectly represent the opinions of taxpayers.
Page 48
Independent Contractors and Businesses A ssociation of British Colum bia, Construction M onitor(2012)
J.Lahey, Controlling Federal Com pensation Costs: Tow ards a Fairer and M ore Sustainable System (2010)
L.Troy, A re m unicipal Collective Bargaining and m unicipal G overnance Com patible(2003)
M inistry of Com m unity, Sport and Cultural D evelopm ent, Statistics Relating to Regional and M unicipal
G overnm ent in BC(2011)
Public Sector Em ployersCouncil Secretariat, A G uide to Excluded and Executive Com pensation In the
British Colum bia Public Sector(2009)
BCPSEA , Public Sector M anagem ent and Executive Com pensation Freeze(2012)
R.L.Bish, The Cost of m unicipal Elected O fficials in the Capital Region of British Colum bia(1999)
R.Young, M ultilevel G overnance and Public Policy in Canadian m unicipalities: Reflections on R esearch
Results(2013)
T.Reilly, Public Sector Com pensation in Local G overnm ents A n A nalysis(2005)
The A ssociation of Professional Engineers and G eoscientists of British Colum bia, R eport on M em bers
Com pensation and Benefits(2012)
The Fraser Institute, Com paring Public and Private Sector Com pensation in British Colum bia(2013)
The Fraser Institute, W age board: The solution to reining in public sector com pensation(2012)
The School of Public Policy, U niversity of Calgary, G overnm ent-ow ned Enterprises in Canada(2013)
Treasury Board of Canada Secretariat, Review of the G overnance Fram ew ork for Canadas Crow n
Corporations(2005)
Treasury Board of Canada, Report of the Review of the Public Service M odernization A ct, 2003(2011)
U nion of BC m unicipalities, Local G overnm ent in British Colum bia a com m unity effort(2006)
W estern Com pensation and Benefits Consultants, Report on Com pensation Paid to Excluded Em ployees,
prepared for the Post-Secondary Em ployersA ssociation(2009)
Page 49
Appendix B. Total Public Sector wages
Sources:
D ata point for Local general G overnm ent: Statistics Canada, Public sector em ploym ent, w ages, salaries, seasonally unadjusted
and adjusted, m onthly(M ar 2012)
A ll data points except Local general G overnm ent: PSEC, M inistry of Finance(2013)
Em ploym ent num bers represent num ber of em ployees, and not full-tim e equivalents
Em ploym ent num bers include both full-tim e and part-tim e em ployees
D ata derived from m andatory questionnaires sent to all institutional units controlled and
m ainly financed by G overnm ent
Crow n Corporation and a G overnm ent business enterprise are both controlled by
G overnm ent but the latter derives m ore than 50% of its revenue through its com m ercial
activities; Business enterprises are reported as a unique line item ; Crow n Corporations are
believed to be included in the category of general G overnm ent
This survey w as discontinued as of M arch 2012
Data commentary
Number of employees across the BC Public Sector (March 2012)
0 100 200
H ealth Sector
Education
Local general governm ent
Public Service
U niversities
Colleges and Institutes
Crow n Corporations
Com m unity Social Services
Thousands
4%
5%
7%
7%
7%
13%
18%
38%
There are ~446,000 individuals em ployed in the BC Public Sector as of 2013. M unicipality accounts for 13%
of all em ployees.
N um ber of em ployees (000s)
% of total
Provincial
Regional and local
K
E
Y
Page 50
Appendix B. Total Public Sector wages
Source: Canadian Taxpayers Federation, Rein in the Crow ns(2013)
G iven the per capita cost of Public Sector w ages and salaries, there is increasing evidence that stakeholders
are uneasy about issues in Public Sector com pensation and are taking m atters into their ow n hands.
Poll Question: Taxpayers cant afford to pay more to
Government employees (BC respondents)
0 5 10
H ealth Sector
Education
Public Service
Local general governm ent
U niversities
Crow n Corporations
Colleges and Institutes
Com m unity Social Services
Source: Canadian Taxpayers Federation, Tim e
to sink BC Ferries G ravy Boat(2013)
Case study: Petitions in BC
In 2013, The Canadian Taxpayers
Federation launched a petition to
encourage the BC G overnm ent to m ake
BC Ferries m ore accountable to
taxpayers and to cut back executive
pay. The petition called for changes to
BC Ferriesenabling legislation to m ake
the corporation subject to G overnm ent
rules around executive com pensation,
bonuses and collective bargaining
m andates and to m ake BC Ferries
directly accountable to the M inister of
Transportation
Total wages and salaries for public sector employees (J an 2011 to Dec 2011)
131
240
415
415
524
524
1004
2772
Per capita cost ($)
Totalcost ($BN )
Total w ages and salaries for all BC Public Sector em ployees is $27.6BN , collectively representing a per
capita cost of ~$6,024.
0% 20% 40% 60% 80%
Strongly agree
M oderately agree
M oderately disagree
Strongly disagree
N ot sure
% of respondents
Provincial
Regional and local
K
E
Y
Sources:
D ata point for Local general G overnm ent: Statistics Canada, Public sector em ploym ent, w ages, salaries, seasonally unadjusted
and adjusted, m onthly(M ar 2012)
A ll data points except Local general G overnm ent: PSEC, M inistry of Finance(2013)
Page 51
0 20,000 40,000 60,000 80,000100,000
M anagers in Financial and Business
Services
M anagers in H ealth, Education, Social
and Com m unity Services
M anagers in Public A dm inistration
Comparison of Provincial and Regional and Local compensation Management (2006)
Source: Statistics Canada, Census data(2006)
Incom e
A
850 175
240 50
100 50
Appendix C-1. Analysis of Census data
A nalysis of the 2006 Census data indicates that a m ajority of m anagers in the M unicipality received higher
com pensation than peers in the Provincial G overnm ent. For m anagers in public adm inistration and m anagers
in Financial and Business Services, M unicipality typically pays higher com pensation than Provincial
G overnm ent.
Provincial
R egional and
Local
N um ber of provincial respondents
N um ber of Regional and Local respondents
A
D ata assum ed to include base salary only
Provincial
Regional and local
K
E
Y
Page 52
0 20,000 40,000 60,000
H um an R esources and Business Services
Professionals
A uditors, A ccountants and Investm ent
Professionals
Clerical Supervisors
A dm inistrative and R egulatory
O ccupations
Recording, Scheduling and Distributing
O ccupations
A dm inistrative Support Clerks
Finance and Insurance A dm inistrative
O ccupations
Finance and insurance clerks
Clerical O ccupations, G eneral O ffice Skills
Library, Correspondence and Related
Inform ation Clerks
Secretaries, Recorders and
Transcriptionists
O ffice Equipm ent O perators
M ail and M essage Distribution
O ccupations
Comparison of Provincial and Regional and Local compensation Finance and Admin (2006)
Incom e
A
90
260 240
875 775
985 405
2385 2125
870 925
630 115
1580 770
195 685
2425 880
360 260
1310 400
725 235
Provincial R egional and
Local
In all but three of the thirteen job categories reported in Census 2006 data under Business, Finance and
A dm in occupations, M unicipality respondents reported receiving higher com pensation from their em ployer
than Provincial G overnm ent respondents. It m ay be of note that com parison betw een Finance and
Insurance occupations m ay be skew ed by respondents w orking for ICBC.
A
Provincial
Regional and local
K
E
Y
Page 53
Comparison of Provincial and Regional and Local compensation Natural Science (2006)
0 20,000 40,000 60,000 80,000 100,000
Civil, M echanical, Electrical and Chem ical
Engineers
Technical O ccupations in Physical
Sciences
A rchitects, U rban Planners and Land
Surveyors
O ther Technical Inspectors and
R egulatory O fficers
Com puter and Inform ation System s
Professionals
Life Science Professionals
Technical O ccupations in Com puter and
Inform ation System s
Technical O ccupations in Civil,
M echanical and Industrial Engineering
Technical O ccupations in Life Sciences
Technical O ccupations in Electronics and
Electrical Engineering
Technical O ccupations in A rchitecture,
Drafting, Surveying and M apping
O ther Engineers
M athem aticians, Statisticians and
A ctuaries
Physical Science Professionals
165
65
155
170 340
20 120
1250 300
45 290
315 180
1180 80
1285 430
375 870
115 865
90 100
235 620
Incom e
A
Local
For seven of the job categories reported in Census 2006 data under N atural sciences occupations,
M unicipality respondents reported receiving higher com pensation from their em ployer than Provincial
G overnm ent respondents. Provincial com pensation is higher for only four of the job categories reported.
A
Provincial
Regional and local
K
E
Y
Page 54
0 40,000 80,000 120,000
Judges, Law yers and Q uebec N otaries
Policy and Program O fficers,
Researchers and Consultants
College and O ther V ocational Instructors
Psychologists, Social W orkers,
Counsellors, Clergy and Probation
O fficers
Paralegals, Social Service W orkers and
O ccupations in Education and Religion,
n.e.c.
