ernst & young: public sector compensation review

8/11/2019 Ernst & Young: Public Sector Compensation Review

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BC Public Sector

Compensation Review

Septem ber, 2014


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BC Public Sector Com pensation Review | Septem ber 20 14

Con

tents

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


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1. Executive summary

The Mandate

In N ovem ber 2013, the P rovince of British Colum bia engaged Ernst & Young 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 Governm 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 P rovince 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

Executive

The current governancestructure has enabled C ore

G overnm ent to very effectively

hold the lineon executive

com pensation,w ith average

executive salary rem aining flat

from 20 09 to 2 01 4

The m ajority of Broader PublicSector organizations appear to

have broadly held the lineon

executive com pensation from

200 9 to 201 1

In 2 011-12, com pensationacross the m ost senior

leadership roles (e.g. CEO vs.

D eputy M inister) w as higher in

the B roader Public Sector than

in the Core Governm ent

In 2011, com pensation across them 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

Vancouver and M etro V ancouver

w as higher than the top of the D M

salary range

Management

andExcludedA t the m anagem ent level, Core

G overnm ent com pensation has

been essentially flat since 2 009

and there have been virtually no

increases in com pensation

A nalysis of a sam ple of salarybands indicated that m anagers

in the B roader Public Sector are

typical paid m ore than peers in

the Core Governm ent but less

than those in M unicipality

A t the m anagem ent level there is noclear 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

Barg

ainingunit A nalysisof settlem ent data indicates that betw een 2001 and 2012, Core Governm ent em ployees received 19%

cum ulative increase; those in the B roader 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 inthe Core G overnm entand Broader Public Sector. M unicipality are paying higher com pensation in the m ajority ofcases for com parable roles

N ote that given the lack of available data, com pensation of the m ost senior levels of leadership acrossG overnm ent w as com pared w ith the intent of providing on e 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


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PhilosophiesA 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 B roader 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 alignedacross the B C 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 paratorsB N ote that BC Ferries an d TransLink are not covered by the Public Sector Em ployers Act.

Core

BroaderPublic Sector

Reg. & Local Government

Decreasing level of centralcontrol and increased

variability

Summary of recommendations

There is a need to drive greater alignm ent in com pensation across the C ore, 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 Governm 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 B C Public Sector

The P rovincial 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 B roader 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


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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 moresustainable and market

sensitive

Design future stategovernance model to enablealignment of compensationacross BC Public Sector to

Core Government

Refresh Core Governmentphilosophy for application to

Broader Public Sector

3. Deploy andsustain

2. Build governance model and processes toenable alignment across BC public sector

1. Create commonphilosophy & enablers

Design strategic approachto bringing Municipalityunder this governance

models and design detailedtransition 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 P ublic Sector

2.Revisit the role of Crow n

Corporation Boards in

establishing B roader Public

Sector Com pensation andrevisit the rem uneration

catego rization for Crow n

corporations an d 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 pen sation 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

Associations in the B roader

Public Sector

5.Enable a com m on bargaining

approach in the R egional &

Local G overnm ent

6.Conduct a review of current

arbitration m odels

7.Select strategy to create

adherence to philosoph y and

governance m odel. It is

proposed that:

As data and benchm arking

capability im proves, educate

and set a fram ew ork of

expectations in order toprovide R egional & Local

G overnm ent with the

opportunity to do the right

thingby com plying

W here education and setting

of expectation s do no t 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 C ore w here necessary

2.Further develop this

philosophy to create a shared

philosophy for the entire BC

Public Sector, providingcom m on principles, processes

and guidelines

3.Establish standardized

ben chm arking tools in C ore

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


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2. Objectives and scope

BC is undertaking a Core Review with clearlydefined objectives

British C olum 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 C abinet W orking

G roup on Core R eview is tasked w ith exam ining allG 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 B udget 20 13 (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 toreview variations in compensation

In considering the stated objective of the Core

Review of ensuring appropriate public sector w agelevels, 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 P ublic 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 singletaxpayer' perspective, the apparent lack of

correlation betw een the province's econom ic

position and com pensation increases in

certain areas of Governm 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 B C Public Sector

O n the other hand, the existence of sustained

com pensation freezes m ay lead to significant

talent m anagem ent challenges, givenconstraints 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.


