Docstoc

Nunavut Northern Allowance Nunavut Employees Union

Document Sample
Nunavut Northern Allowance Nunavut Employees Union Powered By Docstoc
					               August 2009
               Final Report:
               Nunavut Northern
               Allowance




                                  Tootoo Consulting
Prepared by:
Final Report                                                                                                                       Nunavut Northern Allowance




    Contents

    1. Introduction ................................................................................................................................2
    2. Contextual Research...................................................................................................................4
    3. Survey of Employers ...................................................................................................................8
    4. Initial Observations Based on Survey ........................................................................................21
    5. The Current Situation.................................................................................................................26
    6. Scenarios .....................................................................................................................................33
    7. Options ........................................................................................................................................40
    8. Conclusions .................................................................................................................................43
         Appendix A: Survey of Household Spending ..........................................................................45
         Appendix B: All Solicited Organizations .................................................................................46
         Appendix C: Questionnaire ......................................................................................................47
         Appendix D: Federal Departments/Organizations Following IPGHD ....................................57
         Appendix E: Assumptions to Calculate Allowance by Community........................................58




                                                                                 1
Final Report                                                                            Nunavut Northern Allowance




    1. Introduction

    In June of 2008, the Government of Nunavut (GN) signed a collective agreement with the Nunavut
    Employees Union (NEU). The agreement included the Memorandum of Understanding No. 9,
    whereby the GN and the NEU agreed to the formation of a joint Employer – Union Committee to
    review the Nunavut Northern Allowance (NNA).


    In January 2009, the Joint Committee mandated Aarluk Consulting, in collaboration with Hay Group
    and Tootoo Consulting, to conduct a review of its NNA methodology. The project team gathered
    data from organizations across Canada paying a northern allowance to their employees and carried
    out research relating to the calculation of various components of the Allowance.


    As confirmed by the Joint Committee, the NNA has two objectives:


               1. to address the difference in the cost of living between Nunavut communities and
                 designated southern communities
               2. to equalize the compensation of GN employees across Nunavut who may face different
                 economic conditions in different communities


    The project team presented a preliminary report to the Joint Committee in June 2009. The objective
    of the report was to provide the Joint Committee with data to support a decision on how to proceed.
    Three options were evaluated:


               1. Maintain the current framework and have the report proceed with recommendations on
                 possible updates to variables, and extrapolation of impacts on current allowances and cost
                 impacts for the GN;
               2. Modify the current framework and recommend adjustments that could be made to the
                 current formulae and the potential impacts of those changes;
               3. Discard the entire framework and begin from scratch - the project team would provide
                 a report that summarized the data collected, justified that decision based on the data
                 analysis, make recommendations on what may need to be changed and advise on how
                 to proceed. However, the design of an entirely new framework was outside of the scope
                 of this review.



                                                        2
Final Report                                                                          Nunavut Northern Allowance




    The Joint Committee directed the project team to proceed with a combination of options 1 and 2 –
    to update the variables with current costs, remove one component and provide options based on the
    implications of the updated/modified formula.


    This report describes our data collection methodology, the results of updating the current variables,
    issues that arise from the application of the formula, the potential impacts of various scenarios and
    conclusions.




                                                     3
Final Report                                                                               Nunavut Northern Allowance




    2. Contextual Research

    The project team carried out research across Canada to identify general principles and methodologies
    of other employers providing similar allowances. These findings provide a context in which
    recommendations can be made on the NNA.


    A northern allowance is an allowance typically paid by employers with employees working in the
    northern regions of Canada to recognize the higher costs of living in these regions. Organizations
    utilize various methodologies to determine the value of the allowance, often depending on the
    specific objectives the organization wishes to achieve through the payment and also on the specific
    components/elements the organization has identified to include as part of the analysis. Before
    determining the value of the northern allowance, the organization must first determine its
    objective/purpose in order to identify the appropriate elements to be included in the formula.


    While the general purpose of a northern allowance is to recognize the higher cost of living in remote
    communities, specific objectives to be achieved through the payment can vary by organization. For
    example, an organization may wish to use a northern allowance as part of its total rewards strategy
    to attract and retain human capital; to equalize the purchasing power of employees across various
    communities; and to provide competitive salaries relative to similar positions based in southern
    Canadian cities (see Figure 1). As will be demonstrated in further detail later in this report, the specific
    objectives of organizations vary slightly in reality.




                                                            4
Final Report                                                                                                              Nunavut Northern Allowance




    Figure 1: Objective of the Northern Allowance

           Value of northern                  Value of northern                         Value of northern allowance at
                                           allowance at northern                            northern communities
        allowance at southern
               base-city                          base-city
                                                                                          Cambridge Bay          Rankin Inlet
                                                                       attract,
                            wance not                     allowance to
               Northern allo ployees        Pay northern capital and to provide r                        Pay northern
                 paid to em                retain human laries relative to simila                        allowance to
                           the base-city               sa
                                           competitive southern jobs                                      equalize the
               working at                                                           Pond Inlet                                  Arviat
                                                                                                       purchasing power
                                                                                                        of employees in
                                                                                                        each community


                  Edmonton                            Iqaluit                               Igloolik             Resolute
                  Montreal                          Whitehorse
                   Ottawa                           Yellowknife
                  Winnipeg


    A comparison of the cost of living between cities/regions is useful information to obtain when
    determining the value of a northern allowance. However, because it is very difficult to measure the
    overall cost of living in a specific region or city, it is also very difficult to complete a global cost of
    living comparison between cities. A simpler alternative is to divide the analysis into individual
    components and to measure the cost differential of each component separately. These living expenses
    may include:
               • Cost of food
               • Cost of shelter and utilities
               • Cost of travel to southern cities
               • Cost of freight to have goods transported to northern communities


    Statistics Canada and the Economic Research Institute both provide information that can be useful
    when analyzing the cost of living in a particular city/region.


    Statistics Canada does not measure the actual cost of living in Canadian cities because it is extremely
    difficult to identify and determine a standard measure that will apply to and be relevant for a large
    portion of the general public. Cost of living varies by individual and by household depending on the
    values of each individual and on the demographics of the household which guide personal spending
    habits. Statistics Canada, however, publishes other data that can be useful for this purpose, such as
    the Consumer Price Index (CPI) and the Survey of Household Spending.




                                                                              5
Final Report                                                                              Nunavut Northern Allowance




    The CPI measures the change of consumer price levels over time but does not provide data
    pertaining to the absolute value of the items contained in the basket of goods that is used as the
    base of comparison. The CPI can provide a benchmark against which organizations can validate
    changes to the value of a northern allowance.


    The Survey of Household Spending collects data about household spending over a period of time.
    The focus of the survey is spending behaviours. Appendix A presents the Average Household
    Expenditure by territory, which is based on the results of the 2007 Survey of Household Spending.


    The Economic Research Institute produces a number of tools, such as the Relocation Assessor®, which
    can be useful when determining the cost of living differential between cities. This tool analyzes
    various cost of living components, such as:
               • Cost of transportation
               • Cost of housing, utilities and insurance
               • Cost of consumables
               • Health costs


    This tool also takes family size into consideration in order to estimate the cost of living difference
    between two cities.


    Other distinct characteristics related to living in isolated communities, such as access to services, all-
    season road access and whether or not company housing is provided, can also be difficult to quantify
    but should be taken into consideration by organizations seeking to attract and retain employees.