Comparison of Provincial and Regional and Local compensation Social Science (2006)
Source: Statistics Canada, Census data(2006) Incom e
A
1615 470
2320 50
100 60
1675 860
1110 55
The trend of higher com pensation for M unicipality, how ever, is reversed for social science and education
w ith all job categories having sim ilar or greater com pensation for Provincial G overnm ent respondents.
Local
A
Provincial
Regional and local
K
E
Y
Page 55
Appendix C-2. Since 1993, bargaining within the Provincial Government
has been governed by mandates established by the Government
2008 2010 2012 2014
The 2010 N et Zero M andate
applies to all public sector
em ployers w hose collective
agreem ents expired on or after
D ecem ber 31, 2009.
Collective agreem ents that expired
in 2010 or 2011 and that have not
yet been renegotiated m ust m eet
the N et Zero M andate for tw o
years. W hile there are outstanding
agreem ents still being negotiated
w ith som e unions under the 2010
m andate, virtually all of BCs
public sector collective
agreem ents covered by the 2010
m andate are now settled for tw o
years of net zero.
U nder the 2010 M andate,
negotiators are seeking to m ove
m oney from one part of the
collective agreem ent to another
any im provem ents in the collective
agreem ents have to be offset by
savings in other com pensation
areas.
The 2012 Cooperative G ains
M andate applies to all public
sector em ployers w hose
collective agreem ents expire on
or after D ecem ber 31, 2011.
The key feature of the
Cooperative G ains M andate is
that it provides public sector
em ployers w ith the ability to
negotiate m odest w age increases
m ade possible by productivity
increases w ithin existing budgets.
Settlem ents under the
Cooperative Gains M andate are
expected to be unique and
differentiated betw een sectors
and betw een em ployers in som e
sectors as each w ill depend on a
num ber of factors, particularly
the ability to generate savings to
fund m odest com pensation
im provem ents.
The Econom ic Stability M andate
applies to all public sector
em ployers w ith unionized
em ployees w hose collective
agreem ents expire on or after
D ecem ber 31, 2013.
The m andate provides em ployers
the ability to negotiate longer-
term agreem ents w ithin a fixed
fiscal envelope and offers public
sector em ployees an opportunity
to participate in the Provinces
econom ic grow th through the
Econom ic Stability D ividend if
actual real G DP grow th is one
percentage point above forecast
real G D P grow th, then a 0.5 per
cent w age increase w ould result,
beyond w hatever w age increase
had been negotiated in the
contract.
Settlem ents are expected to be
unique betw een sectors and
reflect G overnm ents priorities of
having labour stability and
affordable service delivery
throughout BC
Net Zero Mandate Cooperative Gains Mandate Economic Stability Mandate
A
p
p
l
i
e
s
t
o
K
e
y
f
e
a
t
u
r
e
s
In recent years, three m andates have been issued covering unionized em ployees.
1
O n econom ic stability: There is a dim ension to this that is new and novel, and one that I'd be kidding
if I didn't say I'm intensely interested and excited about. U nder this m echanism , public sector w orkers
w ill share in the benefits that flow from that additional grow th. W e think that's appropriate.
Michael De J ong, Minister of Finance & Government House Leader, BC Provincial Government
1
G overnm ent of BC, `Public Sector Em ployers 'Council Secretariat`(2013)
Page 56
PSEC firstly creates a classification structure for
Broader Public Sector entities, including, for
exam ple, Crow ns, H ealth A uthorities, Colleges and
U niversities, but excluding those entities w ithin the
Broader Public Sector w hich have elected boards
(such as school boards).
The w ay these Broader Public Sector entities are
classified w as last set in 2008. Stakeholders
com m ented that since 2008 there have been som e
m inor adjustm ents but the categorization system for
the Broader Public Sector has not been re-opened or
review ed.
Appendix C-3. Process for setting executive and management
compensation in the Broader Public Sector
Development of executive compensation plans in the Broader Public Sector
Cabinet and Minister PSEC Employer
Policy
approved
Executive com p policy
developed
Policy D rafted
Em ployer Exec Com p Plan
2
N o
Exec Com p Plan
approved
Executive Com p Plan
D evelop Executive
Com pensation plan
1
Y es
N o
Y es
Im plem entation of com p Plan
1 Com pensation plans subm itted to PSEC include:
Labour m arket analysis
D em onstrated rationale for changes
Linkage to corporate strategic plan
Com pensation costing (salary, benefits, perquisites)
2 PSEC conducts due diligence and drafts decision note:
A ssessm ent of proposal against policy/ m andate
Consultation w ith em ployersassociation
Com parative check across public sector
Consultation w ith responsible m inistry
Consultation w ith em ployer as necessary
Feedback from som e stakeholders indicated that
the current classification categories are perceived
to be illogical and inconsistent. Representatives
from PSEC observed, how ever, that the levels are
'ageing w ell' in the current labour m arket and
econom ic environm ent, but speculated that this
w ould not be the case w ere BC to experience strong
econom ic grow th.
PSEC has established caps for CEO total
com pensation for each of these classifications. In
addition, policy requires that executive
com pensation in Crow ns not exceed 85% of CEO
salary. Each entity develops its ow n executive
com pensation philosophy and applies this to
develop an executive com pensation plan -
theoretically w ithin these tw o param eters.
Page 57
M andate
approved
M andate concept
developed
D evelopm ent of
policy
Em ployer G uide to
M andate (EG M )
Em ployer G uide to
M andate (EG M )
N o
Yes
D irection Letter D irection Letter
Cabinet and Minister PSEC Employer
Setting the mandate for compensation of management and excluded employees in the Broader Public Sector
Employers Association
Exceptions to the salary plans m ay be allow ed, but m ust be approved.
W ith executive com pensation plans agreed, each organization w ill build, w ith PSECs advice, a senior
m anagem ent com pensation grid. For exam ple, each school district has its ow n w age grid. PSEC w orks to
ensure general com parability across grids betw een sim ilar organizations in the sam e sectors. Individual
em ployees are then placed w ithin salary grids. G eneral increases in com pensation are applied to the grids in
aggregate.
Appendix C-3. Process for setting executive and management
compensation in the Broader Public Sector
Page 58
Appendix C-4. Process for setting compensation for employees covered
under collective agreements in the Broader Public Sector
Cabinet and
Minister
PSEC Employer
Setting the mandate for unionized bargaining in the Broader Public Sector
Employers
Association
M andate
approved
M andate concept
developed
D evelopm ent of
policy
Em ployer G uide to
M andate (EG M )
Em ployer G uide to
M andate (EG M )
Bargaining Plan D evelop
Bargaining Plan
D evelop
Bargaining Plan
N o
Yes
Barg.
Plan
A pproved
Bargaining
D irection Letter
Bargaining
D irection Letter
Bargaining
Com m ences
Bargaining
Com m ences
N o N o
Yes
Yes
Page 59
Appendix C-5. Compensation philosophies applied by the Broader Public
Sector entities
Organization Comparators Percentile
V ancouver School D istrict
Labour m arket includes other BC school districts, other Canadian
school districts, other public sector organizations, selected private
sector organizations
50th
G reater V ictoria N o publicly available com pensation philosophy found
Kam loops School D istrict BC School districts w ith 10,001 to 20,000 FTE students 75th
Sim on Fraser U niversity Undefined N /A
U niversity of British Colum bia
Com pensation values for senior adm inistrative roles reflect a
w eighting of public and private sector values, w ith a clear
w eighting in favour of the public sector, and m ore particularly
U BCs university com petitors in Canada and internationally
N /A
D ouglas College O ther post secondary and public sector em ployers N /A
N orthern Lights College Post secondary industry 50th
V ancouverIsland H ealth A uthority,
ProvincialH ealth Services
A uthority, Interior H ealth A uthority
H EA BC develops salary ranges based on 50th percentile of the
blended healthcare and external m arket pay policy guidelines.
Em ployers are responsible for conform ing to the salary ranges by
ensuring the organization's overall com parison ratio is w ithin 90%
and 110% of the appropriate m arket reference rates
50th
N orthern H ealth A uthority U ndefined targeted m arket 50th
BC H ydro
BC H ydro target m arket includes other Canadian electric utilities
and general industry com panies of a sim ilar size w hich includes
public and private sector organizations
50th
BC A ssessm ent A uthority
The external m arketplace includes an appropriate m ix of public
and private sector organizations and is also sensitive to the
property assessm ent sector in w hich BC assessm ent com petes for
em ployees
50th
BC Pavilion Corporation U ndefined m arket 75th
Insurance Corporation of British
Colum bia
In 2012, ICBCs com parator m arket included Canadian public and
casualty insurance com panies (including SGI and M PI), Canadian
public sector and general industry com panies
50th
Page 60
The Provincial m odel seeks to balance the strengths of decentralized service delivery w ith enhanced central
authority
1
. The diagram below indicates the principal parties involved in the Provincial G overnm ent m odel.
