Chapter 15: Labour Relations and Compensation

Size of Broader Public-Sector Labour Force and Degree of Unionization

There are thousands of public-sector employers and over one million broader public sector (BPS) employees in Ontario. This diverse group of employees includes roughly 300,000 in the health and social services sector, 294,000 in the elementary/secondary education sector, 133,000 in colleges and universities, 114,000 in municipalities1 and 65,000 in the Ontario Public Service (OPS).2

About 70 per cent of BPS employees are unionized — a far higher percentage than the roughly 15 per cent unionization rate in the private sector.3 There are important variations in density across BPS sub-sectors. For example, while overall union density in the health and social services sector is estimated at about 45 to 47 per cent, some estimates place union density in hospitals and acute care facilities at about 75 per cent, child welfare agencies at about 87 per cent, and youth justice service agencies at about 24 per cent.4 In the elementary/secondary education sector, over 95 per cent of employees are unionized.5

This high level of unionization produces a two-way street that requires joint oversight to foster effective union-management relationships. Any government or organization that wants to change the way in which services are delivered must work with the people who deliver those services and with the unions that represent those people.

Trends in Ontario Labour Relations and Employment

Ontario has a history of reasonably good labour relations, with some periods of conflict. In general, there have been fewer work stoppages in Ontario’s BPS than in the private sector.6

Employment has increased steadily in the past two decades across the major BPS sectors and industries, including education, health and social services, and public administration. From 1989 through to about 1993, employment increased in these broad industries and then levelled off through the 1990s; subsequently, employment increased, modestly at first in education and public administration, before increasing rapidly after about 2005. The increase in health and social services employment has been quite significant since the end of the 1990s. Over the period from 2000 to 2011, Ontario public-sector employment in health care and social services increased by 39 per cent and in education by 34 per cent. By 2011, Ontario BPS employment accounted for just over 17 per cent of total employment in Ontario.7

Total Compensation

Since 2003, prices in Ontario, as measured by the consumer price index, have increased by 17 per cent, average wages in Ontario have increased by 24 per cent and average BPS wages have increased by 28 per cent.8 These wage gains are based on reports of earned income from a statistical sampling of Ontarians. As such, simple statistics like these miss some key facts about compensation in Ontario.

Total compensation includes many components. Generally, the largest component of compensation is a “base wage” or salary. When it is publicly reported that an employer and a bargaining agent have reached an agreement of, for example, two per cent increases per year for three years, this usually refers to the magnitude of across-the-board increases in base wages. However, other components of total compensation can increase compensation growth beyond the growth in base wages. Premium payments such as overtime, shift premiums, merit pay and movement through “grids” can add significantly to total compensation. For example, in some sectors, merit pay for satisfactory performance can provide an additional 3.5 per cent per year.9 In other sectors, movement through a qualification and experience grid, for those not at the top, can add about five per cent per year solely for gains in experience that are not tied specifically to merit.10 Given that low inflation is projected for the near future, many employees with such arrangements could still see real wage gains even in the absence of across-the-board wage rate increases.

Wages and premium pay are two components that contribute to a “substantial and ongoing” public-sector wage advantage relative to the private sector in Canada. Key reasons cited for this wage advantage include more advanced pay equity policies in the public sector (thus narrowing male-female pay differentials) and the tendency for governments to pay higher for non-management service jobs, which statistically outweigh the smaller number of managers who tend to be paid less than in the private sector. “In other words, the spread between the top and the bottom of the pay scale is less in government than in the private sector, which is likely a result of political, public and collective bargaining pressures.”11 Other factors have been cited as reasons for a public-sector total compensation premium: public-sector workers are, on average, older and have longer tenure than private-sector workers; and public-sector workers have a higher average education attainment than private-sector workers.12

Other key components of total compensation costs include benefits (both vacation benefits and health benefits), pensions and job security provisions. In general, benefit levels in the public sector are generous; public-sector employees often have access to jointly funded defined benefit pension plans; and many collective agreements include job security provisions that greatly reduce the likelihood that employees in a particular bargaining unit would find themselves out of work (especially employees with seniority under collective agreements with “bumping” provisions).13 Benefits, pensions and job security are undoubtedly valued by employees and also by many employers who recognize this reduces turnover and contributes to workforce continuity and stability. Thus, they must be considered as part of the total compensation package that is negotiated or bargained with employees and employee groups.

