In 2018 the Ontario government issued a new compensation framework regulation (Regulation 406/18) that continued to freeze the current levels of compensation for executives at most designated employers within the broader public sector (including public hospitals, universities and colleges and school boards).(1) Under Regulation 406/18, the Treasury Board president had to review executive compensation again by 7 June 2019.
With the introduction of Bill 100, the Protecting What Matters Most Act (Budget Measures) 2019, the government has done just that by proposing several amendments to the Broader Public Sector Executive Compensation Act 2014. In an accompanying budget document, the government acknowledged its earlier commitment to review executive compensation in the broader public sector. After concluding that existing practices permitted adjustments to be made to executive compensation regardless of the results achieved, the government undertook to implement a new approach. Thus:
Under the new framework, pay-for-performance may only be provided to those leaders who achieve the bold outcomes the Province needs. Compensation adjustments would be controlled, and only executives who deliver on priority-driven outcomes would be eligible.
The amendments give the government the ability to determine the applicable metrics when considering performance-based compensation. Specifically, the Management Board of Cabinet may be authorised by a compensation framework to establish rules governing an employer's use of performance assessment indicators when determining an executive's compensation.
Bill 100 also proposes to give the minister the authority to limit the increase in salary or pay-for-performance that an employer may give, including by limiting:
- the number of executives to whom an employer may give an increase in salary or pay-for-performance; and
- the time periods for which a performance-related increase or pay-for-performance may be given.
For newly created employers, the minister must approve the compensation plan for executives before they can be hired, unless the minister generally exempts the employer from this requirement. The procedure that employers must follow in order to obtain such approval – including the materials that must be submitted – may also be determined by the minister.
The amendments also establish parameters for existing employees and office holders. A compensation plan that was in effect prior to the effective date of the new compensation framework will remain in effect. Any element of compensation in the plan that is greater than what is permissible in the framework will not be valid or payable after 13 August 2021. Further, any increase in compensation that is provided for in the plan but has not been implemented before the effective date will not be valid as it is not in accordance with the applicable framework.
While the freeze established under Regulation 406/18 remains in effect, the proposed amendments indicate that the government will be introducing a new regulation – and new compensation frameworks – that will provide further guidance on executive compensation going forward.
(1) Further information is available here.
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