    It is important to note that when comparing the cost of living in different regions/cities, it is
    imperative to base the analysis on the same criteria. This presents a challenge for organizations
    with operations in remote communities as it can be difficult to obtain data pertaining to these
    communities. For example, the CPI is available only for the city of Iqaluit within the territory of
    Nunavut and the Survey of Household Spending is available only for Nunavut as a whole.


    Organizations seeking to equalize income in northern and southern communities for similar
    jobs and/or to provide competitive salaries in the north should also recognize the various prevailing
    market conditions that can affect the range of salaries being provided across the country. For
    example, fluctuations in the price of various goods across regions/cities, the housing market

                                                            6
Final Report                                                                                                        Nunavut Northern Allowance




    particularities of each region/city and general market conditions, such as an overall labour shortage
    or surplus, can all affect the level of compensation being provided by the market. It is important that
    organizations identify the appropriate base-city, when completing this type of comparison.


    The results of our contextual research conclude that there is not one single best practice to
    effectively measure the cost of living in a city/region. Each organization must, therefore, establish
    a methodology to determine the value of a northern allowance that is appropriate, given the
    specific objectives and the total reward framework of the organization.


    Data that is widely available, such as the Consumer Price Index and Survey of Household Spending,
    can be useful information to consider when maintaining the value of a northern allowance. For
    illustrative purposes, Table 1 presents the most recent CPI data and provides the month-over-month
    percentage change from February 2009 to March 2009.


    Table 1: The All-Items Consumer Price Index, Not Seasonally Adjusted¹

                                                                                           % Change from February
               City                                 CPI as of March 2009
                                                                                                   2009

               Iqaluit, NU                                        112.4                                  0.5%

               Yellowknife, NWT                                   114.3                                  -0.2%

               Whitehorse, YK                                     113.6                                  -0.1%

               Ottawa, ON                                         113.6                                  0.5%

               Montréal, QC                                       112.7                                  0.3%

               Winnipeg, MB                                       112.9                                  -0.1%

               Edmonton, AB                                       120.9                                  -0.5%


    A robust methodology can be timely and costly to administer, making it more efficient for smaller
    organizations to follow the methodology established by larger organizations with similar operations
    and values. Larger organizations, on the other hand, may establish a methodology that addresses the
    specific challenges they are faced with while also taking into consideration what it can reasonably
    afford to pay.
    ¹ Source: Statistics Canada (April 2009). Retrieved from http://www.statcan.gc.ca/pub/62-001-x/2009003/tablesectlist-listetableauxsect-
      eng.htm on April 23, 2009.

                                                                        7
Final Report                                                                              Nunavut Northern Allowance




    3.         Survey of Employers

    The second phase of our project was to perform a survey of employers that provide northern
    allowances to their employees. The objectives were twofold:


               • Obtain information on methodologies and formulae used by employers
               • Obtain quantitative data on the level of northern allowances provided.


    The following discusses in detail our approach and results for the survey.


    Organizations solicited to participate in the survey

    The project team generated a list of suggested organizations to be approached to participate in
    the survey. The list included organizations of differing sizes from various industries with employees
    based in the north. This list was approved by the Joint Committee and other organizations
    were added to the list as we proceeded with the data collection process. A comprehensive list of
    organizations approached to participate in the survey is in Appendix B and the list of participating
    organizations is on page 10.


    Data Collection

    Questionnaire

    A questionnaire was designed in order to collect both quantitative and qualitative data pertaining
    to the targeted organizations’ northern allowance methodology. The questionnaire was designed
    and prepared by the project team in MS Excel format and was presented to the Project Authority
    before being sent to the targeted organizations. The project team conducted an interview using
    the questionnaire with a Joint Committee representative from the GN in order to obtain feedback
    and subsequently revised and improved the questionnaire. The final version of the questionnaire
    sent to participating organizations is presented in Appendix C.




                                                        8
Final Report                                                                          Nunavut Northern Allowance




    Solicitation of Targeted Organizations


    Our first point of communication with each organization was by telephone with a contact person
    identified by members of the project team. The purpose of this telephone call was to explain our
    mandate and to identify the appropriate person to whom we should send the survey. The project
    team was of the opinion that an initial telephone call would increase the overall survey response
    rate. Furthermore, due to the nature of the questions contained in the survey, it was essential to
    contact individuals with in-depth knowledge of their respective organization’s northern allowance
    methodology.


    Immediately following this initial contact, the questionnaire was sent electronically to respondents,
    with the option to respond via e-mail, telephone or fax. However, even with the initial telephone
    call and identification of the appropriate contact person, some of the targeted organizations
    decided not to participate. The most common formal reason for declining was lack of time or
    resources to complete the questionnaire. In those cases where we did not receive a formal reason
    for the organization’s decision to decline, several follow-ups were completed by all members of the
    project team by both e-mail and telephone.


    Data Capture


    Upon receipt of each completed questionnaire, the data was entered into a database created
    for this purpose. A review of each questionnaire was also conducted in order to ensure accurate and
    comprehensive completion of the document. A follow-up with the respondent was often required in
    order to clarify the information provided in the questionnaire or to seek additional information/
    details. Some respondents also provided internal policy documents; the relevant information
    contained in these documents was also entered into the database.


    Confidentiality of Data


    All information gathered in the data collection process is confidential and can not be directly linked
    to the organization that provided it. The only exception to this policy applies to information that is
    available in the public domain.




                                                      9
Final Report                                                                 Nunavut Northern Allowance




    Participating Organizations

    The 12 organizations that participated in the survey were:


               • Canadian North Inc.
               • Federal Government of Canada (Treasury Board Secretariat)
               • First Air
               • Government of the Northwest Territories
               • Yukon Government
               • Inuvialuit Regional Corporation
               • Kativik Regional Government
               • Kivalliq Inuit Association
               • Nunatsiavut Government
               • Nunavut Tunngavik Incorporated
               • Public Service Alliance of Canada
               • Royal Canadian Mounted Police




                                                      10
Final Report                                                                          Nunavut Northern Allowance




    Description of Participants


    Most of the participating organizations are in the public or not for profit sector and all have
    employees based in northern regions of Canada. The Head Offices of the participating organizations
    are located across Canada. The total number of employees per organization varies, as does the total
    number of employees that are based in the north.


    The following graph describes the total number of employees per organization.




                                                                  0-200
                                    500+                        employees
                                  employees                       33%
                                    42%

                                                               200-500
                                                              employees
                                                                25%




    Seven of the twelve participating organizations provided a breakdown by location of the total
    number of employees. The breakdown of the total number of employees within each organization
    is as follows:


               • At least 95% of the total number of employees are based in the north in six of the seven
                organizations that provided this data.
               • At least 98% of the total number of employees are based outside of major cities in four
                of the seven organizations that provided this data (major cities include Iqaluit, Ottawa,
                St. John’s and Yellowknife).




                                                         11
Final Report                                                                                                       Nunavut Northern Allowance




    Survey Results

    Northern Allowance Methodology


               • Only a few of the participating organizations have an in-depth methodology to follow in
                order to determine the value of a northern allowance to be paid to employees.


               • Approximately one half of the participating organizations follow the methodology of other
                larger organizations and/or model the value of its northern allowance following the value
                provided by other organizations in order to remain competitive while still taking into
                consideration what the organization can afford to pay.