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Scope and approach

The Review focused on the scope outlined in the

diagram below . The R eview 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 ).

CoreC

BroaderPublic Sector B

Regional andLocal Government A

BC Provincial G overnm ent

BC P ublic Sector

It is within this context that EY has beenengaged to conduct an independent review

The Province of BC has engaged E Y 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 P ublic Sector

A ssess the current m odels for setting

m andates and m anagem ent and executive

com pensation

In conducting the Review , the P rovince directed E Y

to consider forem ost the role of taxpayers as w ell

as recognize the need for continued strong

leadership and talent in the B C Public Sector.

Scope of review

(4) In scope employee groups

(3)Inscopee

lemen

tso

ftotalcompensa

tion

(1) In scope time series

(2) In scope areas of the public sector

2006 2007 2008 2009 2010 2011 2012 2013

Benefits

Performanceincentive orholdback

Base salary

Bargaining unitManagement &

excludedExecutive

* Federal Crow ns operating in B C w ere

out of scope of this review

It is important for the reader to be aware oflimitations 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 C ore G overnm ent and the B roader

Public Sector collectively

The Public Servicem ay be used to refer to

the Core Governm ent

A M unicipality includes M unicipal G overnm ent, Regional G overnm ent, Fire and Police, BC Ferries an d TransLinkB Broader Public Sector includes Crow ns, Schools, Colleges, U niversities, Health A uthorities and social servicesC Core Governm ent includes M inistries and Agen cies as w ell as som e sm aller Crow ns


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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 ofm anagem ent level pay bands in use in B roader

Public Sector entities indicates that these bands

are m aterially higher than those used by the C ore

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 significantlyhigher increases in com pensation than those in the

Core Governm ent and B roader Public Sector

betw een 2 001 -12. In addition, data indicates that

M unicipality is paying m ore than the P rovincial

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 sufficientdata to allow a detailed comparison ofcompensation

The follow ing section presents findings as to

variations in recent increases in com pensation acrossthe B C 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 B C 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 aconsistent 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 B C 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 ofBroader Public Sector CEO s are paid m ore than the

average D eputy M inister (DM ) 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.


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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

2007

2008

2009

2010

2011

2012

2013

2014

Averagebasesalary($000s)

Average annual base salary of executives in theCore Government (F07 F14)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-0.95%to-0.9%

-0.85%to-0.8%

-0.75%to-0.7%

-0.65%to-0.6%

-0.55%to-0.5%

-0.45%to-0.4%

-0.35%to-0.3%

-0.25%to-0.2%

-0.15%to-0.1%

-0.05%to0%

0.05%to0.1%

0.15%to0.2%

0.25%to0.3%

0.35%to0.4%

0.45%to0.5%

0.55%to0.6%

0.65%to0.7%

0.75%to0.8%

0.85%to0.9%

0.95%to1%

1.05%to1.1%

1.15%to1.2%

Distribution of total compensationA increases forBroader 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 C EO s typically

receiving 0% increase in com pensation betw een

20 09 20 11 .

It should be noted, how ever, that som estakeholders 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 theBroader Public Sector

Increases in executive compensation in theCore Public Service

A Com pensation assum ed to include base salary, perform ance incentive and other com pensation

Deputy Minister

Associate DM

ADM Band D

ADM Band C

ADM Band B

ADM Band A

Source: The Public S ervice A gency, H istorical Average

Salaries for Executives and M anagem ent(201 3) Source: PSEC , Statem ent of Executive C om pensation

(2013 )


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A t the m anagem ent level, data indicates that the

Core Public S ector has been effectively holding the

lineon com pensation since 2009.

