Big changes to severance in PSAC deal

Payout of accrued money can be taken now or delayed
By Danielle Harder
|Canadian Payroll Reporter|Last Updated: 11/16/2010

There will be substantial changes to severance entitlements for 95,000 federal government workers, if they accept a deal recently reached between the Treasury Board and the Public Service Alliance of Canada.

The agreement would give employees in administrative, operational, education and library science jobs a 5.3 per cent wage increase — 1.75 per cent in 2011; 1.5 per cent in 2012 and 2.0 per cent in 2013 — over the next three years. However, severance for voluntary departure will be eliminated.

“It was very difficult to give up voluntary severance,” said PSAC president, John Gordon. “But we feel it’s a trade off. Employees have more pensionable earnings. It’s better to accumulate compensation for retirement through income.”

Under the agreement, all existing employees can cash-out their accumulated voluntary severance at a rate of one week of pay for each year of service, to a maximum of 30 years.

They have three options: immediately cash out at their current rate of pay, retain the accumulated weeks to be paid out once they leave (theoretically, at a higher rate of pay later in their career), or cash out some now and the rest later (again, at a theoretically higher wage).

Gordon said the cash-out will benefit employees with less than 10 years of service who are not entitled to any voluntary severance under the current agreement.

“This is good for younger workers who may only have 5 to 6 years in but don’t want to be stuck in a slot,” he said. “They can still get something.”

Gordon added the deal will be especially beneficial for older workers who will see their entitlement double from ½ week of pay for each year of service to a full week.

“Plus they will have an additional economic increase on their wages, which will continue to compound through the years,” he said. “And that extra money will be pensionable.”

A 20-year employee, for example, earning $55,000 will see his or her severance jump from $10,540 to $21,080. Likewise, someone with four years on the job making $45,000 will now be entitled to a $3,450 cash payout.

Gordon said voluntary severance is gradually disappearing from most collective agreements, so it was no surprise the Treasury Board also wanted to eliminate it. Severance pay now accounts for about 1.3 per cent of the government’s $30-billion payroll.

However, severance will continue for employees who are laid off, said Gordon, noting the union won increases based on seniority in exchange for the elimination of voluntary severance. For example, employees with more than 10 years of service will now get three weeks of severance pay for the first year of service instead of two; workers with more than 20 years on the job will also see an increase in compensation for the first year of service, from two to four weeks.

Gordon said the proposed agreement also offers more to term workers. Those with at least one year of service will be entitled to the severance cash payout. As well, they will now have unused sick leave credits reinstated if they are rehired within one year.

“From a union perspective we would rather see a stable full-time workforce but workloads change, people take leaves, and we will always need term workers,” he said. “This is a big win for those who are called back year after year,” Gordon stressed.

The deal came after only two weeks of negotiations. Treasury Board initiated exploratory talks even though the current agreement was not set to expire until June 2011. Two other groups within the bargaining unit — technical workers and border guards — did not reach agreement. Gordon said the union “did not feel we got enough out of the employer.”

The union hopes to call a ratification vote with the other groups by the end of November.

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