               • The remaining participating organizations were not able to provide an in-depth methodology.


    Of those participating organizations that follow the methodology of other larger organizations, two
    follow the Treasury Board of Canada Secretariat’s (TBS) methodology, as described in the Isolated Posts
    and Government Housing Directive (IPGHD) that is jointly developed by employers and unions under
    the guidance of the National Joint Council. As a result, TBS’s methodology is the most prevalent
    amongst the group of participating organizations. Furthermore, as TBS is the employer for many
    federal government departments and organizations, these departments/organizations would also
    provide the allowances as per the IPGHD for any employees based at an isolated post. For a list of
    departments/organizations that do/would follow the IPGHD for employees based at isolated posts,
    please refer to Appendix D.


    Summary of Treasury Board of Canada Secretariat’s Methodology1

    There are five different allowances included in the Isolated Posts and Government Housing Directive:
               • Environment Allowance
               • Living Cost Differential Allowance
               • Fuel and Utilities Differential Allowance
               • Shelter Cost Differential Allowance
               • Special Location Allowance


    1 Source: Treasury Board Secretariat of Canada (Dec. 2008). Retrieved from http://www.tbs-sct.gc.ca/hr-rh/gtla-vgcl/menu-ipla-dpicl-
      eng.asp April 23, 2009.

                                                                      12
Final Report                                                                              Nunavut Northern Allowance




    The value of each of these allowances is determined by considering various factors relating to each
    community where employees are located. The following sections provide a high-level summary of
    these factors.


    Environment Allowance (EA)


    The value of the EA is determined by assessing three factors relating to the physical and social
    factors of each community, assigning a point value to each of these factors, calculating the sum of
    all assigned point values and then slotting this result into one of five classification levels. Each
    classification level has an associated dollar amount for employees with dependants and for
    employees without dependants. The three factors are:
               • Population factor – examines population density
               • Climate factor – examines wind-chill, the length of period of darkness, annual precipitation
                and temperature variations
               • Access factor – recognizes posts with and without all-weather road access and examines
                the distance to the closest population centre of more than 15,000 in addition to the
                availability of scheduled air or rail passenger services


    Living Cost Differential Allowance (LCD)


    The LCD is paid to employees based at posts where high prices prevail for goods and services. Sta-
    tistics Canada conducts a survey containing approximately 250 goods and services in order to com-
    pare the cost of these items at isolated posts with the prices of the same items at an assigned
    base-city in order to calculate an associated index. The LCD enters into effect when this index reaches
    at least 115 (the index at the base-city is 100). There are 16 classification levels, which reflect five-
    point ranges, each with an associated dollar amount for employees with dependants and for em-
    ployees without dependants.


    The categories of goods and services included in the survey are:
               • Food consumed at home and in restaurants
               • Household services and supplies, including communications
               • Personal care services and supplies
               • Non-prescription pharmaceutical products
               • Public transportation


                                                         13
Final Report                                                                              Nunavut Northern Allowance




               • Automobile operation and maintenance (including snowmobile and/or boat operation)
               • Tobacco and alcoholic beverages
               • Audio/visual supplies
               • Reading material


    Each post must qualify for the Environment Allowance in order to be considered for the Living Cost
    Differential.


    Fuel and Utilities Differential Allowance (F&UD)


    A F&UD allowance is only paid when employees at isolated posts are required to pay for one or
    both of the actual fuel or utilities consumption and when the post experiences 6,000 Celsius degree-
    days annually or the cost of F&UD is at least 15 per cent greater than the base city average cost. There
    are 18 classification levels, each with an associated dollar value for employees with dependants and
    for employees without dependants. Each post must qualify for the Environment Allowance in order
    to be considered for the Fuel & Utilities Differential Allowance.


    Shelter Cost Differential Allowance (SCD)


    A SCD is payable to employees in private accommodation and in government housing at qualifying
    isolated posts to help offset the higher shelter charges experienced there. Qualifying locations are
    each assigned a dollar value; employees with and without dependants receive the same amount.
    (Iqaluit is currently the only community in Nunavut to qualify for the SCD).


    Special Location Allowance


    A post will qualify for the special location allowance when it is removed from the Classification of
    Isolated Posts listing but it qualified for a Living Cost Differential or Fuel & Utilities Differential at
    the time it was removed, or if the location is 129 km or more from a location having a population
    of 10,000 or more, is 257 km or more from a location having a population of 50,000 or more, received
    45 points or more on the Population Factor (part of the Environment Allowance) and qualifies for
    a living cost and/or a Fuel & Utilities Differential. The allowance to be paid in these cases is the sum
    of the appropriate value of the Living Cost Differential and the Fuel & Utilities Differential.



                                                       14
Final Report                                                                             Nunavut Northern Allowance




    Other Allowances


    The IPGHD provides other allowances, such as Vacation Travel Assistance (VTA), that are not included
    in the value of the allowances described above. The IPGHD currently provides a maximum of two VTA
    payments per fiscal year to all employees based at isolated posts in Nunavut.


    Differences Between TBS’s Methodology and Other Participating Organizations

               • The IPGHD provides Vacation Travel Allowance payments separate from the payments for
                other allowances, as do most other organizations, although one organization includes the
                value of its travel allowance in the northern allowance formula.
               • No other organization takes into consideration a population factor or a climate factor when
                calculating the value of their northern allowance.
               • Two other organizations take the difference in the cost of rent between northern commu-
                nities and a base-city into consideration when calculating the value of the northern al-
                lowance.
               • Three other organizations calculate a separate value for employees with and for employ-
                ees without dependants.
               • Three other organizations also consider road/travel accessibility in the community when
                calculating the value of the northern allowance.
               • Three other organizations also consider the cost of fuel and/or utilities in the community
                when calculating the value of their northern allowance.
               • One other organization references a survey conducted by Statistics Canada to help deter-
                mine the living cost differential in various communities when calculating the value of the
                northern allowance.
               • Three organizations provide a separate cargo allowance/provisions.
               • One organization has identified a separate policy, including additional benefits, for man-
                agement employees.
               • One organization provides a slightly higher northern allowance to some of its union em-
                ployees as compared to its non-union employees.




                                                        15
Final Report                                                                             Nunavut Northern Allowance




    Other Benefits Provided by Participating Organizations

               • All participating organizations provide a travel allowance. The most common policy is to
                allot a certain number of round trips per year:
                      - Approximately one half of these organizations provide two round trips.
                      - Approximately one half of these organizations provide one round trip.
                      - One organization provides three round trips.
               • Most organizations calculate the value of the travel allowance/benefit separately for em-
                ployees with and for employees without dependants but some organizations provide the
                same allowance/benefit to all employees.
               • Seven other organizations provide an average of two additional travel or leave days to em-
                ployees based in the North.
               • Two other organizations provide other allowances in certain locations, such as an isolation
                allowance and retention allowance.



    General Northern Allowance Information
    Objective/Purpose of Allowance


               • Most of the participating organizations provide a northern allowance to compensate for or
                offset the higher cost of living and/or other lifestyle issues related to living in northern
                and/or isolated communities.


               • Some of the participating organizations also provide a northern allowance to equalize the
                buying power between remote communities and the base-city.


