Backgrounder
	
Performance Management Program for Public Service Executives

Executive salaries: the need for adequate compensation

During the 1990s, six years of salary freezes saw executive salaries in the Public Service of Canada fall increasingly behind those in the Canadian labour market.  The result was a growing concern about the ability of the Public Service to attract and retain qualified executives.

Without qualified and experienced executives in its public service, the government cannot operate effectively or continue to provide a high standard of service to Canadians.

The Advisory Committee on Senior Level Retention and Compensation

In 1997, the Government of Canada established the Advisory Committee on Senior Level Retention and Compensation, made up of external private and public sector leaders.  The Advisory Committee provides independent advice and recommendations to the President of the Treasury Board about compensation and human resources management matters concerning executives, deputy ministers, chief executive officers of Crown corporations and Governor in Council appointees.

The Performance Management Program

In 1998, the Advisory Committee recommended salary increases to bring federal executive compensation more in line with the external labour market.  Rather than providing all salary in the form of base pay, the Advisory Committee recommended that some salary should be in the form of performance-related pay, in line with widespread best practices in both the public and private sectors.  According to the Conference Board of Canada, performance pay is used in over 80% of Canadian organizations, and over 90% of the executives in these organizations earn some amount of performance pay.  

The Performance Management Program was introduced within the Public Service of Canada, whereby executives must meet the basic requirements of their jobs before they are eligible for performance pay.  

The Advisory Committee continues to support the Performance Management Program as an integral part of executive compensation—the most direct means the government has of establishing accountability and focusing on results for Canadians.

Changes to Performance Management Program reporting

Past practice has been to report all performance pay for executives, deputy ministers and Governor in Council appointees in one category.  This year, the program results will be reported with a breakdown of performance pay in two categories: At-Risk Pay and Bonus. 

For example, the total compensation for an executive at the EX-1 level is set at the median of comparable positions in the external labour market.  This compensation includes 7%, which is at risk.  Therefore, an EX-1 is able to earn up to 7% in at-risk pay for meeting key commitments.  For outstanding performance, an EX-1 is able to earn up to an additional 3% as a bonus.  Previously, these two elements were reported together, as one amount.

Performance pay results will now be reported in the following categories:

Performance Pay	EX-1 to EX-3	EX-4 and EX-5	
No At-Risk Pay *	---	---	
At-Risk Pay	Up to 7%	Up to 10%	
Bonus	Up to an additional 3%	Up to an additional 5%	

* Executives who do not meet expectations or cannot be assessed