PS unions fear battle over severance

November 16, 2011

By KATHRYN MAY, The Ottawa Citizen

The federal unions that vowed never to surrender severance pay without a fight are in contract talks with a government that's made the issue a deal-breaker.

OTTAWA — The federal unions that vowed never to surrender severance pay without a fight are in contract talks with a government that’s made the issue a deal-breaker.

It’s a showdown that’s been looming since the Public Service Alliance of Canada made an unprecedented concession last year and surrendered severance pay as part of a 5.3-per-cent wage increase over three years. About 0.75 percentage points of that increase was to compensate for the loss of severance pay for public servants who leave or retire.

“The reality is the train has left the station on this one. You are either on the train or under it,” said one union official.
The PSAC deal, negotiated in special talks, is highly unpopular among many PSAC members and the concession deeply divided unions.

At the time, other unions rebuffed Treasury Board’s offer for a similar deal, but their contracts have since expired. They are now in contract talks and Treasury Board has put severance on the table, making it clear a deal hinges on trading away severance.
Under the PSAC deal, existing employees will get the severance they have accumulated but it will be eliminated for new workers. Existing workers can be paid out now or when they leave the public service. Laid-off employees will still get severance and PSAC negotiated increased payments for them.

The government has since imposed a similar deal on its executives and other non-unionized workers.

This leaves unions with little choice but to negotiate and get some payback for giving up severance. If they can’t reach settlements the government thinks it can afford and still meet its deficit-reduction targets, the stage will be set for the government to resort to legislation and impose a deal.

“Look, my members would rather it not be on the table, but they understand the realities of the situation,” said Gary Corbett, president of the Professional Institute of the Public Service of Canada. “We are willing to bargain but we’re not going to give it away … We want something for it and don’t want to see it taken away for nothing.”

The big question is what severance is worth, and unions insist they should get more than a 0.75-per-cent wage increase.
Claude Poirier, president of the Canadian Association of Professional Employees, said severance has been part of collective agreements for decades. He estimated the value, in today’s dollars, based on one week per year of service, is worth at least two per cent of salary.

As a result, unions are adjusting their strategies to get some longstanding wage issues fixed in exchange for giving up severance. They expect the same 5.3-per-cent wage increase that PSAC accepted so are putting all their efforts into fixing other issues.

Engineers, for instance, have been getting ‘retention allowances’ that average about $10,000 a year to keep their salaries in line with the private sector. These allowances, however, were “terminable” and could be stopped at any time. PIPSC negotiated a tentative deal that gave engineers the same 5.3-per-cent raise and rolled the yearly allowance into their base pay over two years.
Corbett said most bargaining groups have some compensation issue that is unique to them that unions want fixed in exchange for severance.

Poirier said professionals count on severance pay as part of their total compensation. They spend longer in school and often don’t start their careers until their 30s. He said they count on severance because few will work long enough to collect a full pension.

“ When they joined the public service, the severance clause was in the contract and it must have had an influence in their decision to go for a lower paid job in the public service,” said Poirier.

With a rocky economy and looming cuts, the unions say they are willing to play their part to help rein in spending. They are, however, also mindful that departments’ budgets are frozen, forcing them to absorb any increased costs, such as salaries, which could affect jobs. Unions also watched the Conservatives intervene in Air Canada and Canada Post labour disputes to prevent workers from striking and say the government wouldn’t hesitate to take similar action against its employees.

PSAC argued it made the deal as a trade-off to minimize possible job losses. It negotiated a 1.5-per-cent raise in each of the next three years with a gradual phase-in of the 0.75-per-cent severance provision. Workers would get 0.25 per cent for severance in 2011, but the bigger slice of 0.5 per cent will come in 2013 after the freeze on operating budgets is lifted.

PSAC hoped this will take some pressure off departments as they cope with the freeze. Treasury Board has agreed to foot the bill for severance payouts rather than make departments find the money, which PSAC argued could ease pressure for possible job cuts.

A long-time negotiator said severance pay originated as a quid pro quo in unions’ first contract after the Pearson government brought collective bargaining to the public service in 1967. The new unions gave up payouts for accumulated sick leave and got severance instead.

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