               • Some of the participating organizations also pay a northern allowance to ensure equity
                between employees renting or owning accommodation similar to that provided by the em-
                ployer to other employees.




                                                        16
Final Report                                                                            Nunavut Northern Allowance




    Frequency of Payment


               • Most of the participating organizations provide the payment on a bi-weekly basis.
               • A few of the participating organizations provide the payment on a semi-monthly basis.
               • At least one organization provides employees with the option of lump sum payment.


    Payment Eligibility



                              Some groups
                                                                     All employees
                             of employees
                                                                      at qualifying
                             excluded from
                                                                      locations are
                                northern
                                                                     eligible for the
                               allowance
                                                                        northern
                                eligibility
                                                                        allowance
                                   25%
                                                                           75%




    Note: non-eligible employees include part-time and temporary employees.


               • All organizations that provide a northern allowance to part-time employees pro-rate the
                payment.
               • Approximately one half of organizations that have employees on short-term assignments
                in the north do not provide these employees with northern allowance benefits. The
                remaining organizations that have employees on short-term assignments may provide these
                employees with northern allowance benefits, often depending on the characteristics of
                each individual situation.
               • All organizations that have employees based in northern and southern communities employ
                the same compensation practices for both groups of employees, except that southern based
                employees are not eligible to receive northern allowance benefits.




                                                       17
Final Report                                                                                 Nunavut Northern Allowance




    Determination of Northern Allowance Value


                                   Group
                                                                            Calculate the
                              communites by
                                                                               northern
                              zone & provide
                                                                            allowance for
                                  the same
                                                                           each individual
                              allowance to all
                                                                             community
                               employees in
                                                                                 50%
                                 each zone
                                    25%        Provide the same northern
                                              allowance benefits to all
                                                  employees 25%




               • On average, the participating organizations have been using their current northern
                allowance methodology for at least 13 years.


               • 58% of organizations do not regularly recalculate/modify the value of their northern
                allowance.
               • Of those organizations that do regularly recalculate/modify the value of their northern
                allowance:
                     - 20% review their northern allowance values annually.
                     - 20% review their northern allowance values approximately every 2 years.
                     - 60% did not provide detailed information.


    Quantitative Analysis

    The project team is committed to ensuring the confidentiality of information provided to us by the
    participating organizations. We therefore require a minimum of three data points in order to divulge
    the average value of a northern allowance provided to employees in each specific community. The
    following section presents the results of the quantitative analysis where sufficient data was pro-
    vided to complete this analysis.




                                                            18
Final Report                                                                             Nunavut Northern Allowance




    The following assumptions were made in order to complete the analysis:
               • Seven of the twelve participating organizations have employees based in Nunavut. In total,
                three participating organizations follow the Isolated Posts and Government Housing
                Directive. However, the values as provided by this Directive are included only once in the
                analysis, to represent the Treasury Board of Canada Secretariat’s participation.


               • All five of the participating organizations included in this analysis pay a travel
                allowance/provide travel provisions separate from the northern allowance.


               • In the cases where participating organizations provide the same northern allowance to
                employees with and without dependants, a single figure was used to calculate the average
                value of the northern allowance for both employees with and without dependants.


    General Information


               • On average, the Isolated Posts and Government Housing Directive provides northern
                allowance benefits that lead the market.
               • The average value of northern allowances provided to employees without dependants
                across all communities in Nunavut is $17,143.
               • The average value of northern allowances provided to employees with dependants across
                all communities in Nunavut is $21,001.
               • The average value of the northern allowance provided to employees across all communities
                by the Government of Nunavut is $20,962.


    Break-down by Community


    We received at least three data points in three communities. Table 2 presents the average value of
    the northern allowances paid in these communities in comparison with the Government of Nunavut
    and the Treasury Board Secretariat’s northern allowance value.




                                                         19
Final Report                                                                                      Nunavut Northern Allowance



Table 2: Average Value of the Northern Allowance in Nunavut
                                       Number of      Average Value for   Average Value for    Government of
               Community              Participating   Employee with No     Employee with      Nunavut Data as of
                                      Organizations     Dependants          Dependants          April 1, 2008

                                                          $15,146             $19,794              $17,883
               Cambridge Bay               4
                                                       (TBS : $19,876)     (TBS : $33,126)

                                                          $15,025             $19,223              $13,563
               Iqaluit                     4
                                                       (TBS : $15,954)     (TBS : $26,590)

                                                          $17,192             $21,094              $16,795
               Rankin Inlet                5
                                                       (TBS : $18,138)     (TBS : $30,230)

               Arctic Bay                1 (TBS)          $20,654             $34,423              $23,045

               Arviat                    1 (TBS)          $17,210             $28,683              $19,150

               Baker Lake                1 (TBS)          $19,066             $31,776              $22,114

               Cape Dorset               1 (TBS)          $17,332             $28,886              $19,029

               Chesterfield Inlet 1       (TBS)           $20,532             $34,219              $20,995

               Clyde River               1 (TBS)          $20,648             $34,423              $20,842

               Coral Harbour             1 (TBS)          $20,526             $34,219              $21,126

               Gjoa Haven                1 (TBS)          $22,204             $37,016              $23,896

               Grise Fiord               1 (TBS)          $21,432             $35,719              $31,251

               Hall Beach                1 (TBS)          $19,098             $31,829              $21,371

               Igloolik                  1 (TBS)          $19,098             $31,829              $20,480

               Kimmirut                  1 (TBS)          $18,798             $31,329              $17,345

               Kugaaruk                  1 (TBS)          $22,988             $38,313              $24,162

               Kugluktuk                 1 (TBS)          $19,038             $31,730              $19,993

               Pangnirtung               1 (TBS)          $18,260             $30,433              $17,276

               Pond Inlet                1 (TBS)          $20,654             $34,423              $21,963

               Qikiqtarjuaq              1 (TBS)          $19,876             $33,126              $20,533

               Repulse Bay               1 (TBS)          $22,210             $37,016              $19,858

               Resolute                  1 (TBS)          $20,654             $34,423              $25,829

               Sanikiluaq                1 (TBS)          $18,198             $30,329              $18,406

               Taloyoak                  1 (TBS)          $22,210             $37,016              $27,596

               Whale Cove                1 (TBS)          $21,160             $35,266              $19,559


    NOTE: Only the GN amounts include Travel. TBS provides VTA in addition to the amounts listed below.
    • TBS values are approximate and reflect the maximum value per community, based on information retrieved from
      Treasury Board Secretariat of Canada website (Dec 2008). Retrieved from http://www.tbs-sct.gc.ca/hr-rh/gtla-
      vgcl/menu-ipla-dpicl-eng.asp April 23, 2009.
                                                           20
Final Report                                                                              Nunavut Northern Allowance




    4.         Initial Observations Based on Survey

    Observations

    1.         There is no “best” method for determining a remote or northern allowance. The majority of
               employers follow fairly standard practices and methodologies using similar variables or simply
               follow the practices of another employer.


    2.         While the methodology used to calculate the current GN Northern Allowance is valid and the
               variables are comparable to other employers in similar circumstances, there exist considerable
               differences between the dollar amounts provided by the GN when compared to other
               employers. The GN’s variables have not been updated for many years, highlighting the
               difficulty of maintaining the current framework. This has resulted in any changes to the
               amounts provided being a function of negotiation instead of application of a strictly
               mathematical formula.


