Treasury Board of Canada Secretariat
Symbol of the Government of Canada

ARCHIVED - Expenditure Review of Federal Public Sector - Overview

Warning This page has been archived.

Archived Content

Information identified as archived on the Web is for reference, research or recordkeeping purposes. It has not been altered or updated after the date of archiving. Web pages that are archived on the Web are not subject to the Government of Canada Web Standards. As per the Communications Policy of the Government of Canada, you can request alternate formats on the "Contact Us" page.

Consolidation of recommendations

1. Recommendations on Transparency and Accountability

Recommendation 1

1.1 The Treasury Board Secretariat should present to Parliament annually a report on federal compensation. The report should provide data on indicators such as those described in this section [Vol. 1, Chap. 11] for the current year, and in historical perspective. The report itself should be brief and easy to read, with ample use of visual aids.

1.2 Appendices should provide more detailed information on collective bargaining outcomes for key groups, as well as decisions on compensation for unrepresented groups, and policy changes affecting compensation. It would be useful to include a more in-depth study of a particular topic each year. More detailed data for specific occupational and classification groups, as well as for individual separate employers should be accessible on line.

1.3 A summary of the report should be incorporated in the annual benefit reports provided to employees.

Recommendation 2

2.1 The Department of Finance should consider including in the annual federal Budget an expected track for total spending on Personnel in the federal public sector, except for Crown corporations. This should aggregate planned spending changes for more or fewer employees, changes in average salaries from all causes, and changes in benefits of all kinds.

Recommendation 3

3.1 The Treasury Board Secretariat should define in detail each data element required for inclusion in the Annual Report on Federal Compensation. For elements that must be created through estimation, the definition should specify the method to be used. For all elements, the data sources should be stated. The definitions should be publicly available on the Secretariat's Web site and updated as necessary.

3.2 In preparing and revising these compensation data element definitions, the Treasury Board Secretariat should consult with all groups with a professional interest, including within the Treasury Board portfolio, the Public Service Human Resources Management Agency and the Office of the Comptroller General, as well as Statistics Canada, Finance Canada, Public Works and Government Services, the Public Service Commission, the separate employers, the Canadian Forces, the RCMP, the Public Service Labour Relations Board, the public service unions and interested academics. Where there is no consensus, the Treasury Board Secretariat should make an appropriate determination.

3.3 The Treasury Board should authorize the investments in systems and analytical capacity necessary to implement a consistent approach to estimating and reporting compensation data elements. In view of the size of this area of federal spending (about $25 billion in 2002–03), and its annual growth, appropriate[22] investments in understanding where our compensation dollars go, and how spending in this area evolves will almost certainly pay for themselves many times over.

Recommendation 4

4.1 The Treasury Board Secretariat should participate actively with the public sector unions in supporting the Public Service Labour Relations Board to establish an authoritative compensation research function, as soon as practicable. The scope of reporting should include all aspects of compensation, not just salaries and wages.

4.2 The Treasury Board Secretariat, as well as the other partners, should take the time and care needed to think through and fully argue methodological issues at the outset, recognizing as well the need to learn from experience. The parties should take care to recommend well-qualified representatives, including independent experts, for appointment to the Advisory Board designed to assist in ensuring high quality research methodology is employed.

4.3 The leadership of the Public Service Labour Relations Board should consult fully with both employer and union representatives in establishing and managing the new compensation research function authorized by the new Public Service Labour Relations Act. Drawing on the experience of the Quebec Institut de la Statistique, however, as well as the Advisory Board provided for under the Act, the PSLRB should itself ensure the soundness of the comparison survey and reporting methods adopted.

4.4 Until the PSLRB is ready to publish sufficiently complete information on the comparability of federal compensation to the broader Canadian labour market, the Treasury Board Secretariat (if possible, in partnership with the public sector unions through the National Joint Council) should publish at least every three years appropriate macro perspectives on comparability.

4.5 For other federal employee groups that are non-unionized or unrepresented, comparability studies should be commissioned and published by the Treasury Board Secretariat on an appropriate cycle. For established reports of this type, such as those relating to public service executives or the regular and civilian members of the RCMP, the methodology for comparisons to the external labour market should be reviewed by objective third party compensation experts to ensure they remain sound and pertinent to current circumstances.

