On August 2, 2011, new limitations came into effect in Ontario that restrict perquisites (or “perks”) in the public sector.
The new limitations, authorized by the Broader Public Sector Accountability Act and contained in the Broader Public Sector Perquisites Directive, instruct all designated public sector organizations that perks are no longer allowable unless they can be justified as business-related.
The limitation on perks is based on three principles, all of which are cornerstones of the Broader Public Sector Accountability Act and the provincial government’s Open Ontario Agenda. The three principles are accountability, transparency, and value for money.
TO WHOM WILL THE LIMITATIONS APPLY?
In the education sector, the directives apply to every publicly funded school board, university, college of applied arts and technology and post-secondary institution in Ontario whether or not affiliated with a university, the enrolments of which are counted for purposes of calculating annual operating grants and entitlements.
The directives also apply as “guidelines” to other institutions in receipt of public funds.
The ban on non-allowable perks will effect appointees, members of boards of governors, trustees, and all employees except those whose terms and conditions of employment are established by a collective agreement.
WHAT IS A PERK?
The directive provides that:
The term perquisites, or perks, refers to a privilege that is provided to an individual or to a group of individuals, provides a personal benefit, and is not generally available to others.
Under the new limitations, perks are only allowable in the exceptional circumstances where the perk is a business-related requirement for the effective performance of an individual’s job.
The limitations do not apply to provisions in collective agreements, insured benefits, items available to all or most employees on a non-discriminatory basis, health and safety requirements, accommodations for human rights or accessibility considerations and expenses that are in accordance with the Broader Public Sector Expenses Directive.
If you are not sure if an item is a perk, ask yourself if it is necessary to perform the job. Does it provide a benefit to the person? Is it provided generally to everyone or just a select few individuals?
If you are not sure whether a perk is allowable, ask yourself if it is required for the effective performance of the job. For example, a mobile phone or other communication device is often an allowable perk. Ask whether the perk saves your organization money. Consider whether the public would feel the perk is a legitimate expenditure of public funds.
SOME PERKS ARE NOT ALLOWED UNDER ANY CIRCUMSTANCES
The directive does not permit the following perquisites, even if they can be justified based on a “business case”:
- Club memberships for personal recreation or social purposes (fitness clubs, golf clubs or social clubs).
- Season tickets to cultural or sporting events.
- Clothing allowances not related to health and safety or special job requirements.
- Access to private health clinics - medical services outside those provided by the provincial health care system or by the employer’s group benefit plans.
- Professional advisory services for personal matters, such as tax or estate planning.
The directive includes accountability mechanisms. There must be:
- An accountability framework to ensure the appropriate governance of perquisites.
- A policy stipulating the limited and exceptional circumstances where perquisites are allowable.
- A mechanism for annual public disclosure of summary information about allowable perquisites.
Approval authority for allowable perks should be at a high level in the organization. Records should be kept for verification or audit purposes.
WHAT DOES THIS MEAN FOR THOSE IN THE EDUCATION SECTOR?
The limitation on perquisites is both forward and backward looking. Publicly funded educational institutions no longer offer perks (other than allowable perks) as a hiring incentive. In addition, all perks (other than allowable perks) which are currently in place must be restrained, even if they are in already existing employment contracts.
In the education sector, this will mean that many commonplace perks will no longer be allowable and must be taken away from employees who currently enjoy them. The directive takes precedence over employment agreements. Nonetheless, taking away perquisites has the potential to give rise to a constructive dismissal in some circumstances.
To achieve compliance:
- Adopt policies to put in place the accountability mechanisms required by the directive (detailed above).
- Make employees aware of the new requirements.
- Review the perks already in place for employees and ensure that only those which are allowable remain.
- While there is no reporting system in place for the education sector, be prepared to demonstrate compliance with the directive.
Doing all of these things will ensure your organization adheres to the principles of accountability, transparency, and value for money.