    3.         There are two key differences between employers; how they address travel allowances, and
               how they address employees with dependants. Table 2 on page 20 shows that the GN, in most
               communities, provides a lesser amount of northern allowance than other employers. The GN
               provides an even lower amount when considering the amounts paid by other employers to
               employees with dependants. This difference is even more significant when you consider that
               the GN amount shown does include travel, while the amount shown for the other employers
               that participated does not.


    4.         The amount of the GN allowance in the three regional centres is similar to other employers’
               allowances for employees without dependants. However, the amounts are substantially less
               than those provided by other employers for employees with dependants. It should be noted
               once again that the values provided by the GN include the VTA component while other
               employers deal with this benefit separately.


    5.         In all but four communities, the amount of the GN allowance outside of the regional centres
               is higher than that provided by the Treasury Board IPGHD for employees without dependants,
               but substantially lower than that provided to employees with dependants.



                                                           21
Final Report                                                                              Nunavut Northern Allowance




    Preliminary Options

    Based on the results of the preliminary research and employer survey, the Joint Committee met to
    decide how to proceed. The options considered were:


    1.         Maintain the current framework and have the project team proceed with recommendations
               on possible updates to variables, and extrapolation of impacts on current allowances and
               cost impacts for the GN;
    2.         Modify the current framework and recommend adjustments that should be made to the
               formulae and the potential impacts of those changes.
    3.         Discard the entire formula and begin from scratch - the project team to provide a report
               that summarizes the data collected, justifies that decision based on the data analysis, makes
               recommendations on what may need to be changed and advises on how to proceed.


    The current GN Northern Allowance attempts to meet two objectives:


               o to address the difference in the cost of living between Nunavut communities and
                designated southern communities
               o to equalize the compensation of GN employees across Nunavut who may face different
                economic conditions in different communities


    It attempts to meet these objectives through two types of formulae – the first determines higher
    costs of living in Nunavut communities versus southern communities for various commodities
    (i.e. food, fuel, utilities). The second recognizes additional costs that result from living in remote
     locations (i.e. air/ground freight, airfare, access to services).


    The cost of living formulae include a variable (an “allowance”) and a calculation to determine the
    difference in the value of that variable in a Nunavut community versus a southern community. For
    example, the fuel allowance is 1,200 litres per year, the utilities allowance is 8,400 kilowatts per year,
    and the food allowance is based on a survey by INAC of the costs of a “basket of food” for a family
    of four for a week.




                                                         22
Final Report                                                                               Nunavut Northern Allowance




    The remote location formulae attempt to determine additional costs not borne by southern residents
    – sealift, air freight, airfare and access to services. These amounts also use an allowance and the cost of
    that service in a specific community. For example, the air freight allowance is 100 kilograms of freight
    per year times the GN’s standing offer freight rate for a given community. The access to services formula
    is slightly different in that it measures no specific costs but assumes a smaller community will have less
    access to services and therefore higher costs for services than employees in communities with a
    larger population.


    Maintain Current Framework


    The original version of the northern allowance was based on the Federal Government’s Isolated Post
    Allowance. The IPA was intended to allow Federal employees working on a national pay grid to
    have their total compensation adjusted as an incentive for staff to work in remote locations or to
    ensure they were not penalized with a reduction in disposable income.


    The Nunavut Northern Allowance includes a set of formulas and variables to calculate what each
    employee will be paid based on the community in which they live. The intent of the formula was to
    meet the objectives of helping employees meet the higher costs of living in Nunavut. However, when
    the formula is updated it becomes apparent that the NNA in the current Collective Agreement is
    lower for most communities than that which results from updating the variables and applying the
    formula. This has led to the NNA becoming dissociated from its original purpose and the perception
    that it is not achieving its stated objectives.


    Updating the value of the current variables can be verified by all parties. From a collective bargaining
    perspective, the issue then becomes agreeing on the allowances (why 1,200 litres per year, what is in a
    food basket, why four airfares) which variables should be included (why not climate, shelter costs,
    why population) and the application of the benefits (rates for employees with dependants, casual
    employees, excluded employees, employees receiving additional retention or recruitment bonuses,
    temporary employees, southern hires, northern hires, etc).


    Once both parties have agreed on the allowances, the variables can be updated automatically on a
    regular basis. This would reduce potential conflicts during the bargaining process.




                                                        23
Final Report                                                                           Nunavut Northern Allowance




    An advantage of maintaining the current framework is that it has been developed over time and is
    understood by the bargaining parties. While it does not provide the same level of compensation as
    the IPGHD, the GN does not have the same resources as the Federal Government and is constrained
    by legislation and the principles of fiscal responsibility to ensure it does not exceed those resources
    to the detriment of other priorities and programs.


    A weakness of the current formula is that single employees are given the same allowance as
    employees with dependants. The GN has consistently stated that it wants to support families and
    communities. This has two potential side-effects; many of the employees in Nunavut with families
    are Inuit and there may therefore be a proportionately larger effect as a result of the current
    structure, and; skilled individuals with families living outside of Nunavut may be less willing to
    move – reducing the potential labour pool from which to fill vacant positions.


    Modify Current Framework


    Modifying the current framework could include adding new variables, adjusting allowances or
    removing variables. How applicable are the current variables? While every GN employee receives the
    allowance (some are pro-rated), what percentage of employees actually pay for electricity? Should
    the Allowance reflect the fact that employees with dependants have a higher cost of living than sin-
    gle employees? Should travel costs be completely removed and dealt with separately? Should shel-
    ter costs be included in the current allowance?




                                                      24
Final Report                                                                              Nunavut Northern Allowance




    Create New Framework


    Are the objectives for the current NNA still relevant to Nunavut’s goals and needs? Do the objectives
    reflect the reality of the NNA as it is currently calculated? There needs to be complete clarity as to the
    objectives of the NNA. Achieving equity between all GN employees across Nunavut is an objective that
    may be achieved with one methodology, while reducing vacancy rates by ensuring competitiveness
    in the labour market may require a very different approach.


    By establishing the objectives of the NNA, even more so if there is a goal of designing it with an
    "attractiveness" objective, the GN may need to have a more holistic view of how the NNA fits into
    their total compensation philosophy and framework. There are some interdependencies between
    the NNA and other compensation elements and there is a need for all of these elements to be in
    synch if the desired objectives are to be attained. A typical candidate will look at this from a
    holistic perspective and not at discrete compensation elements when making a decision to accept
    a job offer.


    Joint Committee Direction

    After reviewing the preliminary report, the Joint Committee met with the project team and directed
    them to proceed with a combination of options 1 and 2: maintain the current framework with some
    slight modifications. The project team was asked to do the following:


    • Review whether current variables are reasonable (i.e. does using the INAC Food Basket Survey
      provide a reasonable means of addressing food costs in Nunavut?).
    • Remove the “access to services” allowance
    • Update the variables with current costs
    • Calculate the current formula and extrapolate the results
    • Examine scenarios and provide options for how to proceed.




                                                       25
Final Report                                                                            Nunavut Northern Allowance




    5. The Current Situation

    This section of the report will analyze the NNA methodology currently used by the GN. This research,
    in combination with preceding sections of the report, will form the basis for our discussion of
    various scenarios and options in the following sections.


