NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 26, 1998

• 0907

[English]

The Chairman (Mr. Robert Bertrand (Pontiac—Gatineau—Labelle, Lib.)): Order, please.

Colleagues, we have with us again this morning Colonel Lemay. He will continue his presentation.

Colonel Lemay, what I would like you to do is introduce the people you have brought with you, and you can start.

Colonel Pierre Lemay (Director General, Compensation and Benefits, Department of National Defence): Thank you, sir, and good morning, everyone.

This morning I have with me Madame Renée Jolicoeur, who is the director of accounts processing, pay and pensions; and Lieutenant-Colonel Jean-Pierre Cyr, who is the director of compensation and benefits administration.

Mr. Chairman, Madame Jolicoeur is with us to answer the questions that were asked on Tuesday afternoon regarding the reserve pay system, and if you would allow it, I would suggest that Madame Jolicoeur answer those questions, and then I would proceed with my presentation on allowances and travel and relocation benefits.

The Chairman: That's fine with the committee. I'm sure the quicker we can fix the problem, the better it will be for everyone.

[Translation]

Ms. Renée Jolicoeur (Director, Accounts Processing, Pay and Pension, Department of National Defence): Good morning.

[English]

As Colonel Lemay said, I'm responsible for the military pay and pension. I've been in that position for about two and a half years, and obviously the reserve pay issue is one of my first priorities.

RPSR, which is the reserve pay system, has been implemented in the four regions across Canada. It experienced numerous difficulties when it was first implemented, going from difficulty with connectivity, software bugs, processing. What you've heard about that is all true. But hose problems have been resolved, and I must say that in the last two or three months the system has been quite stable, and 98% percent of the units are processing data in our system presently, which is 278 of the 280 units we are dealing with.

• 0910

With respect to class A, for instance, class A is paid one pay period in arrears. If I take the example of a class A reservist who parades on March 11, if the unit sends that out to our system on March 15, the person will get paid on March 30. In the case of class B, the unit needs to enter the contract data, and once it's entered, then the system pays the class B person on a regular basis in the current pay period.

If you compare the performance of the system now, which is 98% connectivity, to what it was in the fall, which was 60%, it's quite an improvement. But all that said, that is not sufficient to resolve the reserve pay problem. The fact that the system has been stabilized is very important, but it's not sufficient. The fact that the system had major difficulties before had caused a series of problems that need a lot of resources to resolve and a lot of involvement from the units.

You have probably heard that the units are downsized, have fewer resources than they had before, and they are suffering the same problems as we are all suffering. They have difficulty coping with their workload. Pay is one of their priorities, but they have other priorities, and that's the problem we are experiencing.

To be able to resolve the reserve pay system, we have come up with some sort of strategy. I will give you very quickly the components of that strategy. The first one is to make sure that all the reservists are on the system. It's a lot easier for us to manage the reserve pay if all the members are on the system. But the problems caused by the system have made some pay accounts incorrect, and this requires that the units, with the help of the central staff, take the time and energy to reconcile those pay accounts. That's one of our priorities. That will be our next priority, but that again is a question of resources. So that's what we are trying to do presently.

We have established a contingency process for those members who are not on the system. Those members have their records on the system, but they are not paid by the system. So we have put in place a contingency process where the units are sending to us the data on those members, and we are paying those members from those spreadsheets that we are getting from the units. Obviously a lot of resources are spent on this contingency process, and the sooner we are able to resolve the problem of incorrect pay accounts, the better for everybody, because I will be able to assign those resources to other problem areas with the reserve pay question.

A second component of our strategy is related to training, training of unit pay clerks. The clerks doing the work at the unit are naturally reservists, as you know, and often they work part-time. As I said before, pay is only one of their priorities. So they need training and they need regular training. There is also a high turnover with those pay clerks, and although we have trained everybody before implementing the system, we have to do retraining because now we are realizing that a number of the pay clerks don't have the necessary training to be able to operate the system.

The last component of our strategy is to try to reduce the amount of decentralization of the administration of reserve pay. As I said, we have to deal with 280 units. We have to make sure that they are well trained and have sufficient experience. We have to make sure that they act promptly, that they treat pay as a first priority. So it's very difficult for us to manage. There are too many people involved in the management of the system.

We are living through the problems that everybody else with a distributed system is living through presently. People are realizing that it's a lot easier to manage centralized systems than to manage distributed systems. For instance, if I implement a pay raise, I have to send the table to each of the 280 workstations. To make sure the pay raise is implemented on the system, each unit has to turn on their system and make sure the table is in. So then I have to call all the 280 units to make sure those tables are in.

• 0915

So obviously we are experiencing those problems, but I think that with less decentralization it will be manageable. We will be able to operate the system and provide good service to the members.

The future? We are presently redesigning the regular force pay system. One of the objectives is that the reserve force will be paid by the regular force system. At the same time, we are updating the system to the year 2000. By the way, our PSR is also compliant with year 2000 requirements.

With respect to the regular force system, the schedule says that the system will be ready to take the reserve force in the fall of 1999, but obviously, as we will be at the end of 1999, we will probably wait until 2000 to make sure that we don't create chaos with the production of T4s.

I think one of the other questions was related to ASD in terms of why we don't ASD the function or the system. Our PSR is a system that has been developed by ISM, which is part of IBM. The payment portion of the system is contracted out to Comcheq.

Using a private sector system, like a system that the Bay or Sears use to pay their employees could be possible, but it would require a major customization of the system, and it will end up probably more expensive to the department.

The military system is different. It has its own specificities and complexities that are very different from private sector systems. I must say that we have just completed a study presently of considering contracting out the whole military pay function to the private sector, and these are some of the conclusions that we came up with in respect to ASD. It's not that it wouldn't be possible, but it's very important that we decomplexify our business rules before we go to the private sector.

Those are the questions I got. I don't know if you—

[Translation]

The Chairman: Thank you very much, Ms. Jolicoeur. I know a few members have questions to ask, so if it is all right with you, we'll immediately go to questions.

Ms. Renée Jolicoeur: Yes.

The Chairman: Mr. Goldring.

[English]

Mr. Peter Goldring (Edmonton East, Ref.): Thank you, Mr. Chairman.

Thank you very much, Madam Jolicoeur. Maybe you can tell me for my information whether the reserve pay is equal to the regular pay. Do they have the same incremental raises as those in the regular forces pay? Do they get the same raises and the same timeframing as maybe the regular forces would have? Is the overall pay considered to be behind, as is the regular forces pay, and are they looking for substantial increases, and how much?

Mrs. Renée Jolicoeur: I have to refer the question to Colonel Lemay, who is responsible for the policy aspects of the reserve force pay.

Col Pierre Lemay: Thank you. You may remember that on Tuesday afternoon I spoke about a reserve force get-well program that was approved by the Treasury Board in 1997, which became effective on April 1, 1997. Bringing the reserve force rates of pay to 85% of that of the regular forces was approved in that program.

That 85% comes from an analysis that was made in the earlier 1990s that compared, at the same rank, skills, job knowledge, experience, and a number of other factors. Following that study, it was concluded that we should set the reserve force rate of pay at 85% of that of the regular force. That was approved.

In terms of an ongoing pay adjustment, because their pay is set on the reserve force, they get pay adjustments at the same time as the regular force gets them. So if we talk in terms of comparability, they also get the pay comparability adjustment at the same time as the regular force does.

Mr. Peter Goldring: Take the benefits as well. How are the benefits comparable?

• 0920

Col Pierre Lemay: Some of the benefits are similar. Others are adapted to the reserve force. You may remember on Tuesday I talked about the new retirement gratuity, which is a benefit tailored for the reserve force to encourage service in the reserve force but tailored on the severance pay of the regular force. Some of the benefits accrue only to members of the reserve and their own full-time service.

I should note as well that if you are a member of the reserve on class C service.... We have different classes of service. Class A is the Tuesday, Thursday, weekend service. Class B is the longer periods, generally over a month, generally less than six months. Also, reservists can be placed on what we call class C. If you are on class C service, you receive exactly the same benefits as the regular force. Normally if we employ reservists to serve on our peacekeeping missions around the world they will be placed on class C. They will be paid exactly the same as the regular force.

Mr. Peter Goldring: I see. Then the pay goes to the full rate.

Col Pierre Lemay: The full rate as well, for the class C service.

The Chairman: Mr. Proud.

Mr. George Proud (Hillsborough, Lib.): Thank you, Mr. Chairman.

I listened intently this morning to the woman speak about this reserve pay system, and I was given a briefing the other evening by the lieutenant commander across the way here on what has happened with it over the last year. I guess I'll have to take you people at face value. I am not the one who is worried, of course, so much as the guys down there at the end of the line on pay day, waiting to get paid. They were very upset at the thing that happened during the ice storm, but then we go back to last summer, when people went on their holidays and there was no pay in the system for them.