Appendix C-6. Models in the Core and the Broader Public Sector
Organizations involved in setting compensation in the Provincial Government
(1)
Core
PSA
C
Minister of Finance
PSEC
(2)
Crowns
CCEA
(3)
Schools
BCPSEA
(4)
Colleges
PSEA
(5)
Unis.
UPSEA
(6)
Health
HEABC
(7)
Social
CSSEA
All 19
ministries
and agencies
and some
smaller
Crowns
27 Crowns
D
60 Public
Boards and
education
D
19 post
secondary
employers
D
6 major
universities
in British
Columbia
D
7 Health
authorities
D
~200 orgs.
covering
aboriginal
services,
community
living
services, and
general
services
D
Unions and employees
PSA
CCEA
PSEA
BCPSEA
Public Service Agency
Crown Corporat ions Employers Associat ion
Post Secondary Employers Associat ion
BC Public School Employers Associat ion
A
BC Ferries, BCIM C do not fall under the Public Sector Em ployersA ct
B
Each em ployer w ill have its ow n collective agreem ent w ith unions each agreem ent m ay include different provisions for benefits,
salary and other benefits
C
Public Service Agencyis responsible for som e sm aller Crow ns such as the British Colum bia Pension Corporation and D estination BC
D
N um bers in the diagram above indicate num ber of organizations for w hich EA is responsible additional entities exist
1
Source: Korbin J, The Report of the Com m ission of Inquiry into the Public Service and Public Sector(1993)
Broader Public Sector governed by the Public Sector
Em ployers A ct
The Public Service -
G overned by the
Public Service A ct
UPSEA
HEABC
CSSEA
Universit y Public Sect or Employers Associat ion
Healt h Employers Associat ion of BC
Communit y & Social Services Employers Associat ion
E
x
c
l
u
d
e
d
e
n
t
i
t
i
e
s
:
B
C
F
e
r
r
i
e
s
,
B
C
I
M
C
A
E
m
p
l
o
y
e
r
s
A
s
s
o
c
i
a
t
i
o
n
E
m
p
l
o
y
e
r
s
C
o
l
l
e
c
t
i
v
e
a
g
r
e
e
m
e
n
t
s
B
Boards Boards Boards Boards Boards Boards
Page 61
The diagram below indicates the principal parties involved in the setting of com pensation in the M unicipality. In
sum m ary, the m odel is decentralized and fragm ented.
Organizations involved in setting the compensation in the Municipality
(1)
Municipal
Government
No Government prerogative to direct public sector compensation
No body for setting and coordinating strategic direction
(2)
Regional
Government
(3)
Fire services
(4)
Police
Services
160
municipalities
11 police
forces
(5)
TransLink
A&B
1
organization
152 fire
departments
28 regional
districts
Unions and employees
Boards Boards Board
E
m
p
l
o
y
e
r
s
A
s
s
o
c
i
a
t
i
o
n
E
m
p
l
o
y
e
r
s
C
o
l
l
e
c
t
i
v
e
a
g
r
e
e
m
e
n
t
s
A
Labour Relations D epartm ent of M etro V ancouver;
B
G reater V ictoria Labour Relations A ssociation
1
J.Lahey, Controlling Federal Com pensation Costs: Tow ards a Fairer and M ore Sustainable System (2010)
Som e academ ic literature considers that decentralized m odels m ay enable operational m anagers to align
com pensation w ith w ork design
1.
Senior stakeholders in BC, how ever, com m ented that in their
experience highly decentralized m odels result in sub-optim al outcom es w ith significant and unfair
variation.
Appendix C-6. Models in the Municipality
Page 62
In 2012, the CEO of BC Ferries earned a total
rem uneration of $563,000 (including base salary,
incentive pay, pension, executive retirem ent plan,
benefits, and vehicle expense). In the sam e year, the
CEO of W ashington State Ferries received
~$166,000. O n the face of it, there is a clear
argum ent for considering W ashington State Ferries
executive com pensation w hen setting com pensation
for BC Ferries.
Appendix C-7. Comparison of BC Ferries to Washington State Ferries
Comparison between BC Ferries and Washington State Ferries
1
Year BC Ferries Washington State
Ferries
O w nership Public/ Private Publically O w ned
N o. of em ployees 2009 3480 1768
N o.of term inals 2009 47 20
N o.of vessels 2009 36 20
N o. of total routes 2009 25 9
N o. of annualpassengers 2009 20.7 m illion 22.4 m illion
N o.of annual vehicles 2009 8.1 m illion 9.9 m illion
% O n tim e departures (<10 m ins) 2009 88.5% 92.9%
Total operating expenditures 2009 $502.5M M $225.8M M
CEO totalcom p (CA N $) 2012 $563,000 $165,943
BC Ferries, how ever, goes to som e lengths to justify
w hy it does not benchm ark to W ashington State
Ferries.
1
BC Ferry Services Inc., Coastal Ferry A ct- Executive Com pensation D isclosure, (2013)
Page 63
Appendix C-8. Governance structure of BC Ferries
The A uthority m ust not approve an executive
com pensation plan for BCFS unless the plan
1
:
(a) establishes the m ethodology by w hich
rem uneration for the executives is to be
determ ined, w hich m ethodology m ust result in
rem uneration for each executive of BCFS that is,
(i) subject to subparagraph (ii), consistent
w ith the rem uneration provided to individuals
w ho, in organizations in Canada that are of a
sim ilar size and scope to BCFS, perform
sim ilar services or hold sim ilar positions to
that executive of BCFS,
(ii) not greater than the rem uneration that
provincial public sector em ployers in British
Colum bia provide to individuals w ho, in those
organizations, perform sim ilar services or hold
sim ilar positions to that executive of BCFS,
U nder its legislation, BC Ferry A uthority is only
required to align executive com pensation in BC
Ferries to peers in Canada w hich thereby
excludes W ashington state ferries
U nder its enabling legislation, British
Colum bia Ferry Services, is not subject to
G overnm ent rules around executive
com pensation, incentive pay and collective
bargaining m andates. Both the A uthority and
BC Ferries operate independently of the
Provincial G overnm ent.
Ferry A uthority
BC Ferries
Purpose: is to appoint
directors of BC Ferries and
establish com pensation
plans for directors and
certain executive officers
A 2009 review by the O ffice of the Com ptroller G eneral found BC Ferries to be w ell m anaged w ith the
exception of board and executive com pensation
In 2013, it w as m ade public that BC Ferries CEO M ike Corrigan m ade m ore than the top three
W ashington State Ferries executives com bined
2
In 2013, the Transportation M inister w as forced to intervene in executive com pensation at BC Ferries.
The M inister directed the organization to conduct its ow n review of executive com pensation. H is
expectation w as for a plan that w ill bring executive com pensation at BC Ferries into line w ith executive
com pensation across the public service and other Crow n corporations
BC Ferries agreed to im plem ent holdbacks, but there w as no broader alignm ent of com pensation
levels. Board Chair D onald H ayes com m ented: W e have m ade the decision to voluntarily agree to
direction to com ply w ith the holdback principles of the Crow n com pensation guidelines, w hich m eans
that our bonus program is being discontinued and replaced w ith a holdback system under the salaries.
1
BC Law s, Coastal Ferry A ct(2014)
2
BC Ferry Services Inc., Costal Ferry A ct Executive Com pensation D isclosure(2013)
While legislation mandates alignment of BC Ferries executive compensation to that of other Provincial
Public Sector employers, the system is broken
The Governance structure of BC Ferries mandates alignment with the Provincial Public Sector
Page 64
Appendix C-9. Case studies around Municipality capabilities to set
compensation
Source: The N ew s, M aple Ridge council votes for
raise(2011)
Maple Ridge Case Study: Council compensation
Citizen com m ittees: A s one counsellor
com m ented in the face of proposed salary
increase: I think w e need the exam ination
from a citizenscom m ittee. Just to m ake sure
w e are doing the right thing.
Polls: O ne counsellor voted against a
recom m ended increase after using his
Facebook page to poll to w hich 30 responses
w ere received as to how the public felt.
Benchm arking: A review in 2008 resulted in a
raise of 53% for councillors, w hile the m ayors
salary jum ped 28%. In the w ords of one
councillor, the w hole benchm arking approach
creates a snow balleffect
Case study: Examples of wage control
In 2014, the city council in Calgary froze its
ow n salaries and held non union w ages to a
1.8% increase for 2014
1
Edm onton is considering a w age freeze for
its w orkers to keep taxes dow n in 2013
2
In N ew Brunsw ick, city em ployees including
the police departm ent, have agreed to a
tw o-year w age freeze in 2012
3
Sources:
1
Calgary H earald, Council freezes their ow n salaries
(2013)
2
CBC, W age freeze needed for city w orkers(2013)
3
CBC, Saint John firefighters w in pay hike in
arbitration(2012)
No evidence was found of other jurisdictions in
Canada setting consistent regional philosophies
apart from in the face of extreme fiscal pressure.