4.6 As a complement to documenting comparability of salaries and benefits, data on job security and the attractiveness of working for surveyed employers should be compiled and reported publicly.

2. Coherent Management of Federal Compensation

Recommendation 5

5.1 The Treasury Board should approve the proposed Compensation Policy Framework for the Federal Public Service as the public expression of the considerations that should be balanced in determining the federal government's approach to compensation.

5.2 To facilitate an ongoing public conversation about the appropriate way to balance the factors affecting compensation, the Treasury Board Secretariat should publish annually a summary of the most pertinent indicators related to each factor. This would best form an Appendix to the Treasury Board Secretariat's Report on Plans and Priorities that must be tabled in Parliament each year, normally in February or March.

Recommendation 6

6.1 The Treasury Board Secretariat should maintain and consolidate detailed records of approved increases in salary budgets and their rationale.

6.2 Deputy ministers should retain the ability to transfer money from approved non-salary budgets to salaries. However, the transfer mark-up price should be raised from 20% to 30%, and that amount should be reviewed annually and adjusted to reflect the real cost of non-salary employee benefits, taking account of their actual accrual cost.

6.3 Deputy ministers should retain the authority to classify positions up to the EX 3 level, and for EX 4 or EX 5 positions within the existing departmental complement at those levels. The Public Service Human Resources Management Agency should expand to all parts of the core public service its risk-based approach to audits of departmental decisions on reclassification of existing positions and classification of new positions.

6.4 At least annually, an overview and analysis of trends in employment levels and the composition of the public service workforce, as well as the quality of departmental classification decisions, should be presented to the Treasury Board. The Annual Report on Federal Compensation should summarize the results for Parliament and the public.

Recommendation 7

7.1 The Treasury Board President should commission a high-level Advisory Panel on the scope of federal public service collective bargaining. The Panel's mandate should be to recommend how best to expand the scope of normal collective bargaining to cover most or all of the elements of compensation, other than those relating to employer contributions to programs of general application such as Employment Insurance. The Panel should include former senior public servants, union leaders and external experts, and be chaired by an eminent Canadian well versed in public and private sector collective bargaining practices.

Recommendation 8

8.1 The Treasury Board Secretary should create a Compensation Planning and Coordination Secretariat with the mandate and capacity to conduct the necessary analysis and provide strategic advice on the overall management of federal public sector compensation. This Secretariat should report directly to the Secretary. It should be led at the Assistant Secretary level, and include seconded key staff from all of the central agencies with a role in managing federal compensation (i.e. the relevant Treasury Board Secretariat Branches, the Public Service Human Resources Management Office, the Department of Finance, and the Privy Council Office), in order to ensure easy communications among the players. The Secretariat itself, however, should not take responsibility for any of the substantive elements of compensation management, so that it can preserve a clear view of the whole scene.

8.2  The new Compensation Secretariat should be responsible for preparing the Annual Report on Federal Compensation proposed in Recommendation 1, and for preparing the compensation policy indicators report proposed in Recommendation 4 for inclusion in the Treasury Board Secretariat's Report on Plans and Priorities, relying on the data and analytical expertise available in various parts of the Treasury Board portfolio and elsewhere.

8.3 To complement the work of the Compensation Secretariat, the Treasury Board Secretary should chair a deputy minister-level Compensation Council comprised of the most senior representatives of those parts of the federal public service with substantial responsibilities in the compensation field. The Council would advise on the Compensation Secretariat's work plan and substantive products.

Recommendation 9

9.1 The Federal Government should consider establishing further separate employers to improve organizational performance by aligning human resources management practices, including compensation, with each employer's business needs. Criteria for creating separate employers would include staff complements of at least 5,000 and a focused business mandate. Possible examples include the Canada Border Services Agency, Service Canada, Correctional Service Canada, and Statistics Canada.

9.2 In the meantime, or if the Government decides against setting up additional separate employers, the core public service and the principal separate employers should use a form of coordinated bargaining with the public service unions to reduce the risk of salary increases being driven by ratcheting within the federal public sector. Two-tier bargaining could be used to treat distinctly with overall salary levels and with compensation elements specific to a particular employer.

9.3 Federal separate employers should renew their efforts to set up occupational group structures that are well suited to their particular business missions.