I would remiss if I didn't say this. I would hazard to bet that when Mr. de Chastelain came back from Washington and went on again as chief of defence staff and he was paid out of reserve budget, his pay wasn't late coming to him. I find it terrible that these people, who go out and do their thing, have this delay and this wait. I can't believe in this day of high technology and all this it has to go through so much rigmarole to pay a person at the end of the day.

As I said, I'll have to take you at face value. There's nothing else I can do. I have a hard job with taking anybody at face value, because of the things that have happened in the military in the last five and six years, but I will do that today. I hope in the next six months I don't read in the Globe and Mail that another horror has taken place, where something has happened to the reserves' pay system again.

The other thing I would like to ask is when you talk about reserves getting 85% of the regular force pay, if it's a lieutenant-commander, is that based on 365 days of a year; it's 85% of the salary of that lieutenant commander?

Col Pierre Lemay: I would have to verify it, and we can provide it, but that's my understanding.

Mr. George Proud: I am suspicious that maybe it isn't that way and it wouldn't be 85% if in fact it were worked out on the real take-home pay.

The Chairman: John.

Mr. John O'Reilly (Victoria—Haliburton, Lib.): Thank you very much, Mr. Chairman.

I'm sorry I was a little late, but I heard enough to ask a question on the military pay system. Having been in the reserves and wondering whether you're going to get paid on pay day, I understand the frustration with people who came through the ice storm and still haven't been paid. Having had that experience, and with that in mind, I challenge you to tell me there is no pay system you could hook into, similar to a military system. Software is available. Hardware is available. Municipal governments, which I have come out of, pay full-time firefighters, part-time firefighters, and it would be similar to what you're talking about.

A volunteer firefighter who is on standby every third weekend, which would reflect the same mode of training as in the reserves, is hooked into the system. When there's a fire and they're called to service, they're paid in accordance with the hours that are put in by the chief.

• 0925

So there are systems available, and I challenge you to tell me, other than you want a closed shop, why it wouldn't be something that could be jobbed out to the private sector and work far more efficiently than it does now.

Mrs. Renée Jolicoeur: You're right, the function is not different because of attendance. Municipalities have collective agreements that they have to administer, and they are based on attendance, so it's not where the complexity is. The complexity is in the types of allowance we are giving to the people.

I don't say it's impossible. Yes, it's possible we could take a private sector system, but then you would have to invest a lot of money to tailor it to your needs. Your needs are different in terms of the allowance you're giving to the military. For instance, if you take only the get-well program, new measures that we have, they are very different from what you would find even in the public service system.

I'm paid by the public service system. It's very different from the system we are using on the military side, even if we are part of the same global organization. Yes, it's possible, but it would be quite expensive, and again it's a matter of having the funds to be able to finance it.

Perhaps you're right, perhaps at the end we would get a better service because the advantage of using, for instance, a private sector system is that we would benefit from the upgrade of those systems. For example, if we were to buy cuts from another company and they are upgrading that application regularly, yes, we would benefit from it. But again, we would always have to upgrade it to reflect the complexity of the military pay system.

The compensation package of the military is very complicated and different from elsewhere. It doesn't mean the private sector systems are not complex too, but they are different complexities. For instance, the companies that are offering cafeteria style, it's very complex to administer, but it's a different complexity from the military pay system.

I agree with you, but then we would need the financing to be able to do it.

Mr. John O'Reilly: Mr. Chairman, I would go on record to say that I feel the military, for its own reasons, are more interested in a closed-shop system than a public system.

I disagree with you. I came out of the reserves not getting paid and into volunteer firefighters where you got paid. The difference we're talking about and what we're looking at on this committee is how to enhance the pay system, enhance the morale of the military.

Also, when we have a closed mind and say it's going to cost so much, I say show me where it's going to cost more. I don't believe you. I think those systems are available and I think you just don't want anything but a closed shop and that's why you don't investigate them. I don't mean to be hostile—

Mrs. Renée Jolicoeur: No.

Mr. John O'Reilly: —but that's my attitude towards it.

Mrs. Renée Jolicoeur: Yes, and I am used to receiving comments.

Mr. John O'Reilly: I'm used to not getting paid in the reserves, so I think there has to be a better way to do it. That's why we asked this question.

Mrs. Renée Jolicoeur: I agree. But as I said at the beginning, presently the system functions; it functions.

Mr. John O'Reilly: Really.

Mrs. Renée Jolicoeur: It does. No, it's true—

Mr. John O'Reilly: That's not what we hear, so—

Mrs. Renée Jolicoeur: The system functions except that we have difficulty because I'm dealing with 280 units and the units are understaffed and they don't always have the time to input the data promptly. That's one problem. I don't want to blame the units; they are stuck as well as I am in terms of lack of resources. So the system of PSR, I can guarantee you, works. The problem is to invest enough resources to get the data in.

It's not true, we are open to private sector systems. In fact, in two years from now we are going to reconsider whether it would be beneficial to ASD the old military pay function. As I said before, one of the things we need to do before we do it is to simplify our business rules to be able to use a private sector system, benefit from its upgrade and then do it. But presently this would cost probably $1 million and it would cost about $16 million to modify it, customize it to military pay, for instance. Those are the difficulties we are having.

[Translation]

The Chairman: Mr. Clouthier, then Mr. Pratt.

[English]

Mr. Hec Clouthier (Renfrew—Nipissing—Pembroke, Lib.): Madam Jolicoeur, I know we're talking about the pay system, and there seem to be some genuine horror shows in pay. I have a large military base in my riding, Base Petawawa, and I hear it continuously.

• 0930

Has this ever been pursued with the private sector? I come from the private sector, and in my businesses, I know whenever I've decided to perhaps explore the avenue of getting another firm to do my payrolls for my different companies it hasn't cost me a cent. I had three different companies come, and they made the presentations to me.

I would think the military would be a big payroll. It would be a very lucrative contract. I don't believe it would cost the military one cent to explore that avenue. Different companies would be, so to speak, champing at the bit to secure that contract.

Has that avenue ever been pursued? Have you gotten recommendations or input from the private sector business?

Mrs. Renée Jolicoeur: Yes. I must say, first, the military pay system for the regular force functions. I was the director of internal audit—

Mr. Hec Clouthier: That's your perspective.

Mrs. Renée Jolicoeur: —and I did the audit of the military pay system. We went to the members and did both a survey and focus groups.

In terms of the regular force pay system, the CCPS works. With the reserve pay system, I agree with you, we had difficulties. We still have difficulties.

The ASD of military pay function is a project that has been going on now for two years. As part of this project we've considered different possibilities offered by the private sector. In fact, we've had offers from ten different companies. But again, we had to look at the financing of it and we had to look at the complexity of it.

I don't know what to add. You may not believe me, but it's a very different system from everywhere else. Because of that, well....

Mr. Hec Clouthier: I agree with you there, Madame Jolicoeur, but let me tell you, the private sector can certainly work out any of the nuances in the system.

Mrs. Renée Jolicoeur: Oh, I agree—

Mr. Hec Clouthier: Let me tell you, they have ways. You might say it's complicated, but let me tell you, when you're dealing with the public, on many occasions it's a lot more complicated than it really is for a plethora of reasons. The private sector can seem to cut through it and get the job done.

On occasion, if you have those recommendations or the consultative reports from the private sector, perhaps you could peruse them and implement some of them in your own system.

Mrs. Renée Jolicoeur: I agree with you that the private sector can do it—no problem—but at what cost? That's the question.

Mr. Hec Clouthier: That's what I'm asking you. I don't know. Is it more cost beneficial? I don't know what they've proposed.

Mrs. Renée Jolicoeur: Our study has led us to believe that we still have some efficiency to gain from the system, the internal system. Once those efficiencies are realized, we will again examine the system, examine the possibility to contract out, but then, with a system that is a lot more lenient, what we will contract out will probably cost less to the department. That was the type of rationale we were using.

When you're doing ASD, usually you examine your costs and you go to the public sector with your regular or current costs. So there is an advantage to departments when they lower their costs and then go to the private sector. That's what we are trying to do before going to the private sector.

Mr. Hec Clouthier: Okay.

The Chairman: Thank you, Mr. Clouthier.

I want to mention that we are very happy that your equestrian business is computerized now.

Mr. Pratt.

Mr. David Pratt (Nepean—Carleton, Lib.): Thank you, Mr. Chair. I apologize for being late.

Maybe I missed something, but did I hear you say that system works but you don't have the people to input the pay information?