The Challenge

Growth in public-sector wages has slowed since the introduction of the government’s restraint policy in March 2010.14 However, many major agreements, including the agreement covering Ontario’s 24,875 physicians15 and those covering over 200,000 full-time equivalent (FTE) employees in the education sector, have not been renegotiated since the 2010 restraint was announced.

The previous chapters of this report have outlined the scope of the fiscal challenge that Ontario is facing. If the target of a balanced budget by 2017–18 is to be met, government program expenditures must be restrained. As has been indicated, this restraint will take different forms in different sectors. However, one recommendation that crosses all sectors is the need for prolonged moderation of growth in public-sector total compensation.

It is tempting to argue that this moderation should be achieved through a reduction or freeze in wages. Although temporary wage moderation may be necessary to meet short-term fiscal targets, longer-term action will require co-operative approaches that can drive the institutional and system-level change recommended in this report. Ultimately, moderation in total compensation will require that wage restraint give way to a reduction in the size of the workforce, supported by increased productivity and improved service delivery.

Wage freezes have been common tools in previous governments’ deficit fights. However, history shows that wage freezes are often followed by wage catch-up periods. Such action, if undertaken in the current fiscal climate, would undermine our longer-term fiscal mandate and damage labour relations. The Commission confronted considerable confusion over what the Supreme Court decisions16 mean for issues such as wage freezes. However, it is the Commission’s understanding that the two decisions stress the importance of consultation when governments seek to achieve their desired industrial relations outcomes. The interests of positive longer-term labour relations and the emerging law dictate that the same path be followed at this time: make the fiscal objectives and the implications for labour compensation very clear, and then negotiate towards securing the desired results.

Previously in Chapter 3, Our Mandate and Approach, the Commission provided recommendations on the size of the workforce and unionization, which we revisit in this chapter. Focus should be on program outcomes and budgets, and not on arbitrary limits on the size of the civil service. There should be no ideological or other bias towards or away from public- or private-sector delivery of services. Such matters should be dealt with from a position of practical logic: What produces the best result for the people of Ontario? What produces the best public services at an affordable cost? Increasingly, services should be put to tender to secure the optimal results. Yet, the winner should not be decided simply on the basis of the lowest cost. Instead, it should be decided on a quality-adjusted cost basis. For some services, a measure of quality would include, for example, the ability to provide the services in both official languages.

Recommendations for compensation and the labour force should focus on the bigger picture. As long as the system keeps deploying the same short-term solutions (i.e., wage/hiring freezes, global FTE reduction targets, suspension of performance pay), the government will continue to find itself in the same situation in the end. A shift in thinking must take place that moves approaches from short-term solutions to broader sectoral transformation. The lead problem (and solution) cannot be labour itself. The focus of discussions must begin with defining what businesses and services the government should undertake and what policy goals and outcomes the government should seek.

In theory, the system of labour relations in Ontario should allow governments, employers, employees and employee representatives to work together to deliver the public services that people depend on. The principles and recommendations below are intended to help bring reality closer to that theory.


  1. The labour relations system in Ontario should be balanced, effective and transparent. It should respect the interests of both employers and employees; help to provide value to citizens receiving public services; and be seen to do both these things.
  2. Collective bargaining agreements that are negotiated between the parties are preferred to settlements or outcomes that are either legislated or arbitrated.
  3. Accountability for labour relations and service delivery outcomes should be appropriately distributed. Governments, BPS employers and bargaining agents need to bear appropriate levels of responsibility for bargaining outcomes. Broader public-sector management and employees need to bear appropriate levels of responsibility for delivering high-quality public services and value for public money.
  4. Broader system changes should be part of a larger vision, in which labour relations play a part, but are not an end in themselves.

