As companies consider their options around the Ontario Retirement Pension Plan, national employers with staff who work in Ontario and other provinces face additional questions about what to do.
Ian Howcroft, vice-president of on the Ontario division of Canadian Manufacturers & Exporters, has seen members of his organization face questions around internal equity since “now they’ll have a different requirement in Ontario than they might have in other jurisdictions.”
Under the ORPP, the Ontario government will require employers without what it deems to be comparable pension offerings to enrol and contribute 1.9 per cent of salary (matched by their staff) on behalf of their Ontario-based employees. Besides the administrative burden, Howcroft says companies may face complaints from staff outside of Ontario complaining about unfair treatment if only Ontario employees get improved pension contributions from their employer.
The issue could work the other way as well. According to Thak Bhola, pension manager at Goodyear Canada, the ORPP actually has the potential to disadvantage its employees in Ontario. The company currently offers a voluntary defined contribution plan with the employer contributing four per cent of salary to the plan regardless of what the employee puts in.
“We don’t believe in making our employees make contributions,” says Bhola, whose company has about 800 employees in Ontario with others based in Alberta and Quebec. “The employer’s putting up four per cent of pay, right? Anything the employee puts in is voluntary. At least that’s our position right now.”
But because employees don’t have to contribute, Goodyear Canada’s defined contribution plan wouldn’t meet the ORPP’s comparability criteria that requires a contribution of at least eight per cent with half coming from each of the employer and the employee.
While not speaking directly about the Goodyear Canada pension plan, Bhola believes there’s the potential for discrepancies when it comes to employers with staff in different provinces. On the one hand, if an employer doesn’t currently have a pension plan, Ontario employees would reap the benefits of the employer’s ORPP contributions, he says. Of course, an employer may already meet the comparability criteria or be willing to boost pension contributions for all employees.
The equity issue could arise in collective bargaining discussions across Canada as well. Asked if unions are likely to seek similar pension improvements in other provinces when negotiating with employers that have increased their contributions as part of or due to the ORPP, Chris Roberts, director of social and economic policy at the Canadian Labour Congress, says it may play a role. “Certainly, I would think that employees at bargaining tables outside of Ontario would look at pension improvements in Ontario the same way they would look at compensation improvements in related sectors or occupations anywhere in Canada,” he says.
Michel St-Germain, a partner at Mercer and vice-chair of the national policy committee at the Association of Canadian Pension Management, doesn’t expect employers that want to treat their employees differently across the provinces will face many difficulties in doing so.
“You can have different working conditions between Ontario and other provinces. I don’t think there is a legal issue. It is awkward, though,” says St-Germain.
Provincial standards, of course, already vary when it comes to issues like voluntary retirement savings plans in Quebec and payroll taxes, so it’s not unusual for national employers to face different costs across the country. But when it comes to the merits of the ORPP itself, St-Germain worries it takes some of the choice of saving for retirement away from people who work in Ontario.
“When you look at how generous the ORPP is, it significantly reduces the need for the average Canadian to save on their own,” he says. “Although we support some sort of transfer of responsibilities to the public sectors for retirement, it is important that the average Canadian still carries some responsibilities for saving.”
This sentiment echoes Bhola’s comments about his company’s defined contribution pension plan. While it currently offers staff a choice around their contributions, the ORPP would see Ontario employees save in a specific way.
St-Germain, however, still believes the concept behind the ORPP is sound. “We should applaud what Ontario is doing,” he says. “They have taken the leadership and they are in a certain way forcing the hands of the other politicians to conclude this long debate on whether public plans should be increased in Canada.”
But he hopes a June meeting of finance ministers about enhancing the Canada Pension Plan will lead to a national response. “The last thing we want is to have an ORPP and an SRPP in Saskatchewan and an MRPP in Manitoba and so on and so forth,” he says.
Bhola hopes for a similar resolution. “These are just my personal views, these aren’t the views of my company, [but] maybe expand the [Canada Pension Plan]. Then what happens is that everybody, every employee in our company, whether they’re in Alberta, Quebec or wherever, gets the same benefit.”
When it comes to the labour movement, Roberts notes CPP enhancement remains the priority as well. “So that’s what we want to see, but if, in fact, for whatever reason that continues to be blocked or there’s no agreement on expanding the Canada Pension Plan and Ontario goes ahead, then absolutely we will encourage other provinces either to work with Ontario to participate in the ORPP or pursue similar efforts in other parts of Canada to bring better pensions to workers who don’t have workplace pension plans. So absolutely, we’ll be looking for ways to move ahead.”