Compensation Cuts in Alberta

Word Reward against the red falling graph. 3D illustration picture

In late February, the Alberta government announced the implementation of significant compensation cuts for individuals holding senior executive positions in public sector agencies, boards, and commissions.

On the face of it, these cuts are significant.

Click here to read the Globe & Mail’s assessment of this change.

Click here to read the CBC’s reporting on this change.

The compensation decreases come as a result of a long term review of compensation levels for these positions which are paid for by the taxpayer. There is no doubt that the individuals holding executive-level positions are just as dedicated to their work as any other Canadian committed to a life of public service. On the other hand, is the value of the work performed at the executive level limitless? Do the performance requirements match the rewards that include housing allowances, golf course memberships and hundreds of thousands of dollars in salaries?

In isolation, the answer to these questions would be that the levels are excessive. Of course, the Albert government’s actions to implement these drastic cuts appear reasonable for these types of positions where the compensation levels seem to be excessively rewarding.

However, nothing linked to compensation exists in isolation.

Alberta has gone through an extreme economic change that has impacted all levels of industries and services across the province. When the economic times were good in Alberta, they were exceptionally good for everyone. All compensation levels were high. It would make sense that any executive-level position was paid equitably in comparison between the public and private sector markets. As the Alberta economy has dropped, so too have the opportunities and compensation levels for everyone. In order to compete in the market place, everything must adjust to current economic realities.

Rather than seeing this compensation adjustment as a reduction of individual proportions, we have to consider the context that is part of a larger economic cycle which ebbs and flows based on what the market, and the taxpayer, will bear.

Discussion Questions:

  1. What is the difference between public service and civil service?
  2. What are the risks associated with capping severance pay for other senior executive positions across Canada as a result of this change in Alberta?
  3. From a Human Resources perspective, what are the challenges that these public sector organizations will face into the future?
  4. If you were one of the executives facing a $500,000 salary cut that reduced your earnings from $900,000 to $400,000 per year, how would you react?