50

60

70

80

90

100

110

2007 2008 2009 2010 2011 2012 2013 2014Averagebasesalary($000s)

Strategic Leadership

Business Leadership

A pplied Leadership

Average annual base salary excluded management(F07 F14)

Sou rce: The Public S ervice A gency, H istorical Average

salary for executives and m anagem ent(201 3)

0 100,000 200,000

City of V ancouver

BC H ydro

Translink

HEABC

U niversity of BritishColum bia

BC Institute of Technology

BC L ottery Corporation

BC T ransit

G overnm ent of BC

BC A ssessm ent

M ax of BC

Governm ent

salary range

($1 13k)

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 ithseveral entitys m inim um com pensation

exceeding com pensation caps in the Core

Broader Public Sector entities such as BCLottery Corporation and B CIT are in the m iddle

of the range

BC H ydro and UBC stand out am ong BroaderPublic Sector entities as paying tow ards the top

end of the range

The C ity of V ancouver is the highest payingorganization of those for w hich data w as

available

Strategic Leadership salary ranges across the BCPublic Sector

Source: The P ublic Service A gency, Strategic Leadership

Review : Com pensation challenges(201 3)

Salary

Comparisons of management and excludedemployees compensation across the sector

D ata is not readily available to support analysis of

increases in com pensation of m anagem ent andexcluded 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 consistentlyindicates that M unicipality typically pays higher

com pensation than the Provincial G overnm ent for

com parable positions.

Comparison of Strategic Leadership levelsalary bands across the BC Public Sector

Increases in management compensation inthe Core Public Service

Provincial

Regional and localKEY

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 S ervice is the low est paying.


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Comparison of Business Leadership levelsalary bands across the BC Public Sector

0 50,000 100,000 150,000

Public Service

BC H ydro

BC Lotteries

BCIT

HEABC

U V ic

BC T ransit

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 B C Public

Service pays at or near the low er end.

IT Manager salary ranges across the BC PublicSector

Source: Provided by PSEC

0 50,000 100,000 150,000

Public Service

BC H ydro

BC Lotteries

BCIT

HEABC

U Vic

BC T ransit

Budget Manager salary ranges across the BC PublicSector

So urce: Provided by PSEC

0 50,000 100,000 150,000

Public Service

BC H ydro

BC Lotteries

BCIT

HEABC

U Vic

BC T ransit

OHS Manager salary ranges across the BC PublicSector


Comparison of Applied Leadership level salarybands 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 P ublic 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

HEABC

U Vic

BC T ransit

HR Consultant salary ranges across the BC PublicSector


0 40,000 80,000

Public Service

BC H ydro

BC Lotteries

BCIT

U Vic

BC Transit

Executive Coordinator salary ranges across the BCPublic Sector


0 40,000 80,000 120,000

Public Service

BC Lotteries

HEABC

U V ic

Policy Advisor salary ranges across the BC PublicSector



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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 hoidentified them selves as being em ployed by the

Provincial and M un icipality in BC. Hourly 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 excludedemployees (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 excludedcompensation across the BC Public Sector

0 50,000 100,000 150,000

The A ssociation o f Professional Engineers and G eoscientists of

BC Report O n M em bersCom pensation A nd B enefits(20 12 )

Base salary comparison Professional Engineersand Geoscientists of BC (2012)

# of data points

Region al &

Local

35

Provincial49

Comparison of compensation for specializedskills 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 thatM 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

So urce: Labour Force Su rvey D ata

Provincial

R egional and localKEY

Provincial

Regional and local

KEY

Lo w er quartile H igh er quartile

M edian


14/88

Page 14


0%

10%

20%

30%

40%

50%

$75,000 $150,000

Percentage of employees receiving between$75,000 to $150,000B

Share of total FIA disclosed compensation paid tothose earning more than $75,000C

0% 50%

A bbotsford

Surrey

Prince George

Vancouver

Victoria

Kelow na

Kam loops

Provincial

% of total FIA disclosed com pensation >$75,000

Percen

tageofemployeesreceiving

between$75Kto$150K

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 $7 5,000 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 dataB A nalysis provided by PS ECC D ata includes salary, w ages, bonuses, gratuities, taxable benefits

Regional &

Local has

higher % of

high earners

Comparison of distribution of salaries betweenRegional and Local and Provincial Governments

Salary, w ages, bonuses, gratuities,

taxable benefits

A nalysis prepared by P SEC 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 increasesin com pensation in recent years than their peers in

the P rovincial G overnm ent from 2001 to 2012.