3. Specific Substantive Compensation Issues Relating to Salaries

Recommendation 10

10.1   The Treasury Board, after consultation with the public service unions and appropriate external experts, should publish a proposed occupational and bargaining structure that appropriately combines employees with common interests and working conditions, and that will facilitate compensation comparisons with the external Canadian labour market. This work should be completed within 12 months.

10.2   Within six months of publishing this proposal, after an opportunity for public debate, the Governor-in-Council should proclaim a new occupational group structure for the core public service.

10.3   If, for whatever reason, the responsible Treasury Board portfolio officials cannot complete the project expeditiously, the President of the Treasury Board should consider establishing an expert panel to develop an independent proposal as the basis for the Governor-in-Council to proclaim a new occupational group structure.

10.4   The Public Service Labour Relations Board should determine the appropriate bargaining unit structure in relation to the new occupational group structure as soon as practicable thereafter.

10.5   As a last resort, if there is no other way to move within three years to an appropriate new structure, the government should consider using legislation to implement such a framework.

10.6   The other federal separate employers should proceed with parallel but distinct processes to adapt their occupational and bargaining group structures to the nature of their businesses, also within the next three years.

Recommendation 11

11.1   In parallel with the design of a new occupational group structure, the Treasury Board should determine, in consultation with the public service unions, the most appropriate approach and sequence for developing modern classification standards that reflect the current realities of public service work, and that minimize gender bias.

11.2   In the meantime, the Public Service Human Resources Management Agency should focus on supporting departments to simplify the management of classification by directing that job descriptions not exceed five pages, by encouraging the use of generic job descriptions, by updating the most suitable benchmark positions for the most numerous groups, and by providing guidance on how to use overall rationales for classifying positions by comparison with the benchmarks.

11.3   Consideration should be given to expanding the use of appointment to level for employees in groups or situations where their skills, knowledge, and performance can be assessed objectively in relation to well-defined standards.

11.4   As practicable, the Public Service Human Resources Management Agency, in consultation with the relevant public service unions, should give priority to complete the updating of the classification standards for priority occupational groups that are not likely to be changed as a result of the reform of the occupational group structure proposed in Recommendation 10.

11.5   Once the Treasury Board has decided on the occupational group structure for the core public service, the Public Service Human Resources Management Agency should publish its planned timetable for modernizing classification standards to correspond with the recommended occupational group structure, and report to Parliament annually through the Agency's Report on Plans and Priorities.

Recommendation 12

12.1   On pay for performance, we should focus first on strengthening our culture and capacity for performance management, including developing mature skills in defining organization objectives and standards, setting individual goals, assessing performance, giving feedback, and taking necessary action.

12.2   Deputy ministers should propose to the Treasury Board selective experiments in making greater use of pay for performance in cases where the organizational capacity and culture are suitable and credible with both managers and employees.

12.3   The Treasury Board should similarly work with willing departments and the appropriate unions to experiment also with one or more well-defined pilot projects to test the utility of pay for knowledge in such areas as language skills and advanced qualifications for specialized groups.

12.4   The Public Service Human Resources Management Agency should propose for Treasury Board approval ground rules for cases where the Treasury Board could authorize a higher maximum salary for specific executive or other employees bringing exceptional expertise to the public service, in situations where interchange programs are inappropriate as a means to access the required expertise.

12.5   As part of the review of executive salaries proposed later in this section, the overlap of top level specialist pay with Executive pay ranges should be reviewed and rationalized so that high level technical expertise can be appropriately remunerated without the need to resort to Executive classifications for jobs that focus mainly on advice and relatively little on executive management.

12.6   Recruitment and retention (terminable) allowances should generally be avoided. If there is clear evidence in the external labour market of a sustained relative salary level increase for a particular group, this should be included in public service salary levels. If rapid increases occur in a hot market externally, and there is doubt whether the change is temporary or structural, one-time bonuses should be used to recruit or retain essential staff in as targeted a manner as feasible.

12.7   As part of the process of modernizing classification standards recommended earlier in this section, the Treasury Board Secretariat and the Public Service Human Resources Management Agency should work together with the relevant unions to ensure that the structure of pay bands for these groups makes sense according to accepted salary administration norms.