Evidence indicates that smaller municipalities lack
capabilities and expertise with which to set
compensation
Page 65
Appendix C-10. PSEC, and the Public Service Agency provide advice, co-
ordination and enforcement in the Provincial Government & AGLG audits
Local Government
1
G overnm ent of BC, Public Sector Em ployers A ct(2013)
2
BC Law s, A uditor G eneral for Local G overnm ent A ct(2013)
Public Sector Employers Council
1
: PSEC consists of
the M inister, w ho chairs the Council, and the
follow ing m em bers appointed by the Lieutenant
G overnor in Council:
N ot m ore than 7 persons each of w hom is
either a m em ber of the Executive Council or a
deputy m inister;
A person nom inated by each of the em ployers'
associations
The head of the Public Service A gency
The functions of the Council are to:
Set and coordinate strategic directions in
hum an resource m anagem ent and labour
relations
A dvise the G overnm ent on hum an resource
issues w ith respect to the public sector
Provide a forum to enable public sector
em ployers to plan solutions to hum an resource
issues consistent w ith cost efficient and
effective delivery of services in the public
sector
U nder the term s of the Public Sector Em ployers A ct,
PSECs responsibilities apply to all public sector
em ployers, w here public sector em ployers are
defined as:
The G overnm ent
Crow n corporations
School Boards
Colleges
U niversities
H ealth care em ployers
Social services em ployers
Public Service Agency: U nder a provision pertaining
to personnel m anagem ent in the public service,the
Public Sector A ct defines the Public Service A gencys
responsibilities as including advising the M inister
respecting personnel policies; recruiting, selecting
and appointing em ployees; overseeing staff training
and carrying out research on com pensation.
Indeed the original vision for the Public Service
A gency as defined in the Com m issions 1993 report
w as for it to have responsibility for Strategic H um an
R esources.
AGLG: The office of the A uditor G eneral for Local
G overnm ent (A G LG ) w as established in A pril 2012
through the A uditor G eneral for Local G overnm ent
A ct.
This A ct states that the purpose of A G LG is to
conduct perform ance audits of the operations of
local G overnm ents in order to provide local
G overnm ents w ith objective inform ation and relevant
advice that w ill assist them in their accountability to
their com m unities for the stew ardship of public
assets and the achievem ent of value for m oney in the
operations.
A G LG , like its federal and provincial counterparts,
w ill be lim ited in that it w ill not question the m erits
of policy decisions or objectives of a local
G overnm ent. A G LG w ill therefore only com m ent on
the quality of policy im plem entation. A G LG w ill also
provide non-binding recom m endations to the audited
local G overnm ents through publically released
reports.
2
W hile A G LG plans to conduct a perform ance audit of
M anaging the Inherent Risks of Lim ited H um an
Resources w ithin Sm all Local G overnm ents, it does
not currently have a publicly stated plan to review
com pensation as a specific issue.
Page 66
Oversight
body
Province Enforcement mechanism
A
Provincial Government /
private wage differential
1
Y ukon G overnm ent of Y ukon N o legislated enforcem ent m echanism or coordination.
N orthw est
Territories
Territorial
G overnm ent
Public Service A ct for the GN W T; Canada Labour Code for the
tw o separate school boards (The tw o local school boards are
not part of the public service and negotiate their ow n
contracts); N o legislated enforcem ent m echanism or
coordination.
N ew foundland Provincial G overnm ent Labour Relations A ct
Prince Edw ard
Island
Provincial G overnm ent N o legislated enforcem ent m echanism or coordination.
N ova Scotia
Public Service
Com m ission
Lim ited coordination: N S Public Service Com m ission ("Public
Service A ct") encom passes broad public sector -not
bargaining agent -provides strategic advice and input; gains
authority and enforcem ent m echanism through a variety of
A cts.
N ew Brunsw ick
Board of M anagem ent
(Cabinet Com m ittee)
Lim ited public sector, but centrally coordinated; lim ited
legislated authority in the Public Service Labour Relations
A ct.
Q uebec
Treasury Board
Secretariat
G overnm ent sets m andates and co-ordinates bargaining; m ost
centralized province outside of BC;governed by legislation A ct
Respecting the Process of the N egotiation of Collective
A greem ents in the Public and Parapublic Sectors"
O ntario
Labour Relations
Secretariat (M inistry
of G overnm ent
Services)
H ighly decentralized -em ployers and unions negotiate directly;
G overnm ent has a difficult tim e coordinating bargaining. The
Labour Relations Secretariat has been established to
coordinate bargaining; has been engaging in ongoing
consultations w ith BC for a PSEC-like structure in O ntario.
M anitoba
Com pensation
Com m ittee of Cabinet
Sets m andates; central oversight; no legislated enforcem ent
m echanism or coordination.
Saskatchew an
Personnel Policy
Secretariat (M inistry
of H um an Services)
Sets m andates; centrally co-ordinates bargaining, but still
carried out by local em ployers; no legislated enforcem ent
m echanism or coordination.
A lberta
Treasury Board/
Com m ittee for
Strategic M anagem ent
Sets m andates; uses funding authority to influence bargaining;
no legislated enforcem ent m echanism or coordination.
British
Colum bia
Appendix C-11. BCs provincial model is considered leading practice by a
number of other Canadian jurisdictions
-5% 0% 5% 10% 15%
BC
perform ance
A
Jurisdictional review conducted by PSEC
1
CFIB, W age W atch: A com parison of Public Sector and Private Sector w ages(2008)
The follow ing table com pares BCs m odel and outcom es w ith respect to the Provincial G overnm ent and
Private sector w age differential to other Canadian jurisdictions.
Page 67
Appendix C-12. The Minister has set policy to create a more rigorous
approach to executive compensation in Crowns
Set m axim um caps for CEO s and ensure all
other executive salaries are less than that in
each Crow n
Elim inate bonuses. Im plem ent salary
holdbacks w ithin a m axim um base salary
Executive salaries frozen in Crow n
Corporations
W here bonuses are now present, an
im plem entation plan to m ove to holdbacks to
be provided to PSEC secretariat
W hen a new staff or new ly prom oted staff
m oves to an executive position, w hich
currently has bonus, a holdback to a
m axim um of 20% of m ax base salary w ill be
em ployed
Perform ance criteria w ill be established by
agreem ent betw een the Board and the
M inister responsible for the Crow n
Corporation and w ill reflect G overnm ent
priorities as outlined in the shareholders'
letters of expectations
H oldbacks should be phased out below
executive level. In general holdbacks should
be used for executive only
1
Crow n Corporation Executive Com pensation Policy (2012)
Stakeholders from PSEC com m ented that over the last tw o years, a plan has been designed and
im plem ented to resolve the issue of repeated breaching of CEO com pensation caps, and reported that
good progress had been m ade. In particular, in early 2012, a w orking group of Crow n Corporation Board
Chairs w as form ed at the request of G overnm ent to propose revisions to the fram ew ork guiding executive
com pensation in Crow n Corporations. The G overnm ent, in its role as shareholder, w as concerned about
levels of bonuses available in som e Crow n Corporations, variations in their adm inistration, and the num ber
of executives in som e Crow n Corporations.
1
Objectives of the review
Lim it generic perquisites to transportation
allow ances and only provide such an
allow ance w here appropriate
O rganizational design, including the num ber
of executives and num ber of organizational
layers that is satisfactory to G overnm ent
Outcome of the review
H ow ever, the policy states, 'elim ination of
bonuses and holdbacks w here they apply to
unionized staff is a bargaining issue and not
w ithin the scope of the policy
Perquisites w ill be discontinued. Policy
states that perquisites w ill be discontinued
for new em ployees or new ly appointed
em ployees. For existing em ployees, they w ill
be elim inated as quickly as possible w ithin
the bounds of em ploym ent law . A plan for
the rem oval of perquisites is to be provided
to PSEC
Transportation allow ances are perm itted
If executives to a CEO earn m ore than 85%
of the CEO s total com pensation, a plan to
elim inate com pression w ill be developed by
Crow n in consultation w ith PSEC
Page 68
Appendix C-13. The Regional and Local model does not have a comparable
PSEC or the Public Service Agencymodel
The follow ing analysis presents the w age differential betw een M unicipality em ployees and M unicipal
G overnm ent em ployees across Canadian jurisdictions. BC is a m iddle of the packperform er.
0% 5% 10% 15% 20%
N ew Brunsw ick
Q uebec
V ictoria
V ancouver
N ova Scotia
British Colum bia
M anitoba
O ntario
A lberta
Saskatchew an
N ew foundland
Prince Edw ard Island
N W T
Yukon
BC
perform ance
Municipality / private wage differential
1
In 2010, the O ntario Finance M inister
encouraged m unicipalities across the
Province to freeze com pensation, adding
that no m oney for increases w ould be
budgeted in the grants the province
m akes to the m unicipalities to help m eet
their expenses.
The Finance M inister said "There w ill be
difficult bargaining ahead, but
m unicipalities can certainly pursue a
course of action that involves freezing
salaries for non-bargained em ployees,
and... for the Broader Public Sector," he
said. "W e w ill not be funding increases in
overall com pensation."