    The Current Variables
    Cost of Food

    The GN references a survey conducted by Indian and Northern Affairs Canada (INAC) in order to
    determine the difference in the cost of food between Nunavut communities and southern Canadian
    cities. The survey is regularly updated by INAC and references a basket of food that a family of four
    can reasonably be expected to consume in one week. The Northern Food Basket used to conduct the
    survey takes into consideration certain health criteria in addition to food preferences of the
    population. We believe that this survey is an appropriate tool to use to estimate the difference in the
    cost of food between Nunavut and the south. However, because the survey represents consumption
    of a family of four, the amount may be inflated for employees without dependants.


    Cost of Transportation of Goods – Air Freight Rates


    The current formula provides employees with an allowance to compensate for the cost of shipping
    100 kilograms of goods per year to their community by air. The GN’s standing offer for air freight rates
    is used to estimate the cost of shipping these goods (in cases where a community is served by more
    than one airline, the lowest rate is used). We were unable to find a source to validate reasonableness
    of the allowance of 100 kilograms and are therefore not able to provide our comments regarding this
    allotment. The GN however, may wish to consider whether or not one standard allowance is suitable
    for employees with and without dependants.


    Cost of Transportation of Goods – Sealift Rates


    The current formula provides employees with an allowance to compensate for the cost of shipping
    1,500 kilograms of goods per year to their community by ground or sealift. The GN’s standing offer
    for cargo rates is used, when applicable, to estimate the cost of shipping these goods (in cases where



                                                      26
Final Report                                                                                          Nunavut Northern Allowance




    a community is served by more than one shipping company, the lowest rate is used). We were unable
    to find a source to validate the reasonableness of the allowance of 1,500 kilograms and are therefore
    not able to provide our comments regarding this allotment. Once again, the GN may wish to consider
    whether or not one standard allowance is suitable for employees with and without dependants.

    Fuel and Utilities

    The NNA references a survey conducted by MJ Ervin and Associates Inc. in order to determine the
    difference in the cost of fuel between Nunavut and southern Canadian cities. The survey is regularly
    updated by MJ Ervin and Associates Inc. and quotes the price per litre of gasoline in various
    southern cities. The GN’s Petroleum Products Division determines the cost of fuel in each Nunavut
    community with the exception of Iqaluit. We believe that this survey is an appropriate tool to use to
    estimate the difference in the cost of fuel between Nunavut and the south.

    This annual allotment of this allowance is 1,200 litres of gasoline. We completed the following
    calculations in order to determine how far 1,200 litres of gas will take you:


    Table 3: Fuel Efficiency
                                                      Fuel Efficiency

          Vehicle                    Data             Calculations                       Results

                                                      If the sled uses 12.8L to drive
          Bombardier Sled¹           12.8L/100km      100km then it would use 1,200L     1,200 L = 9,375 km
                                                      to drive approximately 9,375 km.

                                                      If the truck uses 14.3L to drive
                                     14.3L/100 km
          Ford F150 pick-up truck²                    100 km, then it would use 1,200L   1,200 L = 8,390 km
                                     (city driving)
                                                      to drive approximately 8,390 km.

        ¹ http://www.ski-doo.com/NR/rdonlyres/3F0BFF93-C4CA-4AA3-9DB2-5F947973CB26/%200%20/SkidooBrochure_ENCA.pdf
        ² http://www.ford.ca/app/trucks/f150.do?modelYear=B90



    In order to determine if the allotment of 1,200 litres is reasonable, we must understand the objective
    of this part of the NNA. If the objective is to compensate the employee for all of their gasoline usage,
    we would have to first determine how many kilometres per year the average employee drives. If the
    objective is to compensate the employee for part of their gasoline consumption then we would need
    to know how many kilometres per year the average employee drives in addition to the portion of this
    the GN wishes to provide compensation for. Without this information, we are unable to comment as
    to whether or not the allotment of 1,200 litres is reasonable.
                                                               27
Final Report                                                                                                 Nunavut Northern Allowance




    The NNA also includes an allowance to compensate for the cost associated with the usage of 8,400 kWh
    of electricity per year; the allowance is calculated based on the difference between the costs of
    consumer electricity rates in Nunavut versus the rates in the south. We completed the following
    calculations in order to determine the reasonableness of the allotment of 8,400 kWh. Please note that
    this calculation serves only as an approximate measure of electricity consumption and is not intended
    to be used as the sole source of data in determining the kWh allotment as part of the NNA formula.


    Table 4: Electricity Consumption
    Based on this calculation, we believe that an allotment of 8,400 kWh per year is conservative, especially
    for a family of four.

                                                Electricity Consumption (1yr)

                       Appliances                                      Family of Four     Single

                       40 Gallon hot water tank (14.6 kWh/day)         5,329              5,329

                       Warm Water Wash (2.59 kWh/use) 1                269                135

                       Normal Cycle dryer (2.39 kWh/use) 1             249                124

                       Shower (2.4 kWh/use) 2                          3,504              876

                       1 60Watt bulb (88kWh/yr) 3                      880                440

                       Freezer (1,035 kWh/yr)                          1,035              1,035

                       Fridge (1,060 kWh/yr)                           1,060              1,060

                       Range (548 kWh/yr)                              548                548

                       Oven (374 kWh/yr)                               374                374

                       Vacuum (42 kWh/yr)                              42                 42

                       Kettle (110 kWh/yr)                             110                110

                       Toaster (21 kWh/yr)                             21                 21

                       VCR (9 kWh/yr)                                  9                  9

                       Color TV (385 kWh/yr)                           385                385

                       Engine block heater (221 kWh/yr)                221                221

                       TOTAL:                                          14,036             10,709
                      1 Assumes that a family of four does 2 loads of laundry per week (wash and dry) and
                        a single person does 1 load of laundry per week (wash and dry).
                      2 Assumes that each person takes 1 shower per day (therefore, a family of four takes
                        4 showers per day).
                      3 Assumes that a family of four uses 10 light bulbs and a single person uses 5 light
                        bulbs.
                      Source: http://www.hydroquebec.com/residential/energywise/calcul_
                               consom.html
                                                                 28
Final Report                                                                          Nunavut Northern Allowance




    The NNA provides one half of the value of the difference of the cost of fuel and of the cost of
    electricity consumption, as described above. Due to subsidized electricity rates in Nunavut this may
    be appropriate when calculating the value of the allowance to compensate for electricity usage.
    The Joint Committee may, however, wish to consider the reasons and justification for providing
    one half of the value to compensate for the higher cost of gasoline in Nunavut.


    Travel Costs


    The NNA allows four return airline tickets to the closest designated southern city. Based on the
    results of our survey, we believe that it is important to provide some form of compensation for travel
    to southern cities. However, the current allotment of four return tickets to all employees results in
    a higher benefit for single employees than for employees with dependants. For example, a single
    employee could travel to the south four times per year whereas an employee with three
    dependants could travel with the entire family once per year. We believe the travel component of
    the NNA should be reviewed by the Joint Committee in order to ensure equitable treatment for
    all employees.


    Access to Services / Special Location


    The Joint Committee has indicated that this variable will be excluded from the NNA in the future so
    we did not analyze this component.