Cumulative percentage wage increase in bargainingunit compensation vs. inflation (2001 to 2012)

Increase in bargaining unit compensation in theProvincial and Municipality

So urce: FIA D ata

Source: FIA Data


Provincial


0%

5%

10%

15%

20%

25%

30%

35%

40%

Core BPS

R egion al and L ocal In flatio n

Betw een 20 01 and 201 2, Core Governm ent

em ployees received 19% cum ulative increase; those

in the B roader Public Sector received 24%; and

those in M unicipality received 3 8%. This in

com parison to inflation of 23% over the sam e tim e

period.


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# of data points

Protective

Services

29 3

79

Technical

related to

N atural and

A pplied

Sciences

92

92

Professionals

in N atural and

Applied

Sciences

61

13 7

Clerical

16 7

20 0

A dm inistrative

and

Regu latory

22

11 7

0 20 40 60

Exam ination of Labour Force survey data betw een

January 2 01 3 to D ecem ber 201 3 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 forcom parable roles.

Comparison of compensation of employees coveredby collective agreements (J an 2013 to Dec 2013)

Earnings (assum ed to be base salary only) ($/hour)

Compensation of union members in theProvincial and Municipalities

The m ajority of m unicipal spending goes to

em ployeescom pensation. The Independent

Contractors and Business Association of BC (ICBA )

estim ates that m ore than 50% of typical m unicipal

budgets goes to w age and benefit costs1. A study

also calculated that in V ancouver 67% of operatingspending w ent to w ages, salaries and benefits, on

average, annually betw een 2 000 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 200 0-10 ,

com pared w ith approxim ately 10% in the Provincial

G overnm ent1.

Increase in compensation expenditure inMunicipality

95

100

105

110

115

120

125

130

135

Rea

lper

Cap

ita

Expen

diture

(In

dexe

d2000=

100)

N ote: Excludes capital spending

Source: BCBC, Up and aw ay: The G row th of m unicipal

spending in M etro V ancouver(20 12)

Real per Capita Expendituresmunicipalities in Metro Vancouver and Provincial

1 ICBA of British Colum bia , Construction M onitor(2012)2 CFIB, Big C ity 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)So urce: Labou r Force Su rvey D ata

Provincial


Provincial

Reg ion al and localKEY

Lo w er qu artile H igh er quartile

M edian


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4. Variations in Philosophies and governance models

Compensation mandate:Cabinet and the M inisterhave 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

Regional and Local m odel, no one party sets the

rules around executive com pensation and collectivebargaining 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 E m ployersAssociations 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 theinterests 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 ixedapproach 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 lackof 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 feasiblyprovide 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 identifiedvariations 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 2 008 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 DM

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 DM s; and

that Strategic Leadership com pensation be set at

85% of BCs AD 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 B roader Public Sector and

M unicipalities are understood to have varied

philosophies. Crow ns often operating m onopolyservices 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 arkagainst 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 entm 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).


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4a. Philosophies

Core Government compensation philosophy

Executive: In 2008, Cabinet approved a philosophyfor executive com pensation in the Core Governm ent.

This philosophy m andated that Deputy M inisters

com pensation be set at 83% of equivalent executives

in the Federal G overnm ent that Assistant 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 hilethe 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 20 08. W hile C abinet 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 Leadershipcom 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 setphilosophy in the form of m andates for increases in

unionized em ployee com pensation. Since 1993,

bargaining w ithin the Core Governm 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 P SE C across the

Broader Public Sector in accordance w ith a

classification structure for entities that w as last set in

2008 (See Appendix C-3). M any C row 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 C row 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). C EO salaries tend to be set atthe 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 Governm 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 itscom 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).