A Balanced, Effective and Transparent System

A Balanced System

Essential Services

It is generally accepted that negotiated settlements or outcomes achieved between parties through unconstrained collective bargaining with the right to strike/lockout are superior to other mechanisms for achieving contracts. The reasons for this are that the parties are best positioned to understand the trade-offs that allow them to optimize in negotiations, and the parties are more likely to live with the settlement or outcomes if the contract is freely negotiated (e.g., a lower grievance rate is more likely).

Some occupations are often regarded as essential. If the parties do not agree on a settlement and the union decides to exercise its right to strike, the public at large takes an immediate interest. “Many of the services provided in BPS industries are considered ‘essential’ insofar as the withholding of the provision of the services would materially affect the health and/or security of the public.”17

It is very difficult to determine which services should be deemed to be “essential” because there is no litmus test of hardship. In some medical or personal security cases, it is fairly clear, but in many other cases it is not. Some medical procedures can wait, others can wait but not for too long, and still others may require immediate assistance. Furthermore, there is the issue of consumer/public and political tolerance. There may be little tolerance for any service disruptions in health care and primary and secondary education by the affected public, while the non-affected (i.e., the healthy or those without children in school) may have a greater tolerance for service disruptions. So there is no clear distinction to divide specific services that are essential and those that are not.

Various governments have tended to undertake policy measures to respond to public pressures to avoid the public outcry that would result from public service delivery disruptions. Policy measures that governments undertake usually take one of these options in response to the public’s pressure:

  1. Increasing the number of designated workers in a bargaining unit (i.e., increase the proportion of employees designated as essential, to maintain a basic level of what is viewed as an essential service to the public); and
  2. Increase usage of outright strike bans.

“In labour relations, the main issue is identifying which industries/employers provide essential services and what proportion of a given workforce ought to be deemed essential. This issue determines the right to strike or, in the case of enterprises where only a portion of the workforce is designated as essential, whether a strike by remaining employees would have any meaningful impact on the operations of the employer … [and that] … BPS employers are under pressures and have unique incentives to rely on designating employees as essential; just as unions and employees are wary of the tendency to invoke this rationale for limiting the right to strike.”18

Recommendation 15-1: Establish an independent working group to consider and determine which broader public-sector occupations and industries should be deemed as providing essential services, the appropriate essential-worker designation process, and the appropriate form of dispute resolution mechanism for broader public-sector industries and occupations.

The Commission understands that this issue is highly complex and that trade-offs need to be made in any decision to deem any service as “essential,” as highlighted previously. However, as we clearly state from the outset, freely negotiated outcomes achieved between parties are always the best option. About one-third of employees in Ontario’s BPS are in occupations that are deemed to be essential; Ontario has the highest percentage of BPS employees in Canada who fall into this category. An independent review would seek to define the litmus test and examine whether Ontario has the correct public services deemed as essential.

Interest Arbitration

There is a well-established legal framework on bargaining rights in Canada — this is to be respected. However, this does not mean change is neither possible nor necessary — just that change must be collaborative and done in good faith.

The need to reach a balance between the rights of workers and the needs of employers is a key component of our labour relations system. As with any large, complex and vitally important system, it is worth reviewing its components to ensure that they are functioning as intended. One such component of the system that has received increased scrutiny in recent years is the system of arbitration.

The interest arbitration process in Ontario is a major determinant of wage (compensation) settlements in the Ontario BPS for unionized employees; all hospital employees, long-term care workers, police officers, professional firefighters and Toronto Transit Commission employees have no right to strike and thus have unresolved bargaining issues decided through interest arbitration. Interest arbitration is also used periodically in other industries, such as ambulance services and energy, and is used as a dispute mechanism of last resort to settle disputes after striking employees are ordered back to work.

The system of interest arbitration is very important. Unfortunately, the system has recently come under increasing scrutiny and attack. The arbitration system thus must not only work, but it must be seen to work.

