Ottawa has paid out $3.7 billion (so far) to end public service perk

See how every federal civil servant receives a severance cheque
WATCH ABOVE: See how this public service perk has paid out $3.7 billion in severance payments to federal civil servants.

Ottawa is nearing the end of a costly six-year effort to eliminate a workplace perk offered to federal public servants, and the bill to taxpayers now exceeds $3.7 billion.

The perk, first introduced in the 1960s as a way to attract people to the civil service, is linked to severance pay.

Until late 2010, severance was paid out to any government worker who quit their job or retired. That kind of generosity is unheard of in the private sector, where severance is traditionally only granted to people who are laid off or fired.

READ MORE: Was there any way to spare taxpayers $3.7 billion to end severance perk?

In order to get rid of the unneeded — and some said wholly unfair — severance cheques, the Conservative government started negotiating with unions for one-time, lump-sum payouts to just about every federal employee that had accumulated severance over the years. The windfalls for individuals have been in the tens of thousands of dollars.

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It’s a process that has continued under the Liberals.

“As of February 2016 (the most recent month of data available) more than 190,000 employees in the federal public service had received immediate settlement payments of accumulated severance benefits totaling nearly $2.8 billion,” said Treasury Board Secretariat spokesperson Alain Belle-Isle.

“In addition, about $0.9 billion has been paid to members of the RCMP and the Canadian Forces (regular and reserve forces) in payments for the immediate settlement of accumulated severance benefits for voluntary departures.”

And it’s not over yet. Employees with the Canada Revenue Agency (CRA) haven’t yet received their money. They represented the last bargaining unit to come to a collective agreement with the government last fall.

WATCH: Free national park pass comes with cost to Canadian taxpayers

Free national park pass comes with cost to Canadian taxpayers
Free national park pass comes with cost to Canadian taxpayers


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All employees also had the option of taking their money upon retirement, meaning that Ottawa will continue to pay for years to come for those who chose to receive the deposit when they leave the public service.

Still, the program is now in the home stretch.

“($3.7 billion) is a large number, but I think the process was important,” said Aaron Wudrick, federal director of the Canadian Taxpayers Federation.

“A lot of the time, when you have situations with collective agreements that are very generous, the only way to get out of them is to phase them out. There’s a price involved with that. Sometimes a very high price.”

The Tories also argued that the move was worth it back in 2010, noting that short-term pain would mean long-term gain for taxpayers. The price of keeping the perk in place was around $500 million a year, said then-Treasury Board president Tony Clement. Once the process is complete, taxpayers will start saving that same amount.

The Conservative caucus declined to comment for this story. The NDP camp also offered no comment this week.

Over at the Canadian Federation of Independent Business, president and CEO Dan Kelly agreed that the perk needed to go and this was probably to the only way to do it.

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Like Wudrick, Kelly acknowledged that removing any entitlement means it’s often necessary to issue lump-sum payouts. But, he added, it’s “crazy” that the extra severance was paid out for so long as a result of “terrible contracts” negotiated in the days when public service jobs paid far less than the private-sector ones.

“Everybody understands that if you get fired through no fault of your own then severance is owed to you,” Kelly said.

“But taking severance when you retire from a job that you worked on, and you’re going to go to a giant pension for the future? That’s crazy.”

Asked about the $3.7 billion in payouts during a cabinet retreat in Calgary this week, current Treasury Board president Scott Brison said his government is committed to working with the country’s public servants and that he would need to look into the figure before commenting further.

According to Wudrick and Kelly, it is critical for Ottawa to take steps to make sure that in the future, taxpayers are getting value for money.

That means taking a hard line on contentious issues like sick leave benefits and relocation expenses for political staff and bureaucrats, they noted.

“The government needs to remember that there are 35 million Canadians, many of whom don’t work in Ottawa or in the public sector, that are counting on the government to negotiate as hard on behalf of all Canadians as union leaders do on behalf of their members,” Wudrick said.

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Kelly said that like the severance for people who quit or retire, some perks were built into the contracts decades ago and then seemingly left to balloon.

“We’d like to see more aggressive action to de-layer all of these hidden benefits and extra perks that civil servants get, and bring them more in line with what reasonably well-paid employees earn in the private sector, the benefits that they receive.”