12.8   In recommending on how best to modernize the public service's occupational and bargaining group structure, consideration should be given to the suitability of applying regional pay to some parts of the suggested new structure. Criteria for identifying such groups would include an emphasis on local hiring, substantial salary differences across the country, availability of credible data on these differences, and negligible geographic mobility in the group.

12.9   Once the more pressing pay management and compensation issues covered in this chapter have been resolved, the Treasury Board should examine the desirability and feasibility of introducing a system of national salary rates with regional supplements based on substantial cost of living differentials.

Recommendation 13

13.1   The Treasury Board President should ask the Advisory Committee on Senior Level Retention and Compensation to review and offer recommendations on the extent to which federal public sector executives should be compensated at levels equivalent to their private sector counterparts. It would likely make most sense to focus initially on the salaries of Assistant Deputy Ministers and Deputy Ministers. In doing so, the Committee should assure itself that the method of comparison is conceptually sound, and that the comparability data is reliable. It should also consider proposing a narrowing of the definition of positions that can be included in the Executive group to exclude those without substantial management responsibilities, and recommending terms and conditions of employment that acknowledge that an executive may be let go for inadequate performance.

13.2   The Committee should at the same time reconsider the appropriate role of pay for performance in the overall executive compensation package.

13.3   If the Treasury Board President decides to ask for the review proposed in recommendation 13.1, the Privy Council Office should request the Advisory Committee to undertake a similar review and offer recommendations with regard to our positioning of compensation for heads of Crown corporations and others appointed by Order-in-Council vis--vis private sector counterpart compensation.

13.4   The Minister of National Defence and the President of the Treasury Board should jointly appoint an eminent Canadian public figure to propose how best to establish a Canadian Forces Compensation Advisory Committee, modelled generally on the United Kingdom Armed Forces Pay Review Body.

13.5   The Minister of Public Safety and Emergency Preparedness and the President of the Treasury Board should invite a reputable consulting firm[23]specializing in compensation issues to review how the RCMP Pay Council measures total compensation, what considerations other than comparability ought to be weighed in determining RCMP compensation, and how the Treasury Board should deal with situations where compensation increases for one or more police forces are unusually high.

13.6   The Minister of Justice and the Canadian Judicial Council should ask the next Quadrennial Commission, scheduled to report in 2008, to conduct as part of its deliberations an in-depth analysis of the value and relevance of various possible comparators in determining the appropriate level of compensation for federal judges.

13.7   If, in the future, there is a sense that parliamentarians' salaries are out of step with what is paid for other senior federal public sector positions, an independent commission, similar to that appointed every four years to recommend changes to judicial compensation, could provide a transparent and independent means to advise Parliament on how best to update parliamentary compensation.

13.8   In mandating all the various advisory groups on compensation, the principle should be respected that they are independent in regard to their analysis and formulation of recommendations, but that the final decision on compensation rests with the Government or Parliament, as appropriate.

4. Specific Compensation Issues Relating to Pensions and Other Benefits

Recommendation 14

14.1   The President of the Treasury Board should ask the existing Pension Advisory Committee, involving representatives of the employer, the public service unions, and pensioners to review the suitability of the existing Plan design in terms of how it deals with such issues as the existing incentives to retire as soon as a member can receive a pension without a penalty, whether we need a more flexible approach to survivor benefits, how the Plan affects career movement into and out of the public service, and how equitable the existing Plan is to various groups of employees, and to make appropriate recommendations.

14.2  After the current litigation on the pension account surplus is resolved, the President of the Treasury Board should renew discussions with the public service unions with a view to involving the unions more directly in the governance of the Public Service Pension Plan, on the basis of a greater sharing of responsibility for pension policy and financing.

Recommendation 15

15.1    The President of the Treasury Board should commission external experts, including members with experience on both the union and the management sides of benefits design and management, to undertake a fundamental rethinking of how best to insure employees in the event of death or disability, and to supplement generally available health and dental coverage, taking account of the current and future needs of employees and their dependants. The scope of the review should include the purpose and design of the Supplementary Death Benefit under the Public Service Superannuation Act. In particular, the rethinking should assess the feasibility of offering employees a set of choices for coverage that best suits their needs and preferences, at reasonable cost. Consideration should also be given to the desirability of purchasing insurance programs underwritten by external insurers (such as the existing Disability Insurance Plan), or programs administered by third parties where the government assumes direct responsibility for benefits (such as the Public Service Dental Care Plan).