The Commission heard many submissions from employers in the BPS claiming that arbitration is seriously flawed, even broken. Specific charges included the granting of high compensation awards, ignoring “ability to pay” arguments and long delays that are sometimes followed by high retroactive awards that had not been budgeted for.

Our research leads us to make recommendations to improve the arbitration process. But we hasten to add that we do not find the system to be broken. In general, arbitration awards have followed freely negotiated settlements. The notion of “ability to pay” is understandably difficult to apply in the public sector where most of the employer entities could raise taxes if pressed. Further, we found that the employer often did not present evidence of this argument to the arbitrators.

We believe the recommendations set out below will improve the system. However, by themselves, the changes will not materially change the sorts of compensation increases awarded through arbitration. The fiscal situation dictates that those compensation increases must be highly constrained over the next several years. That will only happen if the public-sector employers adopt tough, but fair, stances in negotiations. The pattern will then likely be reflected in arbitration.

Wherever government, BPS employers and bargaining agents have established a pattern of negotiating moderated wage increases, then interest arbitrators should follow that lead. 

Bringing the Interest Arbitration Process under One Roof

The Commission recognized the need to establish principles/outcomes that would assist its recommendations for interest arbitration process reform.

Recommendation 15-2: Establish the overall principles/outcomes necessary for reform to the interest arbitration process going forward.

Several key principles must be established to maintain the integrity of the interest arbitration process:

  • Assignment to cases independently of the parties;
  • Co-ordination of case assignment, in part to ensure that cases are handled in a timely/efficient manner;
  • Monitoring — which requires that decisions be reviewed with a view to ensuring that decisions reflect clear assessments based on criteria specified; and
  • Transparency — publishing decisions and decision summaries is critical; this is a form of external regulation by virtue of pressure from the parties and the interested public.

Recommendation 15-3: The normal course of an arbitration process should begin with mediation, prior to arbitration, to attempt to arrive at a negotiated settlement between the parties.

Again, the best settlements are freely negotiated between parties. The Commission acknowledges that a negotiated settlement is not always possible between parties; however, all efforts should be made to have parties attempt to settle on a negotiated agreement. A negotiated agreement is always preferable to one that is legislated or arbitrated.

Recommendation 15-4: The arbitration system needs to be shifted in favour of more objective analysis, based on objective criteria and supported by systematic data and research.

Prepare and propose changes to labour and other relevant legislation and procedures that guide the arbitration process, to create a more efficient process, and a more professional line of business with standards and appropriate training.

Changes should include:

  • The establishment of an independent tribunal or commission to create, maintain and manage a roster or a panel of independent arbitrators. Three might be the optimal number. Arbitrators would be assigned to cases by the tribunal/commission independent of the parties. Arbitrator and mediator assignments should be co-ordinated across the BPS, including provision for the appointment of arbitrators across sectors of the BPS. Either a roster or a panel of three arbitrators could work, but without the principles/outcomes outlined for the interest arbitration process, neither would work well. The Commission also emphasizes that the independence of the arbitrators from government influence or interference is of vital importance for either the roster or panel model to be implemented;
  • Establish a time limit on the arbitration process and the time arbitrators can take to issue a decision (currently they can take as long as three years, often because parties seek a particular arbitrator who is busy — such delays in decisions can mean they are ultimately out of sync with the current environment);
  • Develop specific and well-defined objective criteria that interest arbitrators would be required to account for in formulating their awards/decisions. For example, “ability to pay” criteria should be broadened to include economic and fiscal environment, and productivity criteria in arbitration awards/decisions;
  • Arbitrators should be required to provide clear assessments and reasons for their awards/decisions based on the specific and well-defined criteria specified in legislation, as well as any others;
  • Ensuring transparency by publishing arbitration awards electronically;
  • Arbitrators should function within well-defined parameters of the process and expectations of the stakeholders regarding the quality and scope of the awards rendered;
  • Arbitrators should not make judgments on issues not presented to them by either party;
  • Centralized support provided to arbitrators, as required; and
  • Increase professionalization of arbitration practitioners to enhance the quality of arbitration services provided. There are two dimensions to address to increase the professionalization of these practitioners. First, the core skill required for the profession must be identified, and programs to build these skills must be developed. Second, in arbitration and mediation professions that determine outcomes that affect the fundamental interests of third parties, a formal Code of Conduct should be developed for the profession.