Case study: Ontario
The R ural m unicipal A dm inistrators
A ssociation of Saskatchew an issues a
suggested salary schedule that is deem ed
to represent fair rem uneration for the
m ajority of m unicipalities. The schedule is
m eant to be a guideline for m unicipalities.
Case study: Saskatchewan
The A ssociation of m unicipalities O ntario, Finance M inister
Encourages m unicipalities to Freeze com pensation(2010)
SA RM 2014 Suggested Salary Schedule(2014)
1
CFIB, W age w atch: A com parison of Public Sector and Private Sector W ages
(2008)
Provincial
Regional and local
K
E
Y
Page 69
Appendix C-14. Employers Association Municipality lacks entities to
provide coordination in response to organized labour
Vancouver and Victoria have built more co-
ordinated responsesto organized labour
The Low er M ainland and V ictoria have both
endeavoured to build m ore co-ordinated responses
to organized labour in the form of the Labour
Relations departm ent of M etro V ancouver and the
G reater V ictoria Labour Relations A ssociation.
In the Low er M ainland, for exam ple, as early as the
1960s, it becam e evident that the m unicipal trade
unionsincreasingly sophisticated approach to
collective bargaining w as consistently producing
settlem ent levels in the Low er M ainland
m unicipalities w hich could not be justified by
reference to either the public or private sectors.
In response, the City of V ancouver, the City of N ew
W estm inster and the D istrict of Burnaby
established the Joint Liaison Com m ittee on Labour
Relations in order to form alize consultation and
collaboration in collective bargaining m atters. In a
further effort to enhance levels of consultation and
co-ordination, in 1965 the m unicipal Labour
Relations Bureau (M LRB) w as form ed to provide
com m on negotiating, research, and advisory
services to its m em bers. By 1982, the M LR B joined
the Labour R elations Function of the G reater
V ancouver Regional D istrict (now know n as M etro
V ancouver).
Today, the labour relations departm ent of M etro
V ancouver provides labour relations and ancillary
services to M etro V ancouver's 15 m unicipalities, 1
regional district, and 16 related em ployers. O n
behalf of its m em bers, the Labour Relations
departm ent:
N egotiates collective agreem ents
Evaluates and re-classifies jobs
Researches key collective bargaining
inform ation like pay in the m arket place
O ther related labour relations services
However, the co-ordination of labour relations in
the Lower Mainland is increasingly fragmented
M unicipalities w ithin m etro V ancouver can choose
w hether they w ant to be participating m em bers of
the Bureau. The Bureau has never had Surrey as a
full participant and has been hit by a series of
w ithdraw als or notification of intent to leave in
recent years including Richm ond and Coquitlam ,
Burnaby, V ancouver, D elta, and W est V ancouver.
O ne stakeholder speculated that som e of these
departures w ere due to union pressure on city
m ayors and councillors.
M unicipalities have acted at and aw ay from
collective bargaining table in w ays that have
surprised and aggravated others.
J ames Dorsey, Sustainable or Spent Force: Review of Metro
Vancouver Labour Relations Function (2011)
Page 70
Appendix C-15. Size of unions in the Municipality sector
0 10 20 30 40 50 60
Canadian U nion of Public Em ployees
Firefighters
Police
W est V ancouver M unicipal Em ployees U nion
G reater V ancouver R egional D istrict Em ployee U nion
BC G overnm ent Em ployees U nion
Team sters
U nited Steelw orkers
International Brotherhood of Electrical W orkers
Canadian A uto W orkers U nion
A m algam ated Transit U nion
International A lliance of Theatre and Stage Em ployees
N ew W estm inster Public Library Staff A ssociation
Unions for Local Government Employees
M em bership (x000) in 2007
Source: Sean O M ellnn, interview s (2007)
Page 71
Appendix C-16. Collective bargaining models and processes There is a
mixed approach to collective bargaining process across the Province
Influence of strikes on political players
In the private sector w hen w ork ceases, custom ers
can procure substitutes from alternative suppliers
generally w ith little inconvenience and w ith no out
of pocketcost. W hen w ork ceases in the public
sector, how ever, the associated services such as
garbage collection or public transit cease to be
available. In m any cases this causes significant
inconvenience for citizens w hile they generally
continue to pay for or subsidize these services
through taxation w hich continues to be collected
during w ork-stoppages. The inconvenience m ay
potentially cause the electorate to w ithhold support
or deliberately vote against elected officials in
pow er at the tim e of the w ork-stoppage at future
elections.
In the Province certain m odifications have been
m ade to the private-sector labour relations m odel,
including legislation to prevent stoppage of
essential services such as fire or police services and
the arbitration of disputes involving such services.
H ow ever, in m any other non-essential service
areas, w hen the public is injured or inconvenienced
by a cessation of public service, G overnm ent
em ployers have no m ore authority to end the
stoppage than a private em ployer despite the
fundam entally different im plications. G iven the
im plications of w ork-stoppage, there m ay be a
greater w illingness to concede to union dem ands in
the m unicipalities, on the hope that tax payers w ill
not react as vehem ently to a m arginal increase in
taxation than they w ould do to a stoppage in
services. G iven the size of m unicipalities and the
nature of the services provided, som e observers
have speculated that this im pact is accentuated at
the m unicipal level.
Political influence of unions
In addition, it m ust also be considered that Public
Sector union m em bers m ay be active political
participants
1
. A s Bish observes, union m em bers
m ay contribute to cam paigns or w ork on behalf of
elected officials w ho prom ise to provide them w ith
m ore generous settlem ents or to increase services
and m ay w ork against those w ho prom ise to cut
taxes or reduce services. U nions political support
com es in num erous kinds:
Cash
In kind
Free labour tim e: electioneering services
Inform ation: new spapers, m agazines
1
The Fraser Institute, W age board: The solution to reining in public sector com pensation(2012)
Page 72
Appendix C-17. Arbitration system in Fire and Police services
1
The N elson D aily, M ayor w ants to change process for bargaining
w ith police and fire unions(2013); N N L, Big 12 Police Services
Boards call for arbitration fix(2011)
2
Labour Relations Board BC, G uide to the Labour Relations Code
Province of BC (2014)
3
D . Lew in, The N ew G reat D ebate about unionism and Collective
bargaining in U .S. State and Local G overnm ents(2012)
US Case Study: Impact of arbitration
In the U S som e states are governed by arbitration
law s and others are not.
2
A nationw ide U S study
exam ined the effects of arbitration on police and
firefighter w ages, and concluded that:
1. W ages of police and firefighters covered by
arbitration statutes w ere not significantly different
from w ages for police and firefighters in states in
w hich collective bargaining does not include
arbitration but typically includes m ediation, fact-
finding, or both.
2. W age grow th for police and firefighters in states
w ith bargaining law s that include arbitration did
not differ from w age grow th in states w ith
bargaining law s that do not include arbitration.
3. There w ere no significant differences betw een
w age increases aw arded to police and firefighters
in arbitration and w age increases resulting from
negotiations w ithout the use of arbitration
These results are not surprising, because m ost
arbitration statutes in the U S require arbitrators to
com pare w ages and other term s of em ploym ent
together w ith cost of living, ability to pay, and
other objective factors am ong com parable
jurisdictions in shaping their aw ards.
3
Academic studies suggest that if arbitration is set
up to consider a range of factors, it will have
comparable outcomes to mediation
A number of parties are attempting to change the
current arbitration system
1) N elson Citys m ayor com m ented that the
processes for negotiation for Fire and Police services
are biased in favour of the unions. H e has called for
a change in the w ay negotiating is done w ith them .
2) A m ajority of the Big 12 Police Services Boards
recently endorsed a resolution requesting that the
Province of O ntario am end the interest arbitration
system to ensure that arbitrators apply local
econom ic criteria and consider the financial im pact
of salary and benefits on the m unicipality and its
taxpayer.
Case Studies
1
The BC Government may already specify specific
terms of reference for arbitration. This could be
used to limit the range of outcomes
Arbitration under the Fire and Police
Services Collective Bargaining Act
If the M inister directs that a dispute be resolved by
arbitration, the parties m ay, by agreem ent, m ake
arrangem ents for the appointm ent of an arbitrator.
The arbitrator m ay encourage settlem ent of the
dispute and m ay use m ediation or other procedures
to encourage settlem ent at any tim e during the
arbitral proceedings. In rendering a decision under
the A ct, the arbitrator m ust consider:
Term s and conditions of em ploym ent for
em ployees doing sim ilar w ork
The need to m aintain internal consistency
and equity am ongst em ployees
Term s and conditions of em ploym ent for
other groups of em ployees w ho are
em ployed by the em ployer
The need to establish term s and conditions of
em ploym ent that are fair and reasonable in
relation to the qualifications required, the
w ork perform ed, the responsibility assum ed
and the nature of the services rendered
The interest and w elfare of the com m unity
served by the em ployer and the em ployees
as w ell as any factors affecting the
com m unity
A ny other factor that the arbitrator or
arbitration board considers relevant
In addition, The m inister m ay specify term s
of reference for an arbitration.
