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
|
