Commission on the Reform of Ontario's Public Services

Chapter 15: Labour Relations and Compensation
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
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
http://www.edu.gov.on.ca/eng/funding/1112/technical11.pdf.
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.
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