As with any change, some groups will be negatively affected and thus will resist change. In the case of the changes proposed above, the community of arbitrators in Ontario will likely be displeased with the additional conditions imposed on their profession. In addition, the imposition of an independent tribunal/commission to create, maintain and manage a roster of independent arbitrators and mediators may limit arbitrators’ ability to determine which work they take on and thus may directly affect their livelihoods.

The government should be prepared for criticism and also be prepared to explain why changes are being sought. The rights of employees need to be respected, as do the needs of citizens who depend on public services being delivered within shrinking budgets. Communication, much like the system, needs to be balanced.

An Effective System

Ontario’s workforce and economy are changing. Its population is aging; global competition is increasing; technology is improving; and all signs point to an extended period of slower-than-historical economic growth.

As has been discussed in previous chapters, public services will need to be delivered differently — more effectively and efficiently — if service levels are to be maintained. That means increased productivity — more services provided per employee.

This is primarily a management problem. Most Ontario BPS workers are well educated, highly competent and dedicated to their jobs. However, the system in place to manage those workers does not measure productivity well, nor does it encourage active steps to improve it.

This can and must change.

Recommendation 15-5: Provide zero budget increase for wage costs in the Ontario government so any increases must be accounted for within the respective growth rates recommended in this report.

This will encourage government ministries/departments/agencies to consistently re-evaluate their internal expenditures and will help to maintain the type of healthy tension that drives out inefficiencies.

Annual re-evaluations of departmental budgets also support the more fundamental service reviews recommended elsewhere in this paper. The move to more effective provision of health care, education and social services will inevitably have labour relations implications. When an organization is closed, when two organizations are merged or when the responsibility for a service is outsourced to a different entity, workers are affected. The government has a responsibility to ensure that those effects are balanced against the need for more effective service delivery.

Recommendation 15-6: Bumping provisions (i.e., seniority) in collective agreements are unduly impeding the move towards a progressive and efficient public service. The government needs to work with bargaining agents and employers to explore options for modifying these provisions and monitor progress towards fixing this problem.

Recommendation 15-7: Do not let concerns about successor rights in the broader public sector stop privatizations or amalgamations that make sense and are critical to successful reform. Inherited agreements do not live forever; provisions can be accepted initially and bargained differently when they come up for renewal.

Recommendation 15-8: Consider expanding the authority of the Ontario Labour Relations Board to facilitate the establishment of effective and rationalized bargaining structures that support the delivery of quality and effective public services.

The new powers could include:

  • on receiving an application for certification of a new unit, to combine the new unit with existing units at that employer or
  • on merger of two employers, to combine units (as happens now in the public sector under the Public Sector Labour Relations Transition Act) or
  • on receiving an application from a union or employer anytime, to combine existing units at that employer.

Another way in which the government can support the transition to more effective service delivery in the BPS is to establish new relationships with BPS employers.

For government to have sustained compensation moderation in the BPS and responsiveness to BPS employers on critical needs that they identify, there needs to be sustained and direct government encouragement and direction to BPS employers. This could take various forms:

  • Requiring and supporting employers to adopt best bargaining practices in areas such as total compensation costing, preparing for negotiation, co-ordinating with fellow BPS employers, communicating with government with respect to what their plans are, and being required to provide information on their outcomes;
  • Setting targets for BPS employers (i.e., specific expectations for total compensation and costly non-monetary items); and
  • Setting parameters for employers, enforced through funding levers.

Effectively, the government has the responsibility to encourage sustainable outcomes in BPS bargaining and provide support to BPS employers and bargaining agents so that those outcomes can be achieved. The form of that support will differ from sector to sector.

