On March 27, the Ministry of Finance released the 2012 Ontario Budget which proposes a plan to eliminate the provincial deficit by the 2017-2018 fiscal year. While the changes outlined touch on a number of important labour and employment issues, proposals related to wage freezes for employees in the public service and amendments to the current public sector pension regime are of particular significance.
The budget papers reveal that employee compensation costs in the public sector account for over one half of Ontario’s program spending. To maintain service levels and help the province pursue its financial goals, the Ministry has indicated an intention to work with its collective bargaining partners across the public to reach new agreements which will allow the province to live within its fiscal plan. To that end, the budget does not provide any additional funding for incremental compensation increases for new collective agreements.
In the event that collective agreements cannot be negotiated in line with these wage restrictions, the government has indicated that it is prepared to take all available administrative and legislative measures necessary to achieve its goals. Given the recent declaration by the Supreme Court that the right to collectively bargain is protected by the Charter, as well as the province’s recent inability to impose wage freezes on unionized public sector workers, it will be interesting to see what measures the province will pursue to this end.
The budget also calls for a two year extension to wage and compensation package freezes already in place for executives at hospitals, universities, colleges, school boards and agencies, as well as for Members of Provincial Parliament.
With respect to the sustainability and affordability of public service pensions, the government predicts that unless changes are made, the cost of pensions for public sector employees will nearly double between now and the 2017-2018 fiscal year, and that public sector pensions are currently one of the fastest growing items in the budget. To limit taxpayer exposure to increased costs and guarantee current public sector pension plans remain sustainable, the government will consult with its partners to develop a legislative framework for Jointly Sponsored Pension Plans which reflects the following parameters:
Finally, the budget includes a recommendation that new legislation be created that would allow for the pooling of investment management functions of smaller public sector pension plans in Ontario in order to increase efficiency and reduce costs.
The complete budget papers and addendums can be found on the Ontario Ministry of Finance website at:
If you have any further questions about the impact of public sector wages freezes or pension reforms on your organization, please do not hesitate to contact a Mathews Dinsdale lawyer.
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