Page 73
Appendix C-18. Data limitations have implication for controlling
compensation
There are legislated requirements for the public reporting of public sector compensation in British
Columbia
W e present a brief discussion of the data available to conduct analysis of public sector com pensation in
British Colum bia. In particular, tw o acts m andate the public disclosure of public sector com pensation in the
province: the Public Sector Em ployers A ct and the Financial Inform ation A ct. A num ber of additional
sources on public sector com pensation are also potentially at the disposal of the BC G overnm ent.
1. U nder the Public Sector Em ployers A ct,
Provincial G overnm ent em ployers have tw o
reporting obligations:
A ll Provincial G overnm ent organizations
covered by the A ct m ust publish
com pensation inform ation for the CEO and
the next four highest paid/ranking executives
earning a base salary of at least $125,000.
School D istricts m ust publish com pensation
inform ation for all Superintendents,
regardless of their salary. This disclosure, or
Statem ent of Executive Com pensation, m ust
include inform ation about base salary,
benefits, pension contributions, and any
perform ance paym ents
A ll public sector em ployers are also required
to m ake available for inspection during
norm al business hours contracts of
em ploym ent for senior em ployees (defined as
any em ployee earning a base salary of
$125,000 or m ore)
1
2. The Financial Inform ation A ct requires all public
sector em ployers to disclose the total am ount of
rem uneration and expenses of all em ployees w ith a
base salary over $75,000 as part of their Financial
Statem ents m ade in accordance w ith the FIA ,
w here rem uneration includes any form or salary,
w ages, perform ance incentives, gratuities, taxable
benefits, paym ent into trust or any form of incom e
deferral paid by the corporation to the em ployee,
and does not include anything payable under a
severance agreem ent
2
1
PSEA , A Guide to Excluded and Executive Com pensation in the BC Public Sector(2009)
2
Financial Inform ation A ct (1993)
Stakeholders interview ed observed that
British Colum bia is considered to have one
of if not the m ost stringent legislated
disclosure requirem ents for com pensation
in N orth A m erica
Case study: Surrey School district
FIA data does not provide a total
com pensation view . For exam ple, a form er
association superintendent in the Surrey
school district received $614,382 in
com pensation in 2009-10.
H is base salary w as $117,095 but he also
received $486,650 in vehicle allow ance,
unused vacation, retiring allow ance and
severance payout. There w as also a pension
contribution of $9,637 and another $1,000
unaccounted for.
H is com pensation under FIA disclosure w as
reported as $332,224 in 2009-10.
V ancouver Sun, Surrey gets a record $614,382
com pensation(2010)
Page 74
compensation
There are also a number of aggregate data
sources available from Statistics Canada
1. Settlem ent agreem ents covering the outcom es of
collective bargaining are also reported publically,
and are available through a num ber of sources
including:
The N egotech database, a repository of
collective agreem ents w hich is available as a
courtesy via the H um an Resources and Skills
D evelopm ent Canada w ebsite
1
The BC Bargaining database as m aintained by
the Business Council of British Colum bia
2
2. Census data note that w here in previous years
census reporting w as m andatory, reporting for the
2011 census w as voluntary and m ay therefore
im pact results. D ata is not publically available at an
adequate level of detail to support analysis of
com pensation differentials, but can be purchased
from Statistics Canada. PSEC has traditionally
purchased this inform ation
3. Labour Force Survey (LFS) The Labour Force
Survey is a m onthly survey of approxim ately
56,000 Canadian households. This source is not
currently leveraged by the BC G overnm ent
The BC Government has made initial efforts to use
these sources to begin to understand variation in
compensation across the arms of the Public Sector
PSEC collects detailed com pensation data across
the broader Provincial Public Sector prior to each
bargaining round through electronic subm issions.
This data covers w ages, w age im pacted benefits,
non-w age im pacted benefits, headcount and FTE
num bers, by bargaining unit or grouping, for all
Provincial G overnm ent em ployers and em ployees.
PSEC does not have the legislated authority to
collect sim ilar data from local G overnm ents.
D ata reported under the Financial Inform ation
A ct is not currently collected, aggregated or
analysed, by the G overnm ent. W hile the data m ay
be available on organizationsrespective
w ebsites, to collect this data w ould take
considerable tim e and effort. This is com pounded
by the fact that m any organizations report their
data in scanned hard copy, lim iting the ability to
extract and m anipulate data. It is w orth noting
that the V ancouver Sun has collected and
aggregated this data in electronic form at over the
last six years, through Freedom of Inform ation
requests subm itted to individual organizations
across both the Provincial and M unicipalities. This
dataset is, in turn, m ade available in searchable
form to the public
The BC G overnm ent does collect data on
collective w age settlem ents in electronic form at
from H um an Resources and D evelopm ent
Canada. PSEC is in the process of building a
com prehensive dataset of public sector collective
agreem ents
PSEC has traditionally purchased census data
from Statistics Canada but not LFS data
This Review represents an early step by the BC
G overnm ent to build on its ow n existing w ork.
1
H um an Resources and Skills D evelopm ent Canada, N egotech(2013)
2
BC Bargaining D atabase (2013)
Page 75
compensation
Current legislated sources, however, cannot
enable the construction of a complete picture
O ne of the m ajor constraints identified in
conducting this Review w as the availability and
com parability of com pensation data of em ployees
across the BC Public Sector. O n the follow ing page,
the three prim ary sources are reconciled against a
num ber of key fundam entals required to provide
m eaningful com parisons across organizations w ithin
the BC Public Sector.
N ote as an aside, that all m unicipalities in British
Colum bia are required to subm it to the M inistry of
Com m unity Services (M CS) a sum m ary of financial
activities for the previous year. These data are
collected on an annual basis, and then sum m arized
and released to the public. m unicipalities are
required to subm it a sum m ary of revenues based on
the source of funds, and a sum m ary of expenditures
based on the specific function on w hich the
spending w as directed, but it does not appear this
inform ation includes com pensation costs.
A
N ote that data reported under the Financial Inform ation A ct m ay include inform ation on em ployees covered by
collective agreem ents
Legislatedsources of
information >>>>
Executivedata (Public
Sector Employer Act)
Management & Exec. Data
A
(Financial Information Act)
Bargaining unit
data
(Wage
settlements)
Cover all armsof
Government
only
Provincial G overnm ent and
M unicipality
Provincial
G overnm ent and
M unicipality
Reported for all employees
CEO and next four
earning > $125k
A ll em ployees earning >$75k,
w hich can be assum ed to cover
executives and m anagem ent
2
General
settlem ents only
no em ployee level
inform ation
All elements of total
compensation reported
Total com pensation
including benefits
W ages and perform ance
incentives
% increase in
w ages and
salaries
Information provided on full
time equivalencyof
employees
N o N o N o
J ob descriptionof employee
Job title only, but in
the case of those
covered, this provides
adequate inform ation
Job title only in the case of
those covered this does not
provide adequate inform ation
N o
Information provided to the
Government in electronic
format
Y es the inform ation
is provided through
w eb-based subm ission
N o -Challenging to collect and
analyse
N o Challenging
to collect and
analyse
Data provided with
reasonable frequency
A nnually A nnually W ith settlem ent
Data sources
Page 76
D ata indicates that over tim e, the gap betw een
Strategic Leadership m axim um salary and A D M
m axim um salary has increased.
ADM / Strat. Leadership maximum salary gap
0
50
100
150
200
250
2006 2007 2008 2009
A
n
n
u
a
l
S
a
l
a
r
y
(
$
0
0
0
s
A D M M ax salary ($195k)
Strategic Leadership
M ax Salary ($113k)
Review : Com pensation Challenges(2013)
100
120
140
160
180
200
220
240
A
n
n
u
a
l
S
a
l
a
r
y
(
$
0
0
0
s
)
A D M
Band D
A D M
Band C
A D M
Band B
ADM Salary Distribution compared to salary
bands
Salary band
A ctual salary
Strategic
Leadership top end
salary band
A nalysis of A D M s actual salary indicates that the
A D M bands are w ell used. The low er end of the A D M
Band A , how ever, is not currently used. This
suggests that there is likely a m aterial gap betw een
the com pensation of top earning em ployees w ithin
Strategic Leadership and A D M s.
A D M
Band A
Appendix C-20. Analysis of Strategic Leadership compensation
Page 77
The Canadian Coalition for Good Governance best
practices
1
are worth considering.
The first requirem ent is to build an independent
com pensation com m ittee:
1. Selecting committee members
D o not have current com pany CEO on the
com pensation com m ittee (to keep the
com m ittee independent)
Choose com m ittee m em bers w ith diverse
professional backgrounds that include
specific expertise in executive com pensation
Lim it com m ittee m em bership to no m ore
than one-third sitting CEO s
2. Establish a committee work plan
3. Hold in camera meetings
A recent review by the Canadian Coalition for G ood
G overnance of over 150 Canadian com panies
identified that the m ajority of com panies adhere to
these standards and have an independent
com pensation com m ittee of solely independent
directors
Appendix C-21. The Canadian Coalition for Good Governance best practices
1
Canadian Coalition for G ood G overnance, Best practices in executive com pensation related inform ation(2009)
M unicipal councils need to have a hum an resources standing com m ittee that has a m andate to
provide oversight on an enterprise-w ide total com pensation strategy, senior m anagem ent
perform ance, accountability and total com pensation productivity and perform ance, including
total cost. H um an resources (or com pensation) com m ittees are a recognized and standard
governance m echanism in the private sector, and are increasingly becom e standard practice in
the public and para-public sectors.