15.2    Based on this external study, the Treasury Board Secretariat should discuss with the public service unions how to establish an annual benefits allowance that would be available exclusively to purchase benefits from a menu defined jointly. The initial amount of the benefits allowance should be set to maintain overall equivalence with the value of existing benefits, with an appropriate annual escalator. Collective bargaining, or compensation decisions affecting unrepresented employees, could lead to changes in the allowance up or down. Consideration could also be given to a hybrid approach whereby some benefits covered by the allowance would be mandatory for all employees, and some would be available according to employee choices.

15.3    Employees should be able to purchase coverage beyond that covered by the benefit allowance on the same terms with their own money.

15.4    The President of the Treasury Board should commission a specialized assessment contributing to the study proposed in Recommendation 15.1, again led by external experts from the full spectrum of union and management viewpoints in the public service, to examine how to consolidate plans protecting employees in the case of prolonged disability, both to improve service to employees and to reduce administrative costs. The review should include an examination of the option of replacing the existing practice of earning and accumulating unused sick leave with a form of short-term disability insurance.

15.5    The Treasury Board should harmonize the rate of disability insurance income replacement and annual inflation protection across the various federal public sector plans, except where there is a compelling policy-related case for maintaining distinctions.

15.6    Depending on the result of the rethinking proposed in recommendation 15.1, the President of the Treasury Board should commission the Office of the Superintendent of Financial Institutions to assess what level of contribution would need to be recorded in the Supplementary Death Benefit Account in order to ensure its long-term financial health. Any amounts in excess of what is required could factor into broader discussions with the public service unions on the future of benefit plans.

15.7    Governance of public service benefit plans should be consistent with the allocation of accountability for financing the plans. Joint union-employer management should only apply in the case of plans for which both the employer and the employees, through their representative unions, are responsible for the plan's financial health.

15.8    Employer representatives on plan boards should be selected and trained so as to ensure that they act to implement the employer's policy on employee benefits, including a prudent approach to financing, and not on their interest as plan members. To underline the seriousness of this role, such representatives should be appointed by the Governor-in-Council.

15.9    Public service managers should ensure that employees normally use the annual leave to which they are entitled, and that employees are paid for overtime for which they are eligible to be paid.

15.10 The President of the Treasury Board should commission an independent review of the appropriate level of employer contributions to life insurance, health and dental benefits for public service pensioners, taking account in particular of the practices of other major Canadian public and private sector employers. Representatives of public service pensioners, and the public service unions, should be invited to contribute to this review.

5. Possible Areas for Legislative Change

Recommendation 16

16.1   The President of the Treasury Board should sponsor a series of expert studies and conferences over the next few years to foster broad public debate about a possible alternative model for collective bargaining dispute resolution that would replace the existing conciliation/strike and arbitration routes under the existing Public Service Labour Relations Act. Such a model would provide for third-party dispute resolution––instead of a right to strike or traditional arbitration––in a way that would apply the principle of comparability with the Canadian private labour market to the determination of total public service compensation for particular groups of employees, in a way that would be credible to taxpayers, employees, the public service unions, and the Government.

16.2   Any such model should respect the Canadian Human Rights Act requirement of equal pay for work of equal value, based on a clearer method for interpreting and applying this principle in the federal public service. Refer to Recommendation 17 below for further proposals in this regard.

16.3   If a suitable model can be developed, the Government should propose draft legislation for consideration by the time of the parliamentary review of the Public Service Labour Relations Act, required for 2010.

16.4   In the meantime, the Treasury Board Secretariat and public service managers should apply the new provisions of the Public Service Labour Relations Act relating to essential employees diligently.

16.5   All those with a role in implementing the Public Interest Commission provisions of the new Public Service Labour Relations Act, including the President of the Treasury Board, the Treasury Board Secretariat, the public service unions, and the Chairperson of the Public Service Labour Relations Board, should take advantage of the opportunity to invite distinguished Canadians to bring their experience and wisdom to bear on resolving labour disputes in the federal public sector.