Mrs. Renée Jolicoeur: I'll repeat it briefly for your benefit.

Yes, our reserve pay system has been implemented in four regions over the last two or three months. The connectivity is at 98%, which means that 280 units, except for two, are sending data to the system. If you compare this with last fall, it's quite an improvement. Last fall we had a rate of about 60% connectivity.

If you are a class A and you have parade on March 11, and the data is entered on March 15, you will get paid on March 30. Obviously, the data needs to be entered by the units. As I said before, there are 280 units. They are under-resourced. Sometimes people work—

Mr. David Pratt: I'm sorry, did you say 280 units?

Mrs. Renée Jolicoeur: Yes, 280 reserve units sending data to the system.

• 0935

Mr. David Pratt: Okay.

Mrs. Renée Jolicoeur: Often those people work three hours once a week. They have things to do, other than pay. It puts a stress on the function and on the system. So yes, the system functions, but we have to do a lot more to have a stable system. We have to decentralize the administration of the function to make sure that we have to help less people and that with respect to the people who are doing the function, we have to deal with 80 people as opposed to dealing with 280 people. A lot more effort is made on pay that way rather than having it decentralized to a lot of people. So that's one of the challenges that we have now.

Mr. David Pratt: But when you don't have sufficient people inputting the information...the system may be—

Mrs. Renée Jolicoeur: The unit, yes.

Mr. David Pratt: —foolproof in terms of the software, etc., and—

Mrs. Renée Jolicoeur: Yes.

Mr. David Pratt: —it may all be fine. But if you don't have the people to input the information on a timely basis, it's still a failure—

Mrs. Renée Jolicoeur: Yes, but that—

Mr. David Pratt: —from an administrative standpoint.

Mrs. Renée Jolicoeur: It's true. Obviously I'm talking from the central point of view and we have a lot of stakeholders in that thing. So yes, you're right.

And now I'm working at convincing the area headquarters to make sure that we put in enough resources to make the system function. As I said before, we are in a period of downsizing. Although we are trying to do as much as we can, they have the same problems I do. Sometimes we have problems with—

Mr. David Pratt: Yes, but clearly you have to look at priorities, and—

Mrs. Renée Jolicoeur: I agree with you.

Mr. David Pratt: —as far as the army goes—army, air force, whatever—I would say that it's a priority to be able to feed them and a priority to be able to pay them.

Mrs. Renée Jolicoeur: Yes.

Mr. David Pratt: Those rank—

Mrs. Renée Jolicoeur: Yes. From my side, I'm planning—

Mr. David Pratt: —as close to the top as I can possibly imagine.

Mrs. Renée Jolicoeur: —to establish a flying squad from the centre that will go to help the units that have difficulty with the workload, to help them and make sure that they are okay. Once we have resolved all the problems in one unit, it will be able to send the data regularly. But it's just to go to help them when they have problems...presently there are a number of them that don't have the necessary training and that don't have the time to reconcile all the incorrect accounts. For those reasons, they have difficulty in coping with the workload. But once those problems are resolved, it will be easier for them to send the data to the system and then have their members paid regularly. So yes, there is still that side to correct. I agree.

Mr. David Pratt: But should it take this long to solve what seems to be a relatively straightforward problem?

Mrs. Renée Jolicoeur: It's true. But the first thing we needed to do was stabilize the system, and without a system that was functioning, it was not possible. Even if I had corrected all the units' problems, I would still have problems. Now that the system is stabilized we can put our efforts into helping the units resolve their problems. Then they will send their data more regularly and it will be easier for everybody. We are trying to resolve problem after problem.

The Chairman: Last question. We'll go to the honourable parliamentary secretary.

Mr. John Richardson (Perth—Middlesex, Lib.): Thank you very much, Monsieur le président.

Madame Jolicoeur, I have been involved with this for a long time as well. I was there from its inception and I saw it work so badly that it would almost make you cry to see the distortions in pay coming back, particularly when Comcheq got involved.

I remember going down to Halifax to look at their pay and listening to all the people who came into the armoury. They were just furious. That was about 1994. The issue was “when are we going to get our pay right?” Somebody got up and said they'd gone to Comcheq's system and it was going to be beautiful, it was private sector, and the thing would work just wonderfully.

And I said that I'd heard that song before, from two or three other companies. I didn't say that to the people, because I wanted to retain my sensibility on the floor.

Some hon. members: Oh, oh.

Mr. John Richardson: But certainly, you're promising too—

Mrs. Renée Jolicoeur: Promising.

Mr. John Richardson: —that this thing will be stabilized and effective. Because there's nothing that is more of a dissatisfier in the communities. We're trying to recruit reservists, and in those communities where we're trying to recruit they say “Don't belong to it. You never get your pay right. They have it all screwed up and it's not worth joining, because they pay you sometimes six months behind or you're only getting half of what you thought you were going to get.” All those kinds of variabilities were worked into the system.

So what happens is that this is probably one of the greatest deterrents to recruiting for reservists at the moment, because of the rumours in the communities where we have reserve units, whether they be naval reserve units, air force reserve units or land force reserve units. If you can pick that up and it's corrected, it may make it a little better for them to develop a recruiting program and know that they're coming in and will be paid for jobs done. The morale will go up considerably.

• 0940

I have lived that one through since I was the commander of Ontario back in the mid-1980s, then later as the chief of staff on this at FMC, and then later as a member of Parliament. I thought I'd never get rid of the damn problem.

I'd like to switch over to Colonel Lemay to clarify something, because I think as members of Parliament we can be had, too. When we talk about pay problems in the regular forces, we get the pay schedules that have been put out in the tables. They go by recruits, privates, master corporals, sergeants, all the way up. But what we don't know is that in fact this is the basic pay these people get. They'd be receiving all kinds of add-ons that don't show.

Somebody said that poor corporal is only getting paid this amount, but he's getting all kinds of other allowances, whether they're earned through trades or whether they're earned for postings or whether they're earned there, and they add up to considerable increases in their pay. I don't know how we can get to the true pay, because what we've been using is the tables in all our debates. When we talk about going to Treasury Board, we talk about the tables.

What we should be looking at is whether in fact we have a bit of a cloud around the real pay to our people in the service. I'm talking more particularly about the non-commissioned members than I am the commissioned members.

I'd like to see us get at what the real pay, grossed up, would be for the average master corporal with all the benefits thrown in, not just the basic pay. That's where the tables are distorting some of the things that members of our own party and members of the opposition see, which is that they're living on the margins of poverty when in fact the benefits put them into a better position than a lot of people working in the service industries across Canada.

The Chairman: Colonel Lemay, did you want to respond as well?

Mr. John Richardson: Can we get that kind of answer, after you do grossed-up averaging that includes the pay by rank with all of their allowances put in?

Col Pierre Lemay: We can provide you and the researchers with tables. What you see in the tables referred to are basic pay, that is understood. Generally, for the day-to-day work what would be added to this would be things like the environmental allowances, but again that would be given to those who are experiencing the environment.

If you're in the navy and you are posted to a ship, you will get sea-duty allowance. That sea-duty allowance has different levels, depending on how much time you've had at sea. If you are a pilot or if you're air crew, you get air crew allowance. Again, that allowance is a function of how many times you spent flying or being part of an aircraft aircrew.

There are other allowances that are related to where you are living. I mentioned on Tuesday, and again this morning I will talk about the accommodation assistance allowance. Those in certain locations would receive the allowance. Esquimalt would be an example. Everyone who is renting in Victoria receives the accommodation assistance allowance.

There are allowances or benefits that are related to being moved, a posting allowance. One month's salary is paid to families when the family moves from one post to another.

We could talk about the Canadian Forces superannuation. As you are probably aware, this pension plan is integrated with the CPP. Based on the latest actuarial reports, I think the government pays into the plan an amount in the order of about three times what the members pay. If you look at what a member pays, you can multiply it by three, so your members pay in the order of 6% or 7%. It's a fairly significant add-on to the benefits that are paid.

• 0945

Mr. John Richardson: I know they are hurting for some form of compensatory balance with trades they may find in civilian life, but some of these trades we have are unique to the nature of the forces. Certainly the kinds of work you would find in the air force are, and certainly on the technical side for non-commissioned members. It would be the same thing in the navy for the specialty work on the new frigates, for the highly skilled training programs and the highly skilled work they have to do with these sophisticated machines. And it's equally the same thing in the combat arms, where everything is more sophisticated now.

We'd just like to get a clear picture somewhere, get a handle on it and say we are going to do something for our people. But we'd like to know where they are now, and the tables we get don't reflect the true pay of our soldiers, sailors and airmen. I'd like to see them properly paid, and I'd like to see them feel they're paid in accordance with what they feel they've earned, and we can then put this away. We've been fighting this battle for almost ten years in order to bring them into some form of comparability with society. I'll leave that there.