Cullwick, Compensation Governance: what municipalities need to change (2005)
Page 78
Appendix C-22. Global steps are being taken to control CEO compensation
The U S created a pay "Czar" in
response to high private sector CEO
com pensation (in federally
supported institutions)
The Czar has authority to oversee
pay for the 100 highest paid
em ployees at those com panies
Kenneth Feinberg, the
adm inistrations new special
m aster for com pensationsaid that
he w ill follow certain principles in
m aking his decisions, including
w hether com pensation: rew ards
risk, allow s a firm to rem ain
com petitive, is com parable to
peers, tied to long-term
perform ance and contributes to the
value of the firm
1
The U S has recently experienced a
m ove to Say on Pay; the U K has
previously legislated on 'Say on Pay;
and the Canadian private sector is also
considering m oving to such a m odel
In O ctober 2009, the Canadian
Coalition for G ood G overnance (CCG G )
released its M odel Say on PayPolicy
for private sector Board of D irectors
for public com m ent
CCG G recom m ends that boards
voluntarily add to each annual m eeting
agenda a shareholder advisory vote on
the com panys report on executive
com pensation
2
Case study: Pay Czar Case study: International move to say on Pay
1
The W all Street Journal, Pay Czar gets broad authority over executive com pensation(2009)
2
Canadian Coalition for G ood G overnance, Best Practices in Executive Com pensation Related Inform ation(2009)
The G overnm ent of BC has m oved to control executive com pensation in the Broader Public Sector at a
tim e w hen the private sector is also grappling w ith this issue including through the creation of pay Czars
and the m ove to Say on pay.
"CCG G m em bers believe that institutional shareholders should have regular, constructive
engagem ent w ith the boards and board com pensation com m ittees of public com panies to explain
their perspectives on governance, com pensation and disclosure practices, and to provide detailed
com m ents on the com panys practices to the board"
Canadian Coalition for Good Governance, Best Practices in Executive Compensation Related Information (2009)
Page 79
Source Data used
Included
benefits
Findings
G underson Canadian Census data
(1971)
N o Found a 6.2% public sector prem ium for m ales across Canada;
8.6% prem ium for fem ales; and found that low er w age w orkers
received the largest prem ium
Shapiro and
Stelcner
Canadian Census data
(1980)
N o Found a 4.2% public sector prem ium for m ales across Canada;
and a 12.2% public sector prem ium for fem ales
G underson LFS (1997) and
Canadian Census data
(1971,81, 91, 96)
N o Found a 7.5% to 9.0% public sector prem ium across Canada
Prescott and
W andschneider
Canadas Survey of
Consum er Finances
(1990)
N o Found a 14.3% public sector prem ium for m ales across Canada
and a 25% public sector prem ium for fem ales
M ueller Labour M arket
A ctivity Survey (From
1988 to 1990)
N o Found an overall public sector w age prem ium of 3.3% for m ales
across Canada and 11.3% prem ium for fem ales
Found at the provincial level across Canada that the public
sector w age prem ium w as negative 3.5% for m ales and positive
10.9% for fem ales
Found at the local or m unicipal level, the public sector w age
prem ium across Canada w as 5.0% for m ales & 6.6% for fem ales
G underson,
H yatt and
R iddell
Labour Force Survey
1997, Census 1996,
regression analysis
N o Found a public sector pay prem ium across Canada of 7% to 11%
Institut de la
Statistique du
Q ubec
Com parisons w ith
various different
groups (1999-2010)
Y es Found that in Q uebec public sector w orkers w ere paid on
average 7% less than com parable private sector peers
CFIB Census data (2006) Y es Found public sector w age prem ium of 8% to 17% across Canada;
and concluded that "taking into account significantly higher paid
[non-w age] benefits and shorter w ork w eeks, the public sector
total com pensation advantage balloons past 30 per cent
CU PE Canadian Census data
(2006)
N o Found pay prem ium of 0.5% for Canadian public sector w orkers,
but concluded this is entirely because of a sm aller pay gap for
w om en in the public sector"
Tiagi Labour Force Survey
data (2008)
N o Found a 5.4% public sector prem ium for m en across Canada and
a 19.8% prem ium for w om en
Fraser
Institute
Labour Force Survey
(A pril 2011)
N o Found: "A fter controlling for such factors as gender, age,
m arital status, education, tenure, size of firm , type of job, and
industry, public sector w orkers (including federal, provincial, and
local) located in British Colum bia in A pril 2011 enjoyed, on
average, a 13.6 per cent w age prem ium over their private sector
counterparts"
W atson W yatt
and H ay
A ssociates
Independent studies
of specific jobs
N o Found higher pay for low er classifications but low er pay at the
executive level of the federal public service
Appendix C-23. Public / private compensation differential across Canada
Summary of studies on the public / private compensation differential in Canada
Below we present some findings from studies on Public / Private compensation differential in Canada
Page 80
Analysis of management salary bands indicates that there is material variation in pay bands across the BC Public
Sector, with the Public Service being the lowest paying in all cases.
Appendix C-24. Comparison of the salary bands of comparable roles in the
Strategic Leadership level across BC Public Sector
0 100,000 200,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
BC Transit
Director of Information Technology salary ranges
across the BC Public Sector
0 50,000 100,000 150,000 200,000
Public Service
BC Lotteries
BCIT
H EA BC
BC Transit
Executive Director of Policy salary ranges across
the BC Public Sector
0 50,000 100,000 150,000 200,000
Public Service
BC H ydro
BC Lotteries
BCIT
H EA BC
U V ic
Director of Total compensation salary ranges across
the BC Public Sector
0 50,000 100,000 150,000 200,000
Public Service
BC H ydro
BC Lotteries
H EA BC
Regional Director salary ranges across the BC Public
Sector
Page 81
Appendix D. Spectrum of strategies for Local Government
Select strategy to create adherence to philosophy and governance mode
In detailed design, the strategy pertaining to M unicipality, w ill need to be selected from the spectrum
outlined below .
It is proposed that:
A s data and benchm arking capability im proves, increase in education and opportunities to set
a fram ew ork of expectations provide R egional & Local G overnm ent w ith the opportunity to do
the right thingby com plying
W here education and setting of expectation do not yield results, use financial levers to directly
encourage m unicipalities to set com pensation caps and G overnm ent to stop providing funding
once cap has been reached
Select level of central Government involvement (See Appendix D for further information on options)
1.
Educate and set
framework of
expectations that is
clearly
communicated
2.
Support parties in
undertaking their
own review
processes
3.
Use financial levers
4.
Legislate changes
Current efforts
focus m ore on total
expenditure than
com pensation
Educating and
setting a fram ew ork
of expectations are
highly restricted in
the Province by data
availability
Before taking any
direct actions,
G overnm ent should
and is expected to,
com m unicate its
expectation
Consider
encouraging the
M unicipality to
initiate and
operate its ow n
review process as
to m odels for
setting
com pensation and
trends in
com pensation, in
order to enable
the sector to
reach its ow n
conclusions
This approach
m ight only serve
to cause delay and
confusion as to
G overnm ent
expectations
There are a
num ber of
financial levers
available:
Tax and
expenditure law s
U nconditional
grant funding
could be m ade
conditional
Zero base
budgeting could
be explored
Fundam entally,
though, evidence
suggests
m unicipalities w ill
take all other cost
reduction
strategies before
cutting salaries
The Province m ay
am end or issue
prim ary legislation
to supersede the
Com m unity
Charter in order to
provide a m eans
to directly control
the issue of
m unicipal
com pensation
Such an approach
w ould m eet high
levels of
resistance from
unions and
m unicipalities
Page 82
Source: CFIB, BC m unicipal Spending w atch(2013)
Educate and set framework of expectations that is clearly communicated
O ne senior stakeholder com m ented that m oral
indignationis the only strategy that G overnm ent
currently has to influence m unicipal com pensation
levels.
A s the Business Council of British Colum bia observes,
one factor for this m ay be that the fiscal policies of
individual M unicipal G overnm ents in a fragm ented
sector do not typically attract the sam e degree of
system atic scrutiny from legislators, the public, the
m edia or the business com m unity as the spending or
taxation decisions of the Provincial G overnm ent.
1
In BC there is som e education and a fram ew ork of
expectations, but they do not principally focus on
com pensation, generally focusing instead on total
expenditure.
