About the Compensation Framework Regulation
The Compensation Framework Regulation came into force on August 13, 2018 and introduces limits on executive compensation for designated employers under the Broader Public Sector Executive Compensation Act, 2014.
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All designated employers under the Act are subject to the Regulation, including:
- Public hospitals and the University of Ottawa Heart Institute;
- School boards;
- Independent Electricity System Operator;
- Ontario Power Generation;
- Ornge; and
- Public bodies that are not also Commission public bodies under the Public Service of Ontario Act, 2006.
All executives designated under the Act are subject to the Regulation. Under the Act, designated executives at designated employers are those who are entitled to receive or could potentially receive cash compensation of $100,000 or more in a calendar year, and includes:
- The head of a designated employer, regardless of whether their title is chief executive officer, president or something else;
- The vice president, chief administrative officer, chief operating officer, chief financial officer, or chief information officer of a designated employer;
- A person holding any other executive position or office with a designated employer, regardless of title;
- A director of education or supervisory officer of a school board.
Terms of the regulation
1. Effective date
The Regulation is effective as of August 13, 2018 and applies to all designated employers on that date except in the following circumstances:
- For an employer that is designated under the Act after August 13, 2018, the Regulation is effective for that employer on the date it is designated.
- Despite the effective date of the Regulation or the date that an employer is designated under the Act, if a designated employer does not have any executives then the Regulation is effective for that employer on the date it hires an executive.
2. No increase to salary
The salary of each designated executive position must be less than or equal to the amount provided to the person that occupies that position on the effective date. For clarity, the salary for a position as of the effective date is what is actually being earned by the occupant of the position and cannot be another amount in a salary range for that position.
3. Limited performance-related pay envelope
The performance-related pay envelope is the total amount of performance-related pay available to all designated executives at a designated employer in a given pay year.
As of the effective date, the designated employer’s performance-related pay envelope must be less than or equal to the total performance-related pay disbursed to executives during the most recent pay year before the effective date.
After the effective date the performance-related pay envelope must be reduced by a prorated amount when a designated executive position becomes vacant or is eliminated.
Each employer’s board of directors, or, if the employer does not have a board of directors, the equivalent governing body or officer of the employer, is responsible for any required adjustments to the performance-related pay envelope under the Regulation.
4. Other elements of compensation
Elements of compensation that are not salary and performance-related pay are referred to below as “other elements.”
Designated employers may not provide any new other element of compensation for a designated executive position as of the effective date. Furthermore, other elements of compensation are capped at what they were on the effective date.
In addition to the limits set out above,
- The following elements of compensation are strictly prohibited:
- Payments or other benefits provided in lieu of perquisites
- Signing bonuses
- Retention bonuses
- Cash housing allowances
- Insured benefits not generally provided to non-executive managers
- Termination or severance payments that are payable in the event of termination for cause.
- Payments in lieu of administrative leave.
- Termination pay, including pay in lieu of notice of termination, and severance pay may not exceed a maximum of 24 months’ base salary.
- Paid administrative leave may only be provided to the head of a college or university or another designated executive who is part of, or will return to, the faculty at a college or university in a teaching or research capacity.
- Paid administrative leave cannot be accrued at a rate that exceeds 10.4 weeks paid leave per year and cannot be paid out in lieu of time off.
5. New hires
The Regulation includes terms that apply to employers who hire additional executives after the effective date.
When a new person is hired into a vacant executive position:
- The salary for the new hire must be less than or equal to what was provided to the person in the position when it was last occupied,
- The employer is allowed to add a prorated amount of performance-related pay to the performance-related pay envelope but that amount must be less than or equal to what was provided to the person in the position when it was last occupied, and
- The new hire cannot be provided elements of compensation beyond what was provided to the person in the position when it was last occupied.
If there was no previous occupant in the vacant position (i.e. it is a new position) then the person in the most similar position at the designated employer must be used to determine the appropriate compensation.
Each employer’s board of directors, or, if the employer does not have a board of directors, the equivalent governing body or officer of the employer, is responsible for ensuring that the compensation elements and any performance-related pay envelope adjustment for new hires is determined correctly.
6. Other designated employers
The Regulation also includes terms that cap and limit the executive compensation of new employers.
Under the Act, the Lieutenant Governor in Council may make additional regulations establishing one or more compensation frameworks governing designated employers and designated executives. A regulation may be general or specific in application, and may apply,
- To all designated employers and designated executives;
- To classes of designated employers and classes of designated executives;
- To specific designated employers and specific designated executives; or
- Any combination of the above.
Total Compensation Strategies Branch
Centre for Public Sector Labour Relations and Compensation
Treasury Board Secretariat
Government of Ontario
The Compensation Framework Regulation is posted on the Broader Public Sector Accountability website.
This document provides general information only and should not be relied on as a legal document, nor does it form a contract. Please refer to the applicable authority for current and definitive information.