Recommendation 17

17.1   The Government of Canada should consider proposing amendments to the statutory framework for pay equity, to ensure clarity in the way pay equity is implemented in the modern workplace. Such amendments should, among other goals, respect these five premises:

  • Pay equity should aim to redress that portion of the male/female wage gap that is attributable to discrimination, and not to other factors.
  • Pay equity should operate at a systemic level to detect and remedy patterns of differential pay for men and women performing work of equal value within an establishment.
  • Pay equity should function within a collective bargaining wage determination system with multiple bargaining units based on community of interest, and should disrupt that system as little as possible.
  • Pay equity should recognize that Canada is a market economy in which salaries generally reflect the forces of supply and demand; federal jurisdiction employers should not be expected to stray far from market norms in implementing pay equity.
  • For large employers with diverse workforces, pay equity should permit appropriate partitioning of jobs into groupings with broadly similar characteristics, especially required skill levels.

17.2   Although it has contributed greatly to public understanding of pay equity issues in the federal labour jurisdiction, the 2004 Pay Equity Task Force Report entitled Pay Equity: A New Approach to a Fundamental Right should not be accepted as an adequate basis for revising the statutory framework. In particular, greater clarity is required in such areas as the fundamental purpose of the legislation within a broader competitive labour market, how knowledge can be better accepted as the central employer value in modern workplaces, how to distinguish what part of any male/female wage gap is a result of gender discrimination, and how pay equity can coexist constructively with collective bargaining.

17.3   Until such time as the statutory framework governing the implementation of equal pay for work of equal value in the federal labour jurisdiction is amended, the Treasury Board Secretariat, in collaboration with the Public Service Human Resources Management Agency, should implement a pragmatic, proactive approach to identifying and eliminating male/female wage differences resulting from gender discrimination. This approach should include:

  • Ensuring that new classification standards minimize gender bias.
  • Assisting managers and others involved in classification to minimize gender bias in the application of existing classification standards.
  • Deciding on a sensible framework for comparing groups for pay equity purposes. The potential for the National Occupational Classification published by Human Resources and Social Development Canada to assist in this work should be fully explored.
  • Conducting an analysis of significant differences in male and female salaries in the core public service.

17.4   In conducting the analysis referred to in the fourth point of Recommendation 17.3, the following steps should be undertaken:

  • Document the proportion of male and female employees by existing classification group and level, and the related average salaries.
  • Document the work-related characteristics of male and female employees in these groups and levels, according to the criteria used by Statistics Canada and other social researchers, in evaluating to what extent salary differences may be explained by factors other than discrimination.
  • Assess to what extent there are group salary differences that cannot be reasonably explained by factors other than discrimination.
  • Develop appropriate comparison domains, based mainly on the NOC framework, particularly the skill levels, to facilitate cross-group comparisons.
  • To the extent that the above analyses yield significant discrepancies that may be the result of gender discrimination, include these as issues for priority consideration in the next round of collective bargaining for the affected groups.

17.5   Whatever methods are adopted, the Treasury Board Secretariat and the Public Service Human Resources Management Agency should ensure that measures to implement equal pay for work of equal value complement, and do not distort, a balanced approach to managing the full range of compensation issues in the federal public service.

17.6   The federal public service should continue to pursue employment equity as a key component in bringing greater equality of incomes to men and women in the federal public service.


Total Compensation Summary*









Salaries and Wages (Regular Payroll)


















Performance (at risk) Pay–lump sums only


















Recruitment and Retention Allowances and Other Allowances and Premiums


















Overtime Premiums


















Payroll Deductions for CPP/QPP; EI; provincial health premiums




































Life and Disability Insurance: (Supplementary Death Benefit; PSMIP Life Insurance; Workers' Compensation; Disability Insurance; PSMIP
Long-Term Disability)


















Health and Dental Plans (Provincial health payroll taxes; Public Service Health Care Plan (PSHCP); Dental Care Plan (DCP); Quebec Sales Tax)


















Severance Pay & Cash-Out























* The total compensation figures given in the introduction to Volume Two of the Report are $17.8 billion for 1990–91, $16.6 billion for 1997–98, and $24.8 billion for 2002–03. The major difference between those figures and those in the table above is that the figures here do not include the "other" domain. These figures are based on expenditures.