The other thing I would like to say is that we talk about the private sector being cheaper and quicker. I think it is in some cases, but we're talking about a system that doesn't require a tremendous amount of on-the-job executive quickness. If you're punching in the data, you only have to update it on a regular basis while the person's promoted or the trade levels have gone up a little higher—those kinds of adjustments. I can't see why a person in the armed forces isn't just as competent to do that kind of work as those who are on civvy street, unless it's a matter that the person doing the job in the armed forces is paid more than the people in the private sector. That's the conundrum that you have to crack, too. We're asking for a pay raise at one time, but we're too expensive to do our own job, so we have to job it out.

For everybody around here, I hope you solve the triangle: that you get paid, that you get paid on time, and that morale goes up in the forces.

The Chairman: Thank you, Mr. Richardson.

Mr. Goldring, a final, short question.

Mr. Peter Goldring: Just to follow along with what the hon. member was saying and to ask the question, it had been mentioned that it could sometimes be anywhere up to six months behind. My question is why nobody questioned that at all. In light of the fact that you have said the information could be turned in on the 11th, could be processed by the 15th, and the person could be paid by the 30th, Madame, what is the average delay? If there's a six-month delay on it, is the delay strictly from the time work was done to the time that it was processed? Is it just that period of time that causes the delay? What is the average delay throughout the system with the reserves? What would the average length of a pay period be? Thirty days? Sixty? Ninety? Six months?

Mrs. Renée Jolicoeur: Not six months. As I said, class A's are paid one pay period in arrears. If the unit sends the data before or on the day of one payday, say the March 15, which is one payday, the person will get paid on March 30, which is the next payday.

Mr. Peter Goldring: So the average delay is two weeks.

Mrs. Renée Jolicoeur: Two weeks, yes.

Mr. Peter Goldring: So it's very seldom that it would run into a month or two months.

Mrs. Renée Jolicoeur: Yes. Presently, 76% of the members are paid by the system. I know it's not perfect. We are not at 100%, but it's still progressing. The other people, the remaining ones, are paid through our contingency process, and we are trying to achieve the same performance. However, as I said, again it's more complicated because the units in those cases have to make the calculations, and it takes a lot longer for the unit to send that data. But usually we try to have the same performance.

Mr. Peter Goldring: So how many could run to a month or longer?

Mrs. Renée Jolicoeur: I must say that before we had PSR, we had another system called RDS. In that system—and I'm talking about less than a year ago, maybe six months ago—it happened that people were paid thirty days, sixty days, sometimes ninety days later. That was not the usual performance, but it could happen that way.

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So when people come to me and tell me they have experienced difficulty with their pay, I'm never sure if they are talking about RDS or RPSR. Often we have to go back to the history to know exactly what happened with their pay account.

I must say that in most cases where I got complaints from the people and we returned to what went wrong, it has been mostly because they were not on the system yet, because of the problem I told you about, the fact that they have an incorrect pay account and then there has been some delay in the unit in inputting the data. Most of the time that is what has happened.

The system functions. If you enter the data in the system in time, you will get paid in time. But obviously it's not up to the member. It's up to the unit to send the data in time. That's where we have difficulty. We have a number of stakeholders in that, and I think that complicates the situation.

[Translation]

The Chairman: Thank you very much, Ms. Jolicoeur.

Now we will hear Colonel Lemay's presentation. Colonel Lemay, please go ahead.

[English]

Col Pierre Lemay: Mr. Chairman, members of the committee, I'm very pleased to be be back to give you a brief outline of the allowances and the travel and relocation benefits available to Canadian forces personnel. As well, I will address matters of concern to both the leadership and Canadian forces personnel about these benefits.

The National Defence Act authorizes the Governor in Council to make regulations respecting the rates and conditions of travel and relocation benefits for the Canadian forces. In large measure these travel and relocation benefits mirror those for the public service as established by the National Joint Council of the public service.

The National Joint Council consists of union and management representatives in working committees responsible for the triennial reviews and for the negotiation of benefits in several major categories. Changes to Canadian forces benefits require separate approval, but are often triggered by changes resulting from the National Joint Council triennial reviews. The director of compensation and benefits administration is the senior Canadian forces representative on the government travel committee of the National Joint Council, which is responsible for travel and relocation policy.

Essentially, Canadian Forces personnel are entitled to the reimbursement of actual and reasonable and necessary expenses incurred as a result of directed travel or relocation. This compensation is, for the most part, not related to salary or rank, but rather to the actual expenses incurred by the member. Nevertheless, directed mobility is one of the most unique aspects of the military service and a predominant difference between the public service and the Canadian Forces. As a result, there is often a need to seek approval for benefits based on unique military requirements.

[Translation]

Concerning relocation benefits, they fall essentially into three broad categories: those available to homeowners, those available to renters and those common to both homeowners and renters.

The Home Owner Benefits provide for the reimbursement of most expenses related to the sale or the purchase of a home. For example, they include: real estate and legal fees, and the other expenses incurred to complete the sale of a house at the old place of duty, and the legal fees and expenses incurred to buy a house at the new location. Most fees are based on limits set by the Department of National Defence through agreements with professionals in the trade in each province.

Members may also be reimbursed mortgage related costs such as discharge fees, mortgage penalties and Canada Mortgage and Housing Corporation default insurance premiums, where such insurance is required by law.

There is also some degree of protection against rising interest rates. A member who must arrange a new mortgage at a higher interest rate, as a result of a move, may be reimbursed for the interest that he would not have had to pay, had the old mortgage run to maturity.

Homeowners are also entitled to participate in the Guaranteed Home Sale Plan, and they may be entitled to the Home Equity Assistance benefit.

I will provide more details on these two benefits later.

[English]

In the case of members who rent, the Canadian Forces will reimburse the cost of breaking a lease. The penalty is normally two months' rent. The reimbursement will also cover up to one month's rent for the services of a rental agency and one month's rent to hold an accommodation. Members renting may also be eligible for the accommodation assistance allowance.

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In addition to those benefits specifically directed at homeowners and renters, the Canadian Forces provides a variety of relocation benefits that are available to all members. The Canadian Forces relocation program provides the services of contracted relocation consultants, currently Royal Lepage relocation services, to assist and advise personnel in making their decision on whether to rent or buy and in assessing the type of house they should look for, based on factors such as their family size, their financial resources and their education needs.

The relocation services also provide advice and strategies for planning house-hunting trips and mortgage financing. The Canadian Forces relocation program has been operating now for more than five years and is in part credited with increasing the number of successful house-hunting trips, as well as contributing to reduced costs for interim accommodation.

The transportation and travelling expense reimbursement for Canadian Forces members on relocation are very similar to the public service. The member and spouse are also entitled to be reimbursed for transportation and daily living expenses for a house-hunting trip to the new location to secure accommodation. During the actual move, members are reimbursed actual and reasonable expenses for transportation, accommodation and meals for the whole family, both en route and for a reasonable period of time at the new location. Of course the department covers the costs related to the actual move of the member's furniture and effects and ships most personal effects.

To cover miscellaneous expenses that may not be anticipated or covered by movers, for example preparing appliances for shipping or charges for disconnecting or connecting utilities, members receive a non-taxable moving grant. This grant should not be confused with the posting allowance, which is not directly related to actual expenses but rather to the turbulence and disruption of relocating.

Finally, in situations for which members must proceed to the new place of duty without their family, they may receive the separation expense. This allowance is provided either in the form of rations at quarters at no cost to the member or in the form of a reimbursement of expenses incurred to obtain the commercial equivalent. Separation expense essentially occurs in two ways: for operational missions when families are not authorized to move; or when members request an imposed restriction on the move of their family for personal reasons such as the loss of spousal employment or career, the inability to sell a house, or the disruption of children's education. An imposed restriction situation is normally for one year but can be extended.

[Translation]

The requirement for members of the Canadian Forces to be frequently on the move causes significant concerns over their quality of life when they must leave family behind, or when they must face the loss of spousal income or career, the loss of home equity, the disruption of child education, and possibly, face higher accommodation costs at the new place of duty.

These relocations now occur in a rapidly changing environment in which, for many, dual income has become a necessity to maintain an acceptable standard of living.

Since my first briefing to this committee in March of last year, we have made some improvements in travel and relocation benefits, however, many challenges remain.

We have received approval for a Home Leave Travel benefit for personnel serving outside Canada for four months or more. This benefit provides members with a fully paid trip to reunite with their families once during the normal six-month operational tours. It replaces the antiquated and uneven Leave Travel Assistance benefit, which previously provided a partially paid trip home.