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4b. Compensation Mandate

Under the Provincial Government model, theCabinet and Minister have powers to set thecompensation mandate across the ProvincialGovernment

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 theProvincial 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 FerryServices 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 2 012, a num ber of com m unities of

interest have expressed doubts about the validity ofsuch claim s.2 In sum m ary, the additional levels of

com pensation autonom y have led to som e

em barrassm ent for Governm ent over one-off or

overly rich com pensation for executives.

In the Municipality, no one party sets mandatesand rules across the entire sector. This poweris 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 1 2%, and set a new target that lim its the

increase for each household to a m axim um of 2.5% in2013), 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 R ecom m endation 2 .1) .

1 BCPS EA , Public Sector M anagem ent & E xecutive C om pensation Freeze Policy(2012 )2 N ew sleader, TransLink staff earning 6-figu re salaries(2013)


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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 otherjurisdictions 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 Agency 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, coordinationand enforcem ent across the m unicipal sector.

(See A ppendix C-13)

-5% 0% 5% 10% 15%

BC

perform ance

Yukon

N W T

N ew foundland

PE I

N ova ScotiaN 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 B roader 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(See A ppendix C-11)

Source: CFIB, W age W atch(2008)

BC is, how ever, the only C anadian jurisdiction to have

an A uditor General for the Local G overnm ent (SeeA ppendix C-10). W hile A G LG plans to conduct a

perform ance audit of M anaging the Inherent Risks of

Lim ited H um an R esources 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

Vancouver

N ova S cotia

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

Source: CFIB, W age W atch(200 9)


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4d. Employers Association

The Public Service A gency provides employersassociation services to the Core Government

U nder the P ublic Service Act, the Public Service

A gency has the responsibility to act as the

bargaining agent on behalf of the G overnm ent, w iththose unions w hich represent em ployees directly

em ployed by the G overnm ent.

Six Employers Associations provide servicesto the Public Sector

The purposes of an Em ployersAssociation 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 ployersAssociation 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 ployersAssociations 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 R ecom m endation 2.4) .

At the local Government level, there isdisparity 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 theirnegotiating team s com pared to their union

counterparts.2N 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 Relations departm ent of M etro V ancouver

and the G reater V ictoria L abour 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.

(See A ppendix C-14)

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 C anadian U nion of Public Em ployees, w hich is a

m em ber of the C anadian Labour Congress. CU PE

provides even sm all local unions w ith sophisticated

assistance for bargaining and contract negotiations.

(See Appendix C-15).

A s Langley T ow nship Councillor, Bob Long

com m ented: It w ould be nice if w e w ere all m em bers[of the B ureau]. 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 anycontract 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 Act(2013)2 R.L. Bish, Local G overnm ent in B ritish Colum bia(2008)3 Vancouver Sun , Labour Relations broken(2011)


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4e. Crown Corporation Boards

Most entities in the Broader Public Sectorhave their own boards

The B oards have responsibility for setting

com pensation philosophy, approving com pensation

plans, and ensuring that executive com pensationpaid 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 theirdecision m aking.

W hile Boards can be replaced, there are few other

m echanism s to hold B oards 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 them 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 P rovincial 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 entside.

There are exam ples of the use of com pensation

com m ittees in the B roader Public Sector. U BCs

board of directors, for exam ple, delegates

responsibilities for executive com pensation to its

M anagem ent Resources Com pensation C om 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, thoseguidelines 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.



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Page 22


4f. Benchmarking tools

The approach to benchmarking is also highlyfragmented 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 Association (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 22 2 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 2 22

survey positions1

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 BroaderPublic 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 comprehensivemapping 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 theirown 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 5 0 th percentile of the blended

healthcare and external m arket pay policy guidelines.