Recommendation 15-9: Further rationalize bargaining, while recognizing that multiple models of rationalized bargaining exist (e.g., centralized, co-ordinated, legislated, voluntary). Work collaboratively with broader public-sector employers and bargaining agents to determine the most appropriate model on a sector-by-sector basis.

The overall bargaining structure in the province needs to change. It is now highly fragmented, with over 3,900 bargaining units. Many bargaining units, particularly in the BPS, are poorly resourced. One difficulty with a large number of collective agreements is that many employers, particularly small employers, cannot appropriately resource the negotiations. To a degree, the effects of this risk can be mitigated through consolidation of bargaining. Ultimately, the province needs to move to a smaller number of bargaining units and allow that to facilitate more consistent and complete attention and allocation of resources.

A smaller number of collective agreements will reduce overhead costs for both employers and bargaining agents. However, it will not directly result in lower wage settlements.

Centralized bargaining may take the form of a master table to negotiate sector-wide issues of concern (e.g., wages and benefits) in conjunction with sub-agreements that address issues related to local practices and distinctions in job structures and work processes. This two-tier approach provides the flexibility of not requiring consolidation of bargaining units or standardization of local terms and practices. Depending on the industry or segment of the BPS, the specific centralized bargaining framework may be structured along either occupation-based lines, across an entire sector, or through a combination of specific employers and occupations. Examples of this include elementary and secondary education, colleges, specific occupations in health, and community and social service transfer payment agencies. Some segments of the BPS would not be candidates for more centralized models of bargaining.

However, even where more centralized bargaining would not be appropriate, mechanisms to support desirable co-ordination should occur. Fostering effective sectoral and local practices, including ongoing discussion, and relevant data collection and analysis would be beneficial.

Recommendation 15-10: The government should facilitate a voluntary movement to centralized bargaining for municipalities — particularly in relation to police and firefighting bargaining.

A fundamental problem with municipalities is that they each have a different funding base (i.e., own-source revenues — property taxation, user fees, municipal licensing fees, development charges, investment income, etc., and the amount of funding from senior levels of government). Centralized bargaining works best when the employer side has one funding envelope (e.g., the OPS and its employees). In some circumstances, very small employers would be quite disadvantaged if swept up in a wage settlement driven by larger employers with deeper pockets.

The Commission recognizes that mandating centralized bargaining for municipalities would not be ideal for the reason discussed above. The financially weakest municipalities would likely face slightly higher-than-normal compensation increases, rather than the larger municipalities seeing their employees’ pay increases dragged down.

The benefit of this voluntary approach of centralization for municipal bargaining is that municipalities might not be completely “centralized,” but rather become “more centralized” in bargaining. The larger municipalities, or some groups of them, will tend to bargain together, and, likewise, the smaller municipalities will bargain together but separate from the larger ones.

A Transparent System

There are many misconceptions around public-sector labour relations and compensation. Often, misconceptions are heightened by rhetoric about “unreasonable” union demands or employer-proposed “cuts.” Many citizens have emotional responses to public-sector labour relations issues. Some may feel intrinsic solidarity with other workers fighting for their rights or their livelihood; others — particularly those who do not enjoy the same level of benefits or job security — may instinctively side with employers. In general, public-sector labour relations are a highly politicized policy area.

A government striving to ensure value for public money and sustainable delivery of public services needs to rise above knee-jerk politics. That means sticking to the facts:

  • Total compensation involves more than just wages. Thus, any conversation about total compensation must consider all elements of a pay package — including benefits, pensions, job security and working conditions/rules;
  • There is no such thing as a “typical” public-sector job (nor a “typical” private-sector job, for that matter). Thus, it does not make sense to consider all BPS workers the same, nor to treat them the same when it comes to compensation;
  • There are challenges in measuring productivity across different job categories (in both the public and private sectors) and with comparing job categories, but these challenges can be overcome; and
  • Labour markets are important, but the existence of public-sector monopoly employers complicates the influence of those markets. In general, retention premiums should not be provided to employees in jobs with an excess supply of labour.