In June 1997, Treasury Board approved a Spousal Employment Assistance benefit to reimburse members up to $350 for the preparation of a resume for their spouse who had to interrupt employment as a result of a posting.

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Over the summer, with a Revenue Canada ruling making potentially all Foreign Service allowances taxable, with the excellent cooperation from the Treasury Board Secretariat, we were able to revamp the structure of Foreign Service benefits to avoid the severe financial consequences this tax ruling would have had on our members.

The Department has also gone through a second year of working with the Guaranteed Home Sale Plan, initiated by Treasury Board as a pilot project for all government departments in 1996. This program was designed to facilitate quicker and less turbulent moves for employees and members by providing a guaranteed sale price for their home based on current market value. Based on our experience to date the program has been quite successful in achieving its objectives. In its first two years, more than 2,600 members have taken advantage of the plan.

DND has agreed to participate in an extension of the Guaranteed Home Sale Plan until March 1999. The next six months will be crucial in the determination of whether this program will become permanent and how it will be integrated into our existing relocation program. Given this program's success, the Canadian Forces hope that it will become permanent to support our requirements and the Canadian Forces families' needs.

[English]

For several years the Canadian Forces have been attempting to obtain approval for a benefit that would assist single parents when they are required to incur additional child care costs as a result of Canadian Forces-directed travel or deployments.

The Canadian Forces child care assistance would be based on similar benefits introduced for public service travelling on government business but would include additional unique military provisions that could allow payment of these costs when members are deployed for up to six months. Essentially single parents whose children are all under 16 years of age would be reimbursed any additional child care expenses incurred as a result of being separated from their children for any period of temporary duty or posting, deployment, or exercise. The rate of reimbursement would be the same as that established by the Treasury Board for the public service.

The current public service benefit applies only to business travel of up to four months and does not apply to crew members aboard coast guard and fishery vessels while they are on normal sea duty. It is the department's contention, however, that the unique requirements for military members to serve on operational deployments for periods of up to six months make the longer duration and broader application of this benefit essential to avoid inequitable treatment within the Canadian Forces.

The home equity assistance benefit was approved in recognition of the demanding mobile lifestyle of Canadian Forces members and their families, and it is available only to Canadian Forces personnel and to the Royal Canadian Mounted Police force. This assistance compensates military members on relocation for 90% of their equity loss from purchase price upon the selling of their home, where local market values of comparable homes have fallen at least 10% over their period of ownership.

A major dissatisfier of this benefit stems from the qualification criterion that the local market values for comparable homes must have dropped by at least 10%. Many members who suffer significant losses on the sale of their home receive no compensation because the local market has not declined enough, let's say 8% versus 10%, while others who suffer smaller losses still receive compensation, provided that the 10% market decline has been demonstrated.

The home equity assistance provisions are being reviewed to study a cost-neutral proposal that would eliminate the 10% market decline criterion but that would incorporate a deductible provision. Nevertheless we would be interested in your views as to whether Canadian Forces personnel should be expected to incur any loss or deductible on house equity when they are directed to relocate.

[Translation]

I will now address the subject of allowances. There are two different types of allowances paid to some CF members.

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One type consists of allowances designed to offset or mitigate, for example, the cost of living in foreign countries and isolated posts, the high cost of housing in certain regions in Canada, or the turbulence engendered by frequent relocations over a career.

The other type of allowances are Environmental Allowances. Examples are Sea Duty Allowance, Aircrew Allowance and the Field Operations Allowance. These allowances are paid as compensation for the general hazards and the generally stressful environmental conditions associated with sea duty, flying or field operations.

While the Environmental Allowances have been effective over the years, the allowance related to the cost of rental housing has been far less effective, principally due to its status as taxable income.

The Accommodation Assistance Allowance was designed to address situations where rental costs are at least 12.5% above the national average experienced by Canadian Forces members. Its taxation defeats its purpose as an equalizer of rental costs for Canadian Forces members.

As you are aware, the regional differences in cost of living, and the cost of accommodation in particular, are sensitive issues which have been the target of much dissatisfaction amongst Canadian Forces members relative to existing Pay and Allowances.

Their belief, as expressed to your committee, is that higher than average market value rents and living costs should be offset by higher than average market based disposable income.

Further exacerbating this situation is the fact that personnel relocation policies now call for generally fewer postings over the span of a career, which will result in members posted to high-cost areas for longer periods of time, with the probability of "catch up" postings to low-cost locations much less likely to occur than before.

A form of salary equalization similar to that afforded members outside the country is perceived to be the solution that will assure a constant level of real disposable income no matter where the member is relocated.

In response to these concerns, we have initiated a comprehensive feasibility study to examine cost-of-living variances across the country with a view to developing potentially a National Post-Index or Cost of Living Adjustment that could be applied within Canada, similar to the existing mechanism used for foreign postings.

Necessarily, given its link to the cost of rental housing, the Accommodation Assistance Allowance will also be subjected to a comprehensive re-examination in concert with this study, as it represents a major dissatisfier, particularly owing to its taxable status. We expect this examination of regional costs of living to be completed by this summer.

[English]

Before I conclude, I would like to raise one concern that could create financial disincentives for Canadian Forces personnel. The recent budget proposed several tax measures relating to the treatment of some employer-sponsored relocation benefits and loans and to the residency status of Canadians employed overseas. We are now evaluating the impact of those proposals.

Mr. Chair and members of the committee, members of the Canadian Forces today aspire increasingly to stability, both social and economic. They are more and more concerned with the stability of their family, spousal income and career, home equity, dependant education, and indeed the whole question of what the future holds.

That being said, mobility is an important factor in the Department of National Defence's ability to meet its operational requirements. There continues to be a great deal of logic for employees of the same employer, whether military or civilian, to have their travel and relocation benefits treated the same. However, this department believes that, given the uniqueness of military life, comparability is not always practicable, nor should it be deemed applicable in all circumstances.

Thank you for the opportunity to speak to you again on the Canadian Forces and benefits.

Mr. John O'Reilly: Mr. Chairman, I have a point of order. There's been no member of the official opposition here since 9.55. I just wondered, are we legally constituted?

The Chairman: Yes, he's replacing Madame Venne.

Mr. John O'Reilly: But the official opposition is not present. I just wanted to make sure we're legally constituted.

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The Chairman: Yes, we're okay. All we need is somebody from the opposition.

Mr. John O'Reilly: Okay.

The Chairman: They could be from the Bloc or—

Mr. John O'Reilly: I recognize that the Bloc is present now. I appreciate that. I just wanted to make note that we don't seem to have any official opposition present. I just wondered if there was—

The Chairman: Your point is well taken.

Mr. John O'Reilly: Thank you. Mr. Proud, do you have questions?

Mr. George Proud: There's just one issue I'd like you to elaborate on, Colonel. On page 3, the bottom paragraph talks of attempting to obtain approval for a benefit. Where's the problem in obtaining the approval? Is it through the Treasury Board? Is it through your own department? Where is it? Is it with Canadian Forces child care assistance? Where is the problem in obtaining that approval?

Col Pierre Lemay: The consultation on obtaining approval has been going on for some time, and a lot of progress was made. The difficulty right now is between the department and the secretariat. It concerns the kind of situation the benefit should apply to.

In the public service, when employees are sent on travel, they're sent on temporary duty for up to four months. I believe that after that, there's a place for a shorter allocation.

In the military, we work it out somewhat differently. We have temporary duty, but we also have deployment or exercises whereby personnel are not sent on temporary duty, they're sent on deployment or operations.

The difficulty right now is that it's being recognized that it should apply for people on temporary duty. It's recognized that it should be applied to people who are sent on operations.

Where there's not an agreement yet that it should apply to people who are deployed or who go on exercises like in the army or the navy, it creates a problem for us. That's because it's very difficult to explain to a soldier that he cannot have the benefit while he's sent away from home to train for a deployment to Bosnia, but he can have it when he's in Bosnia.

Mr. George Proud: It's almost unconstitutional, really.

Col Pierre Lemay: Or you cannot have it if you're deployed at sea on an exercise, but you can have it if you're deployed at sea to participate in an operation in the Adriatic Sea or Middle East.

So although we have made a lot of progress, we're just short of getting there. From our perspective, we can't implement a system whereby we say that you can have it here and there, but not elsewhere. For the soldier, it's not going to make any sense at all.

Mr. George Proud: So again, red tape is tying it up.

Col Pierre Lemay: Well, as I suggested to you on Tuesday, from the employer's perspective, the employer has to deal with all of the federal public service and the messages given to all Canadians. So I guess from their side, they have some concerns about extending to us a benefit that they're not prepared to extend in certain other spheres of the public service. If so, it must be well justified and the unique requirements should be well recognized.