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Unions may have undue influence in thecollective bargaining process at theMunicipality level

The m odel of collective bargaining w as originallyadopted by the Public Sector from the private

sector. It is now held as a basic principle in m ost

areas of the P ublic 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 bersm 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 entsor 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 inadvance.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 capture4.

See recom m endation 2 .5).

1 Labour Relations B oard B C, Guide to the Labour Relations

Code Province of BC (20 14 )2 JIBC, Police Com pensation/ N egotiation of Contracts

video(2013)3 R.L. Bish, Local Governm ent in B ritish Colum bia(2008)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 collectivebargaining 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 P olice S ervices.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 Officer 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 B C. (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 P rovince, w ith som e pockets of

arbitration for Police and Fire w hich stakeholdersbelieve m ay be resulting in com pensation escalation.

(See recom m endation 2.6).


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The BC Government does not currently use allavailable sources of information to gain apicture of compensation across the breadth ofGovernment

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 hilethe 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 cannotfeasibly provide the BC Government with themeans to understand variation in totalcompensation across the arms of the Provincial,Municipalities.

O ne of the m ajor constraints identified in

conducting this R eview w as the availability and

com parability of com pensation data of em ployees

across the B C Public Sector. In order todem 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 createssignificant 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 throughlegislated 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).


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5. Talent management implications of recent trends in compensation

Summary of findings

W hile the variation betw een C ore G overnm ent and other areas w ithin the P rovince is of greatest concern, it

is im portant to consider the talent m anagem ent im plications of freezes in com pensation in the C ore.

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 C ore 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 8 5% 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 B roader 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 Deputy 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 P rem ier

Compensation ($000)

Key issues mapped to prescribed salary ranges within the Core GovernmentA

Issue #3: Com pression exists between B argaining unit andm anagem ent, created by lack of increase in m anagem ent

com pensation from 20 09 and restrictions on m ovem ent of

individuals within m anagem ent ban ds

Issue #2: Because the 20 08 com pensation philosophyw as never im plem ented at Strategic Leadership level,

the top end o f this band is too low and thus pay is

uncom petitive

Issue #1: The BCGovernm ent is not

m aking full use o f its

existing com pensation

bands at DM /A DM level

The years of compensation freezes within the Core Government have led to a number oftalent 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


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Issue 1 Use of ADM/ DM bandsCom parisons of m axim um achievable executive

salary ranges to those in other jurisdictions indicate

that the C ore 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 arenot 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

Nunavut

Quebec

N ew foundland

N ew Brunsw ick

Cross-jurisdiction ranking of maximum ADM levelexecutive salary ranges (2013)

Source: The P ublic Service A gen cy, DM and A ssistant

D eputy M inister Review : Com pensation U pdate(201 3)

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 thework I do Executive responses

Percentage of respondents

Source: Th e Public Service A gency, Deputy M inister and

A ssistant D epu ty M inister Review : Com pensation Update

(20 13)

Indeed, the philosophy on executive com pensation

appears to be being successfully applied in the C ore

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 P ublic 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 individualsm oving is not surprising.

A s the The P ublic Service A gencysDeputy Minister

and Assistant Deput y Minister Review:

Compensation Update (April 201 3)concluded,

Based upon the data available, there is no

im m ediate need to adjust salary ranges for

executives w ithin the B C 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.


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Issue 2 - Competitiveness of StrategicLeadership pay

The C ore 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, thiscom 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 S cotiaYukon

O ntario

Saskatchew an

PEI

N ew foundland

N ew Brunsw ick

British Colum bia

M anitoba

Cross-jurisdiction ranking of maximum achievableStrategic Leadership salary range

Source: The P ublic S ervice A gency, Strategic Leadership

Review : Com pensation challenges(20 13)

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 6 6% 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 fiveyears, 232 w ere internal redeploym ents. The

stakeholders stressed concerns that the P ublic

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.


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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 40

1,000

2,000

3,000

4,000

5,000

6,000

113

Salary (un know n constituents) (000s)

M in M ax

Strategic 80,767 113,074

Business 69,998 95,843

ernst & young: public sector compensation review

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