These facts can and must be supported by data. To foster balanced, effective and transparent labour relations, good, independent information is key.

Recommendation 15-11: Establish a Labour Relations Information Bureau to collect and disseminate the range of data and information relevant to employers and unions in the broader public sector in their negotiations, and identify data and other information/knowledge gaps. Of particular importance is developing data and measures of productivity.

  • Through the bureau, support research on targeted areas of significant relevance to the collective bargaining process (e.g., productivity studies, conflict resolution, arbitration). Also, data collected should include collective agreements being made readily available as raw data on the Internet.
  • This bureau should support the independent tribunal/commission for independent arbitrators and mediators by providing current objective data and other information on the labour, economic and fiscal environment.

Recommendation 15-12: Introduce a comprehensive and transparent benchmarking system for Ontario Public Service and broader public-sector compensation, which would include a costing of the full compensation package, including benefits, pensions and moving through “grids” with seniority.

In Chapter 19, Liability Management, we provide a detailed discussion and our recommendations for public-sector pensions.

Appropriately Distributing Accountability

As we hope this paper makes clear, labour relations is about balance. Public-sector employees and employers have responsibilities to each other, to the government and to the citizens of Ontario. As such, public-sector employees and employers, at all levels, must be held to account.

Recommendation 15-13: Ensure that leaders in the Ontario Public Service and broader public sector are held to account and that they are adequately compensated and encouraged through incentives to lead and excel.

This recommendation should apply to both the OPS and the BPS — but the OPS should lead by example.

Achieving this vision will require thoroughly competent employees, including managers. This means they must be adequately compensated and offered appropriate incentives through the reward structure. The usual temptation to suspend managers’ bonuses during restraint should be resisted.

Significant bonuses should go to those who are deemed, through their job evaluations, as exceeding job requirements. If the government wants to apply restraint to overall bonuses paid, then it could divide the second, and largest, evaluation category. At present, this “fully effective” category, which includes about 70 per cent of managers, gets an automatic bonus that goes into their base pay (until they hit the pay ceiling for their category). There could be two categories within this group, where only a portion get the bonus, or two levels of the bonus could be established. The third category, those not fully meeting requirements, but judged to be in that position due to exceptional and likely temporary circumstances, such as being new to their job, could be denied an automatic bonus amount. Those not meeting requirements would continue not to get a bonus and would clearly be on notice that dismissal will follow if their performance does not soon improve. As in any organization, a certain percentage of employees are likely underperforming and this should be reflected in the distribution of overall ratings.

This tough-but-fair approach should then be encouraged across the BPS. Ongoing conversations about appropriate executive compensation and performance incentives have been initiated in the health sector. Such conversations should be expanded to other sectors. In general, executives who do not perform should be held to account. Conversely, those who do perform should be encouraged and retained.

Recommendation 15-14: Ensure that the job descriptions and collective agreement provisions defining management’s ability to organize work are flexible enough to allow for the movement of people to ensure that the best people are in the right places at the right time.

The government will need greater flexibility to move people around and to address underperforming employees and areas that are no longer priorities or where the service could be provided better by another entity. The government must become more organized in pursuing the dismissal of public servants significantly failing to meet job requirements. Often the effort is not made because the process can be long and difficult. But that sends an inappropriate message that taxpayers’ money will continue to go where little value is generated. To achieve this, more emphasis must be placed on top-quality management throughout the BPS, including training, recognition and support of top performers, action with underperformers (remedial and ultimately dismissal if required) and more emphasis on performance appraisals and incentives based on ability and performance.

Recommendation 15-15: Provide a better sense of expectations and objectives for each program, how those fit into the broader public policy thrust, and communicate those expectations to the broader public sector.

Achieving improvements in organizational effectiveness and productivity across the BPS through a centrally driven, “top-down” approach is highly unlikely to succeed given the sheer size and complexity of the entire BPS. A government-led approach that is more likely to achieve some of the desired objectives across BPS industries is one that supports professionalism, diffusion of best practices and innovation. Government-led reform of public-sector management and human resources management practices (including labour relations and collective bargaining) requires a comprehensive strategy that:

  • Sets out common global objectives to be achieved across organizations, including an expectation of sustainable outcomes (without necessarily being specific);
  • Supports the development of objectives, and strategies to achieve those objectives, that are more specific to organizations/sectors with unique requirements; and
  • Requires that organizations develop metrics/benchmarks to measure progress.