We are consulting very hard to resolve this situation. But to reply in short to your question, yes, this is where it's bogged down right now. We have different views on how the benefit should apply for the Canadian Forces.

It's regrettable, from our perspective, because it's a benefit that in fact was approved in principle by the President of the Treasury Board in 1997, but we cannot get down to resolve the fine print.

A lot of people out there are hoping that this benefit will come into play soon. We have a fair number of single parents. They're getting tasked to be deployed. They'd like to remain in the Canadian Forces. Hopefully, we can resolve these differences very, very soon so that the benefit can be made available to them.

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Mr. George Proud: Thank you. I think this is a special thing, and I don't believe many of the regular civil servants are called to do these special duties the way the military people are. I think it's something that should be looked at and implemented as soon as possible.

I have another quick question, if I might.

The Chairman: Sure.

Mr. George Proud: The other night we were in North Bay. One of the enlisted people was talking about the posting allowance. This individual has five young children. He got the posting allowance, but what that did to him was to eliminate his child tax benefit. So it really wasn't much of a special thing for him, I guess because it's a taxable benefit.

Again, that's something that should be looked at, these benefits being taxed, because most benefits, I don't believe, as in this case, should be taxed. It doesn't really do much for a person like that, let me say that.

Col Pierre Lemay: We've exchanged many letters with Revenue Canada over the years asking that posting allowance not be recognized as a taxable allowance. We're still trying. Your views on this subject would be most welcome.

Mr. George Proud: Thank you.

The Chairman: Madam Longfield.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): I thank Mr. Proud, because my views on the subject of posting allowance.... You say here that it's to get over the turbulence and so on, but my understanding is that, in actual fact, it pays for new drapes. It pays for the extraordinary expenditures we don't see covered under any other allowance.

As Mr. Proud was saying, in many cases what it does is inflate someone's income for a period of a year, causing him to actually have less money in his pocket at the end by the time Revenue Canada gets busy with deductions.

If you can't get Revenue Canada to say the posting allowance is non-taxable, couldn't people just be asked to submit expenses for those kinds of expenses that are coming out? As an expense, it's not taxable. You don't need Revenue Canada to change that.

Col Pierre Lemay: Posting allowance is paid as compensation for turbulence. It's not paid for compensation to change the drapes or buy new rugs.

Mrs. Judi Longfield: But if that is the case, why is there more turbulence for a member of a higher rank than a member of a lower rank? If posting allowance is based on one month's salary, I would suggest that the lower the income, the more disruption there is to a family in trying to relocate and to get the things they need to re-establish themselves. This just flies in the face of...if that's what it is.

I've moved many times, and I can tell you, the higher my income, the less stressful my move has been.

Col Pierre Lemay: Your concern is very valid, and we've been listening to it. Posting allowance was instituted in, I believe, 1982. At that time people thought it was all right and reasonable that it should be a month's salary.

I guess what people saw there is the link that as you move in rank, generally, everything being equal, you will have a larger family and you will have moved more often. This was the correlation made. People believed it should be linked to rank because of the size of the family. As well, when you're higher in rank, it's probably your tenth relocation versus the corporal's second.

From personal experience, it's fairly recent, this point you have made, this very valid point, about why it's tied to rank. Corporals with three kids suffer probably more problems or relocation stresses than lieutenant colonels with three kids.

I can tell you, looking at posting allowance and how it's administered is on our business plan for the fiscal year 1998-99. We're to consult with the commands, consult with the soldiers, the airmen and the people who go to sea to find out if it's a general view. If it is, we'll see what we can do about it. I would suggest to you, though, that whatever we do, it would have to be in a cost-neutral way.

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Ms. Judi Longfield: I'm not as concerned about cost neutrality as I am about appropriately compensating people who, through no fault of their own, are being taken out of a normal situation.... But you've heard my concern on that.

The other has to do with the separation expense. I read here, and I think this is appropriate, that for various reasons, and you've laid out the imposed restrictions, there is compensation, which makes me wonder. I talked to a woman in North Bay who is trying to be relocated with her spouse. She is told there's no money for posting allowance. They just can't afford to move her. At the same time she is under this imposed restriction and they are being reimbursed for the second home, all those other expenses. I'm thinking to myself that those costs far exceed the cost of reuniting her with her spouse. If the reason is that there is no money for posting and this is why they are not doing it, then someone should get out the figures and find out it's costing a whole lot more to keep them apart.

Col Pierre Lemay: I know the budgets and the number of moves have been restricted, and they will be even more restricted next year, because of the financial circumstances of the department.

I understand your point very well. When we look at it from a Canadian Forces perspective, some people on imposed restrictions cost much less because they are going to be in quarters and that's the rule: you have to be in base quarters first, if they are available. We are going to pay for a room downtown only if no quarters are available.

On averages of averages, I believe we've come down as saying that two or three years of imposed restrictions on average equals one move on average. Those are averages of averages and may not be specific to the personal case of which you're speaking. For that particular person it may be true that business case-wise it would be cheaper to move that person than to leave her here, but there might be someone somewhere who is dealing with it from the perspective that everything being equal, a person on imposed restrictions is so much money and a move is so much money. At the end of the year, when people make plans, when moneys are attributed, they work it out on the basis of number of moves.

Mrs. Judi Longfield: But at some point don't we value the individual? We make exceptions for other things.

Again, you've heard my point.

Col Pierre Lemay: Yes, Madam.

Mrs. Judi Longfield: I think we're spending far too much time saying “on the whole” when these are individuals, these are people, and we expect a great deal from them. There has to be a way to look at the individual.

The other thing—and Mr. Proud mentioned it—is the Canadian Forces child care assistance. Would this be a taxable benefit?

Col Pierre Lemay: No, Madam, it's considered a reimbursement of expenses.

Mrs. Judi Longfield: Okay.

You asked for our opinion on home equity assistance and whether we should eliminate the 10%. Based on the number of people I've talked to and the hardships they are forced to incur, I would say no, I think this should be eliminated. I don't think someone should be forced to absorb that kind of cost.

Sea duty allowance, air crew allowance, and field operation allowance: are they taxable?

Col Pierre Lemay: They are all taxable, yes.

Mrs. Judi Longfield: You have said on page five that triple-A taxation defeats its purpose as an equalizer of rental costs for Canadian forces members. What are we doing about it? We're talking about it, we know it exists, but what are the concrete steps we're taking to overcome this, particularly given the fact that there have been pay freezes, there are people who are in Esquimalt or other areas of high cost and who, because now the relocations have dropped considerably, are in this situation, and might be for quite some time?

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Col Pierre Lemay: In fact, ma'am, in 1996, I believe, we looked very closely at triple A to see if we could do something about it within the constraints that it's taxable and that any proposal we would make would be cost-neutral. Within those constraints we were not able to come up with adjustments to it that would make a big difference, and the reason was fairly simple. If we took money from the more senior ranks to give to the more junior ranks, because the majority who receive the allowance is from the more junior ranks you'd have to take an unproportionally enormous amount from the higher ranks to give very little to the junior ranks.

Our conclusion was that within the current rules there's nothing we can do that would improve significantly what we have here. So what we've done now.... And I talked in my presentation about this cost-of-living study that we've embarked on and we hope to complete by the summer, which will at the same time include the accommodation assistance allowance.

I should share with you, though, that the Americans—and I'm not saying that the cost of living in Canada is similar to that in the States—came up with a cost-of-living allowance for the United States that does not include accommodation. The average payment of this allowance is $45 per month.

We also want to pursue this thing about trying to make this accommodation assistance allowance non-taxable with Revenue Canada again, and we want to demonstrate that it's an employee cost because of the employer demands. I believe this would help the people in the high-cost areas tremendously. Our previous studies indicate to us that when you look at the cost of living for people who are in the $20,000, $30,000, $40,000 and $50,000 brackets, with families, accommodation accounts for most of the differences between the locations, so we will again focus on that aspect.

Mrs. Judi Longfield: I'd like you to sort of look from the bottom when you're talking about “cost-neutral”. I would like any solution for the soldier, the airman, whatever, to be that his or her pay is not negatively impacted as a result of a move.

And finally, are there environmental allowances for Alert? And if not, why not?

Col Pierre Lemay: I think in Alert it's called an isolation allowance.

Mrs. Judi Longfield: Right. And what about travel home? If you're overseas you can get back within that six-month period.

Col Pierre Lemay: Yes.

Mrs. Judi Longfield: Can you in Alert? Can families visit?

Col Pierre Lemay: No.

Mrs. Judi Longfield: Is that something we can look at? Surely someone who's in Alert is just as isolated as someone who's in Bosnia. Maybe more so.