    The Current Formula

    We removed the access to services allowance and updated the remaining variables in the current
    formula. Please note that the calculations shown are approximate and a number of assumptions were
    applied in order to arrive at a value for each community (please refer to Appendix E for a full
    discussion of these assumptions). We used the GN’s NNA values as of April 2008 in order to be
    consistent with the values in previous sections of this report but have also included some discussion
    using the April 2009 figures below in order to be as current and accurate as possible. The results are
    presented in the following table.




                                                     29
Table 5: Results of the Current Formula


                                                           Based on current variables updated                                                       Difference                          Cost to update
                        # ees per         F o od      A i r F r e ig h t Sealift      Fuel    Utilities   Tr ave l               Allowance         (updated vs       Cost to update   variables (excluding
     Community         community            F1               AF            GS          F2        U          TC        Total    as of April 08   current allowance)      variables     negative amounts)
Arctic Bay                 43            8,337            1,054           597         161      2,100      25,748     37,997       23,045             14,952             642,949             642,949
Arviat                     163           8,857              578           573         166      2,004      6,636      18,813       19,150               -337             -54,877                --
Baker Lake                 130           10,417             578           573         160      1,713      8,467      21,907       22,114               -207             -26,904                --
Cambridge Bay              170           8,493              442           763         229      1,814      8,443      20,183       17,883               2,300            391,014             391,014
Cape Dorset                98            8,129              909           526         155      1,464      9,141      20,323       19,029               1,294            126,833             126,833
Chesterfield Inlet          25            10,937             757           573         166      2,611      7,207      22,251       20,995               1,256             31,398              31,398
Clyde River                45            10,677           1,308           597         143      1,780      14,701     29,207       20,842               8,365            376,418             376,418
Coral Harbour              45            11,405             757           573         176      2,516      7,190      22,617       21,126               1,491             67,113              67,113
Gjoa Haven                 69            11,405             690           763         229      2,255      11,845     27,187       23,896               3,291            227,074             227,074
Grise Fiord                14            8,753            1,501           597         143      2,239      32,228     45,461       31,251             14,210             198,935             198,935
Hall Beach                 37            10,469             963           573         143      2,138      14,878     29,164       21,371               7,793            288,337             288,337
Igloolik                   110           9,793              963           573         143      1,287      14,861     27,620       20,480               7,140            785,373             785,373
Iqaluit                   1106           7,505              434           440         231      1,190      8,183      17,983       13,563               4,420           4,888,415           4,888,415
Kimmirut                   29            8,129              701           526         155      2,623      9,477      21,611       17,345               4,266            123,724             123,724
Kugaaruk                   33            10,053             812           597         229      3,071      14,869     29,631       24,162               5,469            180,492             180,492
Kugluktuk                  115           10,781             533           763         229      2,383      8,326      23,014       19,993               3,021            347,444             347,444
Pangnirtung                109           10,677             817           526         161      1,369      10,165     23,716       17,276               6,440            701,926             701,926
Pond Inlet                 118           7,401            1,459           597         155      2,168      15,827     27,608       21,963               5,645            666,082             666,082
Qikiqtarjuaq               37            9,845              988           597         185      1,771      11,425     24,812       20,533               4,279            158,333             158,333
Rankin Inlet               295           9,377              386           404         136      1,446      6,636      18,385       16,795               1,590            468,971             468,971
Repulse Bay                32            9,013              757           573         142      2,200      7,190      19,875       19,858                 17               529                 529
Resolute                   20            9,585            1,054           597         107      2,545      27,770     41,658       25,829             15,829             316,590             316,590
Sanikiluaq                 40            9,117              413           573         195      1,914      7,221      19,433       18,406               1,027             41,096              41,096
Taloyoak                   36            10,885             755           763         218      2,549      13,206     28,377       27,596                781              28,099              28,099
Whale Cove                 25            8,597              757           404         166      2,376      5,662      17,962       19,559              -1,597            -39,934                --
                              TOTAL      238,645              20,364     14,638       4,317    51,527     307,305    636,795                                          10,935,430          11,057,145
                            % of total    37%               3%            2%          1%        8%         48%       100%
Notes:
 Source is latest Public Service Annual Report from GN HR website
Final Report                                                                          Nunavut Northern Allowance




    The ‘Difference (updated vs current allowance)’ column of the table confirms that the amounts
    currently being paid are, in many cases, less than the amounts that would be paid using the
    existing formula. Please note that we did not include the value for the ‘access to services’ variable
    in our calculation. If this variable was included, the difference would increase, which would also
    increase the gap between the amount currently paid and the amount that would be paid.


    The financial impact to the GN by applying the existing formula and paying the amounts shown in
    the table above is approximately $11 million. We used the northern allowance values at April 2008
    to calculate this impact but if the April 2009 rates are used, the cost reduces to approximately $8.3
    million. There are, however, some communities that are currently receiving a superior northern
    allowance than what the formula intends to pay. If we remove these communities from the costing
    and apply the April 2009 values, the overall impact to the GN is approximately $8.9 million (this
    assumes that the GN will not reduce the northern allowance in any community).


    If the current formula was applied, the average of the northern allowance paid by the GN would
    increase from $20,962 to $25,472. This average value would lead the market average both in terms
    of employees with and without dependents (average of participating organizations is $21,001 and
    $17,143 respectively, as quoted on page 16 of this report). Once again, however, the GN values
    include the travel component but the market values do not.


    The table shows that the travel and food variables are the two largest variables (representing 48% and
    37% of the total cost respectively). Making changes to either one of these variables will therefore
    result in the largest financial impact on the value of the northern allowance.


    Our Comments

    Overall, we believe that the current NNA formula is comprehensive and can be administered through
    the use of reliable quantitative data. We do caution the GN against relying too heavily on external
    sources of data without having a contingency plan in the event the data is no longer published; the
    GN may wish to identify alternate sources of quantitative data that could replace either of the
    external surveys referenced in the current formula to alleviate this risk. As we described in the
    survey results section of this report, many organizations do not have an in-depth methodology to
    apply but rather they follow the methodology of other larger organizations or they make
    management decisions based on what the organization can reasonably afford to pay.




                                                      31
Final Report                                                                              Nunavut Northern Allowance




    Other Considerations

    The parties may wish to consider changes to the allowances for utilities and fuel. As is
    mentioned in the “Key Issues” of Section 6, the rationale and allowance for utilities is unclear. If the
    intent is to address higher costs of shelter for all employees, this section of the NNA should be
    revisited and consideration given to a full Shelter Cost Differential similar to the IPGHD.

    However, since the GN currently provides support to employees in staff housing through their Staff
    Housing and Rental Assistance Policies, consideration could be given to providing support only to
    employees who are homeowners or paying for accommodations in the private market. Alternatively
    that support could be provided through a separate program at the Nunavut Housing Corporation
    and those allowances be removed from the NNA altogether.

    Furthermore, if the intent of the “utilities” component of the NNA is to address the higher cost
    of shelter in Nunavut, the amount provided for electricity appears to be substantively less than
    required to actually operate a house and the reason for providing the allowance remains unclear.

    The GN Staff Housing Policy and the Rental Assistance Policy are both administered by the Nunavut
    Housing Corporation. The Staff Housing policy describes when an employee is eligible for staff housing
    and what costs they will pay – including the fact that each tenant is responsible to pay their own utility
    costs to encourage conservation.

    The Rental Assistance Policy is a program that ensures no employee will pay more than 30% of their
    income towards shelter costs.