A Broad Vision

The government should clearly set out the objectives and context for labour relations in a public document, and summarize these objectives in subsequent opportunities. It should signal, in the most respectful fashion, the strong intention to achieve low or no cost increases for total compensation across the BPS (defined broadly to include not only wages but also work conditions, flexibility, benefits, and so on, so that potential wage increases could be offset by other aspects of the agreement) and productivity increases. Such a document will provide the opportunity to seek labour co-operation in these efforts; will put government in the best possible position to achieve the desired outcomes; and is necessary should bargaining not ultimately produce the desired results.

Many public-sector workers have agreed to contracts that include a moderation of compensation increases. Non-bargaining employees have had some moderation legislatively imposed. However, some large employee groups are just now entering into bargaining rounds in which they will be asked to make trade-offs.

Given the high percentage of spending on health and education, it is appropriate that employees in these sectors do their part. The stakes are high. The government will need to work collaboratively and co-operatively with BPS employers and bargaining agents to reach compromises that recognize fiscal reality. The government may have to take and maintain hard positions in the face of disagreement and disruption; however, all parties should have a shared focus on results.

It is also important for the government and its BPS partners to realize that moderation in compensation will be difficult to maintain over the long term. A broad vision for labour relations must recognize this and plan for the future. Wages must be moderated in the near term, but it will be transformation and productivity increases that ultimately allow the government to provide sustainable services into the future.

1. Statistics Canada's Labour Force Survey, 2010 — data refer only to Ontario BPS workers (federal workers are excluded).

2. 2011–12 Ontario Public Service full-time equivalent cap is 65,253.

3. Statistics Canada’s Labour Force Survey, 2010.

4. Chaykowski and Hickey, p.14.

5. Based on 2010–11 FTE counts across the elementary/secondary education sector.

6. Ontario Ministry of Labour, 2011.

7. Statistics Canada Labour Force Survey.

8. Calculated from Statistics Canada's Labour Force Survey, 2003–10.

9. Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO) Ontario Public Service (OPS) Collective Agreement, Apr. 1, 2009 through Mar. 31, 2012.

10. Average gain due to one additional year of experience in the A1 or A2 qualification level, not including benefits or pension contributions. Calculated from the provincially funded salary grid in the Education Funding Technical Paper, 2011–12, p. 71, downloaded from

11. Morley Gunderson, Douglas Hyatt and Craig Riddell, “Pay Differences between the Government and Private Sectors: Labour Force Survey and Census Estimates,” 2000.

12. See, for example, Gunderson et al., 2000, “Wage Watch: A Comparison of Public-Sector and Private-Sector Wages,”2008, Canadian Federation of Independent Business; and “Battle of the Wages: Who Gets Paid More, Public or Private Sector Workers?” 2011, Canadian Union of Public Employees.

13. “Bumping” refers to the situation where a laid-off worker with more seniority takes over the job of a worker with less seniority (i.e., “bumps” the less senior worker).

14. Average annual wage increases in the Ontario BPS (excluding municipalities and federal employees) averaged 1.5 per cent for contracts ratified between April 2010 and Dec. 6, 2011.

15. Ontario Physician Human Resources Data Centre – Active Physician Registry as of Dec. 31, 2010.

16. Two recent court decisions (Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, [2007] 2 S.C.R. 391, 2007 SCC 27 (“B.C. Health”) and Ontario (Attorney General) v. Fraser, 2011 SCC 20, [2011] 2 S.C.R. 3 (“Fraser”) have further clarified the need for changes to collective agreements to be made collaboratively and in good faith.

17. Chaykowski and Hickey report, p. 12.

18. Chaykowski and Hickey report, p. 13.