Col Pierre Lemay: I would suggest to you, ma'am, that this question has some type of operational requirement connotation, and I would have to ask that it be addressed to the people on the operations side. I believe we have only one flight a week to Alert. I suspect it has some operational connotation or maybe there is some difficulty in having people coming back and forth regularly on one flight per week.

Mrs. Judi Longfield: And I understand that, but to the wife and family at home that's not much consolation.

Col Pierre Lemay: Understood.

Mrs. Judi Longfield: Thank you very much.

Thank you, Mr. Chairman.

The Chairman: Mr. O'Reilly, then Mr. Pratt and then Monsieur Lebel.

Mr. John O'Reilly: Thank you, Mr. Chairman, and thank you, Colonel Lemay, for meeting with us again.

Obviously when we open the dusty closet sometimes things come out that seem to be very negative, but really, we're trying to complement and expand, and I hope I can add some light to this.

First I want to talk about the home program guarantee, which is with Royal Lepage right now, I believe. You said there were 2,600 people who qualified. What percentage is that of the total moves? How many people don't qualify? What rank is required? And what are the qualifiers that you would use to put people in that home program? Keep in mind that I'm a 22-year real estate broker. I still have my licence, but I don't deal with Royal Lepage, so it's all right.

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The other one you asked for comment on was the market dropping 10%. To me, I had written a number of words from “stupid” to “not based on reality”, and I was trying to be very generous and not facetious. You see, if you're in a small market and you have 23 sales and they're all in the $79,000 to $80,000 range, and four years before they were selling at $125,000—the market has dropped—and there's a $200,000 sale on those 23 sales, the total market hasn't dropped 10%. So at the very least, it should be a graduated scale so that if it has dropped 10% then you get a full benefit; if it has dropped 9% there would be a graduated scale benefit. You could tie it to the market, but it isn't based on reality because the actual markets go up and down and sometimes all the sales in a market are only in the lower end of the market.

If you have a number of $200,000 homes for sale and there's no market, there's no movement in the market. The upper market is the one that stops in the small towns first, so if you have a number of transfers of people out of that small market the lower ones are the ones that are going to sell. People are not going to come in and buy a home that has been abandoned and it's $200,000 and the mortgage company has it. They're going to go to the $129,000 sale. In my market right now, the market is $129,000 to $140,000. Yes, there are $200,000 homes for sale, but if one of them sells the 10% factor would not kick in, in your case. At the very least, a graduated scale would make sense.

I suppose in the guaranteed home plan.... Those are two of my questions. I have some more, but I'll leave you with that.

Col Pierre Lemay: Regarding the first question, sir, Royal Lepage has the contract for the relocation services. The guaranteed home plan is not based on one real estate contractor; there are three of them involved in the guaranteed home sale program.

When I talk about 2,600—and I don't remember the exact words—I meant there are 2,600 people who not only qualify but who accepted the program and had a successful relocation using the guaranteed home sale program. Some people qualify for the program but they may not be satisfied with the guaranteed prices, so they opt out. You always have the option to opt out. So it's 2,600 people who fully use the program.

You asked me a question about the number of moves. Well, the program applies to homeowners, not renters. I don't have statistics with me for renters and homeowners and what the percentage is, but in terms of moves, I believe I can say that we move in the order of 10,000 to 11,000 people a year. Because of all sorts of reasons, including budgets, I believe that next year we're now down to a projection of 5,100 moves.

Regarding the home equity program, I fully recognize your point. The 10% rule.... Basically, if you look at a bit of history of the program, only ourselves and the RCMP have this program. No one else in the public service has it. The RCMP had it a little before us and they had it with this rule. You pointed out the shortcomings of the 10% rule. As I suggested to you, we will be addressing this and will be taking into consideration the suggestion you made about a graduated type of scale.

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What we've done to try to improve the performance of the program today.... Before, when the program first started, for the first couple of years we put the onus on the member to demonstrate to us that the market had declined by 10% to qualify for the benefit, which we thought was probably not the fairest thing to do. When people relocate they have lots on their minds, and making a demonstration of whether the market has dropped or not was an added burden to them. Since that time we have linked the administration of the HEPB, the home equity protection benefit, to the guaranteed home sale plan appraisals. So appraisals are made by fully qualified appraisers. And if somebody has a house and does not select the guaranteed home sale plan we pay for the appraisal. Now the onus is on us to demonstrate to them that it hasn't declined by 10%.

I think from a performance perspective we have made a fair amount of progress in the administration of the program, but the program has inherently some difficulties we have to deal with.

Mr. John O'Reilly: On the rental rate, when a person is transferred, could you not take a look at setting a percentage of a person's pay as the maximum amount of rent they would have to pay so that no matter what market they're in it's equal for everyone, so that if you go from Halifax to Esquimalt you don't spend all your pay on rental, you spend a percentage of your pay on rental and not any more than that?

The downside to this of course is that your people are out trying to find the cheapest houses they can possibly find so that they don't lose a lot of money, so they end up in very inadequate unfamily-like situations. If you were dealing with a percentage of their pay that they know is the maximum they're going to have to pay—and I know this isn't revenue neutral—it would take that morale problem away from people who have a family and have to go to the very lowest market in order to survive. This is where we get the stories of people going to the food bank and delivering pizzas and that sort of thing. I think it's based entirely on how much they have to pay for accommodation. If we're going to have people come into the armed forces we should be able to treat them with some equality no matter what their rank in the area of housing. So I throw that out as—-

Col Pierre Lemay: It's a very good suggestion. In fact the system we have for overseas is a bit similar to this. It's not a percentage of pay, but those who serve outside the country pay—in a recognized way—an average of a PMQ rent in Canada anywhere they are in the world, and then we give them what we call a rent ceiling. They can go and rent a place in the country where they're posted up to that rent ceiling we give them, but they pay the same anywhere they serve. The difference between what they pay and what they have secured as an accommodation under their rent ceiling is considered an allowance.

That allowance outside the country is non-taxable. So the same problem would occur in a different way: if we would charge the same for everyone and then pay a difference, the difference that would be given to them within Canada would be considered a taxable benefit under our current rules. We'd be coming back into the same circle, and then in another way it would require the organization a lot more administration to do than if we determine an allowance and we give it to everyone.

It's a very good suggestion you've made, and we'll have a look at it. However, I expect that at the end of the day the fact that this difference would be taxable means we're back in the same wheel as the current triple A.

Mr. John O'Reilly: I wouldn't want you to find that taxable part to be the major deterrent for not looking at it, because I've talked to people who have said “I was rich and I was poor all in the same day in the military, depending on where I was posted. I liked rich; it's like being able to go out the odd night and enjoy things with your family.”

• 1040

So I think if that was brought in, whether it was taxable or not it would still be a benefit that would help morale. I said it wasn't cost-neutral. I don't know what the cost would be. I'd be interested in knowing that.

The only other point I had, if I still have a minute, is this: Has anything been done—and this goes back to the last Parliament—where reservists lose pay and rank if they're unable to attend training sessions, even though those training sessions are held 50 miles away from where they work and because of family and because of their jobs or shift work, they're unable to attend? Has there been any consideration given to maintaining reservists?

I'll take one particular trade, an ambulance attendant, who would be an ambulance attendant in Bosnia if that was where they were posted, and who is working as an ambulance attendant in their home town but is unable to drive 50 miles for the training. Is there any consideration given to people who are working in the trades, who they're going to use as reservists when they go on to the military, in not having them lose their rank for lack of attendance at training sessions doing exactly what they're doing in the private sector? We talked about this before.

You're looking confused.

Col Pierre Lemay: I'm not the technical witness to really address the reserve—

Mr. John O'Reilly: I recognize that.

Col Pierre Lemay: —personnel policy. Maybe the question can be related to them. But from personal experience, I am not aware that someone would lose rank for not showing up for training often enough. I think generally what is used is called a non-effective strength. I don't have the details with me, but if you have to show up once a month or twice every three months to keep current status in the reserve force, if you don't do this, then you're put in a non-effective strength, which I guess would stop any benefit of calling towards experience, time in rank, and things of this nature. But I would ask that the question be given to the appropriate people.

Mr. John O'Reilly: Thank you, Mr. Chairman.

The Chairman: Mr. Pratt.

Mr. David Pratt: Thank you, Mr. Chair.

I'd like to ask a question about an issue we haven't dealt with today but which was certainly on the minds of a couple of the NCMs I spoke to during the last trip to North Bay. That was the issue of annual leave.

I spoke to one NCM who was advised that he was being deployed for six months and that as a result of that he would be required to take his annual leave at a time that was quite inconvenient for both him and his family. He was subsequently advised that he wasn't going to be going, but too bad, sorry, you've taken your annual leave.