1
Business Council of British Colum bia, Policy Perspectives, U p and A w ay: The Grow th of m unicipal Spending in
M etro V ancouver(2012)
Example of municipal education and setting of
expectations in BC
O ne key driver of this is the availability of data. A
key com ponent of educating and the setting of a
fram ew ork of expectations is m aking data available
to support com m unities of interest to exert
influence. Currently in BC a num ber of com m unities
of interest that are keen to exert education on
m unicipalities struggle to find adequate data on
com pensation in m unicipalities.
The general view voiced by stakeholders, w as that
education and the setting of a fram ew ork of
expectations have historically proved to have little
im pact on m unicipal behaviour.
Page 83
Ontario case study of the value of data for municipal education and setting of expectations
Source: Canadian Taxpayer Federation, O ntario m unicipal Report Card(2013)
In O ntario, the Public Sector Salary D isclosure A ct requires organizations that receive funding from the
Province including m unicipalities to release annually the com pensation of those earning m ore than
$100,000. The G overnm ent collects, collates and releases in electronic form at com pensation all of
this data.
The release of this inform ation in a consolidated electronic form at in O ntario m ay increase the level of
scrutiny faced. For exam ple, in O ntario, the Canadian Taxpayers Federation releases a 'm unicipal
R eport Card'. The scorecard includes a 'Fat Cat R atio' w hich com pares cities on a per capita basis. The
report also includes a calculation of the average property tax bill across m unicipalities to determ ine
how m any households -paying the average property tax rate -are required to pay the salary of the
average Sunshine List em ployee.
Page 84
Explore using financial levers to influence municipal behaviour
The Government has a number of financial levers
available
Local G overnm ents have available to them the
revenue sources that Provincial G overnm ent has
ascribed: firstly, ow n-source revenue, w hich
includes principally property tax and user fees, and,
secondly, transfers from Provincial and Federal
G overnm ents
1
. The G overnm ent could therefore
consider using a num ber of financial levers w ith
w hich to control levels of m unicipal com pensation.
The Provincial Government could consider putting
in place tax and expenditure laws
W ith respect to ow n-source revenue, Provincial
G overnm ents can establish the range and variety of
m unicipal taxation pow ers. In view of their status,
Local G overnm ents in Canada have to be content
w ith the revenue sources that Provincial
G overnm ents have been w illing to allot to them . The
Provincial G overnm ent could therefore potentially
put in place tax and expenditure lim itation law s that
w ould constrain the grow th of taxes collected and
m unicipal spending. The intent of this action w ould
be to force m unicipalities to rein in com pensation
costs.
The Confederation of Independent Business has
been a strong proponent of this concept.
The CFIB is a strong proponent of this concept and
has considered the design of such legislation. CFIB
argues that "a successful tax and expenditure
lim itation law w ould constrain spending grow th and
property tax grow th to no m ore than population and
inflation grow th.In support of this argum ent, CFIB
argues that
2
:
A survey conducted by CFIB in 2007 identified
that 87% of BCs Sm all and M edium
Enterprises believe that m unicipal spending
should rem ain fixed or increase at or below
population and inflation grow th.
Law s enforcing tax and expenditure
lim itations can be found at the state and local
level in the U .S., and have generally proven to
be effective particularly w hen they have been
initiated and designed by citizens"
1
ICPS, m unicipal O rganization in Canada, Tradition and Transform ation V arying from Province to Province(2003)
2
Canadian Federation of Independent Business, British Colum bia m unicipal Spending W atch(2008)
0.0% 50.0% 100.0%
D on't know
N o increase
Less than
population and
inflation grow th
Population and
inflation grow th
M ore than
population and
inflation grow th
Source: CFIB, British Colum bia m unicipal Spending
W atch(2008)
Survey response: What is an appropriate annual
increase in local spending?
Page 85
Unconditional grant funding could be made
conditional
British Colum bias m unicipal affairs departm ent
adm inisters a general program offering
unconditional grants to local m unicipalities in
conform ity w ith the Local G overnm ent G rants A ct
(as at 2003)
1
. Each m unicipality receives a
predeterm ined basic am ount based on the relative
fiscal w ealth of the m unicipality
1
.
The Provincial G overnm ent could consider m aking
this grant funding conditional on m unicipals
achieving certain perform ance indicators pertaining
to the control of m unicipal com pensation.
Grant funding is not a significant contributor to
municipal revenues, but is growing
It is w orth noting, how ever, that transfers from
G overnm ent only constitute a sm all share of
m unicipal revenues.CFIB analysis in 2006,
indicated that in BC only 7.4% of revenues cam e
from transfers from other G overnm ents
H ow ever, m unicipal grants are also one of the
fastest grow ing sources of revenue for M unicipal
G overnm ents. Betw een 2000 and 2006, CFIB
estim ates that contributions to m unicipalities from
senior levels of G overnm ent m ore than doubled,
increasing by 110 per cent
2
.
1
2
0% 20% 40% 60%
D isposition of A ssets
D evelop
Contributions
Transfers from
other governm ents
Sale of Services
O w n Purpose
Taxation
0% 50% 100% 150%
Population and
Inflation
O w n Purpose
Taxation
Total R evenue
Sale of Services
G overnm ent
Transfers
Source: CFIB, BC m unicipal Spending W atch(2008)
Aggregate BC municipal operating revenue growth
(2000-2006)
Source: CFIB, BC m unicipal Spending W atch(2008)
Aggregate BC municipal operating revenues, 2006,
by source
Page 86
Explore zero based budgeting
O ne financial lever that m ight have low er risk of
potential unintended consequences than other
levers could be the introduction of zero based
budgeting.
In the traditional increm ental budgeting process,
previous levels of spending are treated as given,
and approval is only needed for additional spending
increases.
U nder zero based budgeting, all spending by each
m unicipal departm ent m ust be review ed and
approved.
The introduction of a periodic zero based budgeting
review process, along w ith a series of m eaningful
perform ance m easures designed to ensure that
public m oney is being spent efficiently, w ould
ensure greater accountability am ong M unicipal
G overnm ents and provide better value to taxpayers
.
1
Various approaches have been taken to deal with
budget shortfalls in the US
A survey in the U S of 120 cities and counties
conducted in O ctober 2004, identified that 86% of
respondents had faced budget shortfalls.
1
These
organizations reported relying on a com bination of
approaches to dealing w ith budget shortfalls.
The three m ost popular strategies dealt w ith
reducing the labour force:
R educing their labour force through
elim ination of vacant positions (79%)
Instituting a hiring freeze (78%)
Em ployee layoffs (51%)
These approaches w ere follow ed by:
Reducing and / or elim inating services to the
public (39%)
Raising taxes and or / user fees (31%)
O nly 14% of G overnm ents chose to reduce w ages
and / or benefits for current em ployees
A s the authors com m ented, "these statistics clearly
indicate G overnm ents w ere m ore likely to reduce
their labour force, reduce services, and raise taxes
than cut w ages and benefits in response to
budgetary shortfallsrather than reduce
com pensation.
1
0.0% 50.0% 100.0%
Furloughed em ployees
R educed benefits
and/or w ages to
existing em ployees
O ther
O ffered early
retirem ent incentives
R aised taxes and/or
increased user feeds
R educed and/or
elim inated services to
the public
Laid off em ployees
Im posed a hiring freeze
Elim inated vacant
positions
Responses of US municipalities to budget
shortfalls
source: T.Reilly, Public Sector Com pensation in Local
G overnm ents A n A nalysis(2005)
Page 87
Legislate changes
1
2
Municipalities are creatures of the Province and
can be directed by the Provincial Government. The
Government should flex and consider potentially
executing this right.
The Com m unity Charter is built on the principle of
m unicipalities being responsible and accountable.
1
If
the Provincial G overnm ent has strong evidence to
believe that m unicipalities have failed to act in a
financial responsible m anner, and that there is
inadequate response to education, setting a
fram ew ork of expectation or attem pts to discuss or
m ediate the issue of control of com pensation, the
G overnm ent m ay w ish to raise the possibility of
and w orst case scenario, actually execute on -
infringem ent on m unicipal autonom y.
A s stated in section 92(8) of the Canadian
Constitution, m unicipal affairs com e under the
exclusive jurisdiction of the Provinces.
m unicipalities are created by provincial legislation
and it is the Provincial legislation that defines w hat
they can do, how they are m anaged, and their
sources of revenue. In short, from a strictly legal
view point, the very existence of m unicipalities
depends on the goodw ill of the Provincial
G overnm ents,
2
and if the Provincial G overnm ent so
w ishes it m ay am end or issue prim ary legislation to
supersede the Com m unity Charter in order to
provide a m eans to directly control the issue of
m unicipal com pensation.
In particular, the Provincial G overnm ent m ight elect
to threaten to establish or, in the event of
inadequate response, actually establish the right
of a M inister to set rules and m andates for
m unicipal sector com pensation and pow ers to
enable a new or existing entity w ith a sim ilar
m andate as PSEC to provide strategic direction to
em ployers in the sector. M andates could, for
exam ple, constrain grow th in com pensation to no
m ore than population and inflation grow th, or m ight
m andate alignm ent of com pensation to the Core.
Page 88
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