At first glance, it seems like a good idea. The federal government wants to scrap its severance program for public servants, claiming it will save them up to 500 million dollars a year. But first, they’re handing out what will probably be 6 billion dollars in special “severance” cheques to hundreds of thousands of federal workers who aren’t, in fact, losing their jobs.
Why? The government says they agreed to compensate all existing public servants to fulfill their obligations from previous collective bargaining agreements.
Back in the Trudeau era, in a bid to convince well-trained individuals to join the federal public service, the government began writing a “voluntary severance” clause into most bureaucrats’ employment contracts that has remained to this day:
For every year they work for the federal government, civil servants receive one week’s pay in a lump sum when they retire. And unlike in the private sector where workers usually have to meet applicable legislative requirements, including being employed by an employer for five or more years, and where the employer has an annual payroll in Ontario of at least 2.5 million dollars, and then has to meet certain criteria regardless of being laid off or terminated in order. Interestingly enough, workers who quit are not entitled to severance whereas, federal civil servants can collect severance, receiving seven or eight months’ pay even if they choose to quit.
Further, the payouts are calculated based on civil servants’ highest-salary years rather than their average salaries over their entire federal careers.
So the current federal government is going to pay all existing public servants reimbursement for all of the severance money they’ve accumulated to date, at that same rate—one week’s wages for each year of employment. What’s the average payout? About $30,000, but upper-rung government executives and military brass could see amounts closer to $150,000.
In total, the government expects to have handed out about $6 billion by the end of this year. Treasury Board President Tony Clement, the federal minister responsible for public service compensation, says the payouts are a short-term pain for longer-term gains.
“The savings for Canadian taxpayers are significant,” he said in a written statement to CBC News. “The government is no longer liable for future accumulation of voluntary severance payouts that would continue to climb.
So it will take 12 years to start seeing the savings of $500 million per year. And he didn’t mention that those savings could be significantly offset by public service pay raises.
In exchange for getting rid of the severance provision, the government is giving public servants a special 0.75 percent increase in wages, a move that will now cost taxpayers hundreds of millions of dollars a year.
What do you think? Is this a good idea? Is it fair? Share your thoughts and opinions in the comments—we’re curious to know what you think. And if you’re looking to save costs while still hiring skilled employees, Employment Professionals Canada is the place to contact.