Winnipeg Free Press - PRINT EDITION

Golden handshakes too rich

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The payout of rich retirement packages to Crown corporation executives serves to underscore for Manitobans, yet again, the disparity between private- and public-sector compensation. Generally speaking, all provincial or city workers receive such "retirement allowances," although not at the level paid to former MPI president Marilyn McLaren and Bob Brennan, who retired from Manitoba Hydro in 2012. But few within the private sector enjoy such benefits that they must finance through taxes.

The retirement bonuses are a standard, generous feature of union and non-union agreements signed by the provincial government. In 2011, the Manitoba government paid out $11 million in what is called "severance" to retiring employees.

These are benefits that are calculated strictly on years of service: provincial employees earn a week's salary per year worked up to nine years, with additional payment for those of 20 years of service or more.

At the City of Winnipeg, everyone gets a golden handshake. The retirement allowance (which should not be confused with pension benefits) has largely replaced the discredited practice of paying out unused sick days upon retirement: It made no sense to encourage employees to come to work sick and after public outrage, it fell out of favour.

In the late 1980s and 1990s, the city began eliminating the unused sick-day payout for new hires in most of its negotiated agreements with employees and managers. Retirement allowances are paid out now, at a rate of one or two days for each year worked.

Few in the private sector, who pay for the benefit through taxes, can expect a guaranteed retirement bonus.

What principle or purpose underpins paying tens of thousands of dollars to public servants upon retirement?

The idea that the benefit is an appropriate bargaining item is specious, and serves only to underline the power of large, public-sector unions. Public-sector rates of pay are at least equivalent to and often higher than those for similar positions within the private sector. Publicly paid workers get respectable wage increases annually and their pensions are generous. Rarely are wages restricted by edict, such as the two-year "wage pause" the Manitoba's NDP government won from its general employees union in 2009.

Absent concerted efforts to cut payroll, there is no necessity to offer a permanent retirement incentive to push out long-term employees, most of whom can retire without penalty at the age of 55 with sufficient years of service.

The public sector competes with private industry when filling professional class positions and the benefits and security of joining the civil service have long been an attractive trade off for higher salaries private firms or self-employment can offer. For non-professional positions, the benefit is merely a gesture of thanks for years of service.

Likewise, government departments and Crown agencies compete with the private sector in attracting senior executives with elite skills to higher management positions. Unlike the private sector, however, there are no shareholders to hold vice-presidents and CEOs to account for the salaries and benefits.

Ms. McLaren, who received about $400,000 in retirement allowance, and Mr. Brennan ($612,000), were paid by ratepayers, not taxpayers. The retirement bonuses are breathtaking only when seen in isolation -- they are in line, in fact, with the rate of compensation to all public workers upon retirement. However, all of it, the very idea of mandatory retirement bonuses, is out of sync with what ordinary private-sector workers can expect. Taxpayers increasingly are questioning the expense of public-sector benefits. The golden handshakes written into negotiated agreements illustrate the grievance.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition May 10, 2014 A16

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