I've heard a few stories like that, and the whole issue of taking annual leave at a time that is not convenient to the member or the member's family seems to me to be a fairly significant issue. What rules are you operating under that way? Are these Treasury Board rules? Are these rules that DND is responsible for administering? As well, are you looking at injecting a little bit more flexibility into the system?

Col Pierre Lemay: The change in the annual leave policy occurred on April 1, 1996. The reason it occurred was we were in 1995, there had been a pay freeze for five years, and the department, through the former policy, had accumulated a liability estimated to be at $600 million of accumulated leave. So the program that was instituted was to give the opportunity for people to cash leave and get money. We didn't have that flexibility until 1996 to cash in annual leave. So we went to Treasury Board and obtained the authority that members could cash in their accumulated leave. There was a program in 1996, and a fair number of people did so.

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From an employer perspective, if you're going to go and ask to cash annual leave for your members and you have a $600 million liability of accumulated leave, it doesn't look as though you've been managing it very well. So the question was what are we going to do in the future so we don't have a liability of this nature again?

So we came up with the new policy that you're not allowed to accumulate more than one year's entitlement, which for most people is 25 days. On 1 April 1996 an old bank of accumulated leave was set aside, and through programs—we ran one program in 1996, two programs in 1997, and we're running one right now—people voluntarily can cash their old accumulated leave. It's in an old bank and we're dealing with that from a budget perspective.

With the new rule, people must take their leave. You can only accumulate leave for military-imperative reasons, and it's left to the commander to determine what “military-imperative reasons” means. At the same time, if you have reached the maximum accumulation number or if people don't want you to accumulate leave, they can cash it out, but it has to come out of their own budget.

So it has changed the culture tremendously, within the organization, about managing annual leave. We went from a situation in which there was control but you could accumulate your leave—if something happens, just accumulate it. But now there's a change of culture. It has to be managed from day one and it has to be managed in such a way that people must take their leave.

There are no concrete rules, but what we hope the commanders or commanding officers are doing is that people can take a fair amount of leave during the summer, some leave around the Christmas-New Year period, and leave during school breaks, recognizing it's not always going to happen this way.

You brought me a situation, a complaint, and I'm sure they occur, but the policy is in such a way that it's the commanders who have total flexibility. But they have to manage the leave with their people. If it's not managed, there will be problems.

Also, in the blue policy, if a commander receives a tasking additional to what was planned for the coming year, he has the flexibility to address the problem it creates about leave with his people, and he has the flexibility to address with his or her commander getting money to cash out the leave of the people who won't be able to take it.

I'm not saying right now it's going perfectly. It's only been two years, and it was a big change in culture. But it's best for the members in the long run, and the organization.

In terms of changes to assist controlling problems, as you have suggested, we are right now looking at options, and we hope to put them in place in 1998. We're looking at having a roll-over period so that although your leave was for this 12-month period, if something occurs unexpectedly and you can't take your leave, we'll give a three-month or six-month roll-over period in which you'll be able to take it, instead of that year. This is to try to accommodate people taking their leave, as much as possible, when they can.

[Translation]

The Chairman: Mr. Lebel.

Mr. Ghislain Lebel (Chambly, BQ): Mr. Lemay, I was and still am a notary near a military base. What interests me are the postings, for example, at Saint-Bruno.

If I correctly understood your brief, military personnel are transferred and purchase a property. I have already seen two successive transfers in less than six months. Is the evaluated price of the houses based on comparable sales? If members lose 20 percent when they sell their house, but the price of houses has fallen by less than 10 percent in their area, that's too bad, but they have to take the loss.

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However, if there is an economic decline in their area and the price of houses in the region has fallen by more than 10 percent, whereas they have lost only three percent, for example, they will recover their entire loss.

Colonel Pierre Lemay: More like 90 percent.

Mr. Ghislain Lebel: Okay. So we see that this can result in a considerable distortion from one place to another in Canada.

Second, let's talk about the transfers that we occasionally see occurring in quick succession. I'm not saying this is common, but I saw a number in the Saint-Hubert region at one time. If a member is transferred twice in the same year and loses 10 percent of the value of his property each time, he may be penalized not as a result of his own decisions, but as a result of those of his superiors who decided to transfer him.

The houses of majors and colonels are generally worth at least $125,000 to $175,000. That's roughly the normal range. If a member is transferred twice in the same year for whatever reason, he may lose as much as two times 10 percent of $150,000; that's $15,000 each time. I admit this is not common, but, with the way postings or transfers work out, a member can easily lose $30,000 in a given year. Is this true? Is this actually how things work in the field?

Colonel Pierre Lemay: As I said, we are already reviewing the difficulties caused by this 10 percent standard and we have substantially improved program administration. However, the 10 percent figure is provided for in the regulations and we are looking for a better method to suggest to Treasury Board.

As for the specific problem you describe, the regulations contain a special clause for the kinds of cases you are talking about. So it is possible to administer the equity protection program under a special clause under which we need not take this 10 percent criterion into account. The policy is currently being implemented so that, if we have two transfers in the space of two years, we will look at your case and the 10 percent reduction criterion will not apply.

Mr. Ghislain Lebel: You mention regulations, Mr. Lemay. For my own pleasure, could you cite those regulations or forward them to me? You need not give them to me right away. This is a fortunate coincidence because I also sit on the Committee for the Scrutiny of Regulations. I will pay particular attention to these ones.

Consider the example of Sûreté du Québec. There are definitely certain weaknesses in that plan, but I nevertheless bring it to your attention. At Sûreté du Québec, when a police officer is transferred, his superiors tell him: "You paid, let's say, $80,000 for your property. Its municipal assessment is still a little below that figure; let's say its $75,000. We'll buy your house for $75,000 and if we sell it for $70,000, we'll lose $5,000. If we sell it for $85,000, we'll give you your $5,000, your capital cost recovery, and Sûreté du Québec will keep the surplus, the remaining $5,000, $6,000 or $3,000.

Don't you think this plan would make the decision-makers pay the cost of their decisions and prevent the employee or member in our example from being penalized?

Colonel Pierre Lemay: We currently have a guaranteed home sale pilot project which began on April 1, 1996. The program was originally supposed to go on for two years, but it has been extended for a year, until March 1999. It is a pilot project with similar components to those of the plan you mentioned. The member can take part in it. We assess the property and make the individual a guaranteed offer based on the property's market value. If we sell the house at a higher price than the guaranteed amount, the individual receives the difference.

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So, for the moment, we have a system of this kind. It's a pilot project for all the departments which has been very useful to us and has helped us a great deal. We hope it will become a permanent program.

Mr. Ghislain Lebel: Is that the case you are citing here, the one involving the 2,600 members, I believe?

Colonel Pierre Lemay: It's precisely that one.

Mr. Ghislain Lebel: Thank you. That's a good answer.

Would you please inform this committee about the regulations you mentioned a moment ago?

Colonel Pierre Lemay: The equity program regulations?

Mr. Ghislain Lebel: Yes. You will try to find them for the committee's guidance. Thank you.

The Chairman: Thank you very much, Mr. Lebel.

[English]

I have just one last question for you, Colonel. Now that we've gone with the big base concept, have you noticed a decline in the postings?

Lieutenant-Colonel Jean Pierre Cyr (Assistant to Director General, Compensation and Benefits, Department of National Defence): We have this year. What's been happening is that a normal posting year has about 10,000 postings. For this year, 1998, it has been reduced to 5,000, which is an exceptionally low number. It's been forecast that the number of postings that will occur in the years to come will be around 7,000 to 8,000. So yes, there will be a slight reduction from what's been happening in the past.

The Chairman: Slight? You said a slight reduction?

LCol Jean Pierre Cyr: Yes, because the average was about 9,500 to 10,000, and now they're talking about between 8,000 and 8,500 postings a year. But again, for this year there's been a substantial reduction, because we're talking about only 5,000 postings for 1998. So in fact it's less than 50% compared to 1997.

The Chairman: In the past we had more people, so that would include more postings, but now it would be quite interesting to find out comparatively how we're doing. We are down to about 66,000 now. It would be interesting to compare the number of postings we had before, and whether, with us going to the big base concept, we're saving anything at all.

Col Pierre Lemay: Sir, we're not the expert witnesses for that question. I'm sure the support team has taken it down, and we'll provide you with a reply.

[Translation]

The Chairman: Thank you very much, Colonel Cyr. If there are no further questions, I would like to thank you on behalf of all my colleagues for being here this morning. It was very instructive. I am convinced that you will be able to come back and meet with us if any other questions are brought to our attention and we need your expertise.

Colonel Pierre Lemay: It would be my pleasure to come back.

[English]

The Chairman: The meeting is adjourned.