    Therefore, for employees in staff housing, the allowance may be contradicting or duplicating other
    measures – the rates for electricity are subsidized by the Qulliq Energy Corporation, employees in
    staff housing are expected to pay their utilities in order to conserve, and if an employee is suffering
    economic hardship, they can apply to the Rental Assistance Program.

    If the intent is to assist employees living in private accommodations, then the provision of this
    allowance to all employees would appear to be inequitable.

    Finally, if the rationale for the utilities allowance is to support employees with the higher costs of
    maintaining a house in Nunavut then it is unclear why electricity is included in the allowance and
    heating fuel is not.

    The next section presents some options for possible modifications/improvements.

                                                       32
Final Report                                                                                            Nunavut Northern Allowance




    6. Scenarios

    Table 5 showed that the impact of removing the access to services allowance and updating the
    remainder of the variables would cost the GN approximately $10 and $11 million dollars more than
    the April 1, 2008 amounts in the collective agreement. The impact declines to between $8 and $9
    million using the April 1, 2009 allowances.


    The financial limitations of the GN make it unlikely that this is a practical or achievable amount to
    be immediately added to the payroll costs of the government without major impacts on other
    programs and services.


    The following scenarios, using the April 2009 NNA values as the point of reference, attempt to model
    adjustments to the formula based on our review of “reasonableness” and the stated objectives of
    the NNA in a manner that would ameliorate these impacts while still being practical, achievable and
    equitable. Our analysis has shown that the ‘highest impact’ variables within the GN’s current formula
    are food and travel (due to the high cost of these variables in proportion to the other variables) so
    the following scenarios present options regarding the calculation of the value of these variables. Our
    research and analysis also confirmed that the treatment of employees with versus those without
    dependants is an important issue surrounding the northern allowance so the following scenarios also
    present options for managing this.


    Key Issues

               • Travel – this allowance accounts for 48% of the total NNA when the variables for each
                community are updated. The amount is included in the overall allowance while most other
                employers treat it separately.


                Providing a travel allowance is reasonable and common practice among northern employers.
                Capping the allowance for a family of four is also reasonable given the average Nunavut
                family size of 3.7 provided by Statistics Canada2.




     2 Statistics Canada (Aug 2009). 2006 Community Profiles. Retrieved from http://www12.statcan.ca/census-recensement/2006/dp-
       pd/prof/92-
       591/details/Page.cfm?Lang=E&Geo1=PR&Code1=62&Geo2=PR&Code2=01&Data=Count&SearchText=Nunavut&SearchType=Begins&Se
       archPR=01&B1=All&GeoLevel=&GeoCode=62


                                                                33
Final Report                                                                                Nunavut Northern Allowance




               • Food Allowance – the food allowance accounts for 37% of the updated NNA. The
                mechanism for determining the “basket” for a family of four is reasonable and one that can
                be verified easily by all parties.


               • Dependants – the NNA provides the same amount of money to a single employee as it
                does to an employee with dependants. The two major components of the NNA are the
                travel and food allowances – both of which are calculated using four as their base as-
                sumption (four round trip tickets, food for a week for a family of four).


    The Federal Government and some other employers differentiate between employees with and
    without dependants.


    The GN was not able to provide information on which employees have dependants or how many
    dependants those employees may have. In addition, there was no information available as to how
    many couples or families have more than one person employed by the GN.


    Therefore, in order to estimate the impacts of scenarios that address dependants a number of
    assumptions had to be made. The Nunavut Bureau of Statistics, based on StatsCan data, provides the
    following household characteristics for Nunavut in their 2006 Census Data.




                                                        34
Final Report                                                                             Nunavut Northern Allowance




    Table 6: Household Characteristics in Nunavut

                      Selected household characteristics            Total       % of Total

                      Total private households                      7,855          100

                      Households containing a couple                3,300           42
                      (married or common-law) with children

                      Households containing a couple                 855            11
                      (married or common-law) without children

                      One-person households                         1,440           18

                      Other household types                         2,265           29

                      Average household size                         3.7




    The definition of “Other Household Types” includes multiple-family households, lone-parent family
    households and non-family households other than one-person households.


    For Scenarios 2, 3 and 4 the following assumptions have been used.

               • 71% of employees have four or more dependants (A couple with children and “other
                households”)
               • 11% of employees have only 1 dependant (couple without children)
               • 18% of employees have no dependants (one-person households)


    Scenario 1 – Update the Variables in the Current Formula

    The first scenario is presented in Table 5 on page 30 and involves maintaining the formula as it
    exists today, with the exception of removing the access to services variable, but updating all variables
    in order to accurately apply the formula. As previously mentioned, the estimated cost of this option
    to the GN is $8 - $9 million.




                                                           35
Scenario 2 – Adjust NNA (Food and Travel) to Address Dependants

Using assumptions based on Table 6, 82% of employees would have dependants and 18% would not. The current allowance calculates food
for a family of four and four round trips for travel. By simply updating the variables to current costs and dividing the travel and food
variables by four for those without dependants, we can model the impact on allowances.


In this scenario an employee in Arctic Bay with dependants would be eligible for an
increase of $13,748 while an employee without dependants would have their allowance reduced by $11,816.




Table 7: Scenario 2
 Current variables updated and Food, Travel divided by four for employees without dependants
                                                                                                                                                                       Current        Difference     Difference                      Full Update
                            # ees per      Food           A i r F r e i gh t   Sealift    Fuel   Utilities    Travel       Total With          Total Without          Allowance          With         Without          2009/2010       Total 4      Scenario 2
 Community                 community        F1                   AF              GS        F2       U           TC         Dependents           Dependents             Apr-09        Dependents     Dependents            Total     (Scenario 1)      Total 5
 Arctic Bay                    43         8,337               1,054             597       161    2,100        25,748         37,997               12,433               24,249          13,748         -11,816          1,042,707     1,633,884     1,436,019
 Arviat                       163         8,857                 578             573       166    2,004        6,636          18,813                7,193               20,108          -1,295         -12,915          3,277,604     3,066,573     2,725,642
 Baker Lake                   130         10,417                578             573       160    1,713        8,467          21,907                7,744               23,220          -1,313         -15,476          3,018,600     2,847,916     2,516,493
 Cambridge Bay                170         8,493                 442             763       229    1,814        8,443          20,183                7,481               18,777           1,406         -11,296          3,192,090     3,431,124     3,042,426
 Cape Dorset                   98         8,129                 909             526       155    1,464        9,141          20,323                7,371               19,981            342          -12,610          1,958,138     1,991,675     1,763,194
 Chesterfield Inlet             25         10,937                757             573       166    2,611        7,207          22,251                8,643               22,045            206          -13,402           551,125       556,273        495,035
 Clyde River                   45         10,677              1,308             597       143    1,780        14,701         29,207               10,173               21,884           7,323         -11,711           984,780      1,314,308     1,160,132
 Coral Harbour                 45         11,405                757             573       176    2,516        7,190          22,617                8,671               22,182            435          -13,511           998,190      1,017,783       904,814
 Gjoa Haven                    69         11,405                690             763       229    2,255        11,845         27,187                9,749               25,090           2,097         -15,341          1,731,210     1,875,898     1,659,317
 Grise Fiord                   14         8,753               1,501             597       143    2,239        32,228         45,461               14,725               32,814          12,647         -18,089           459,396       636,449        558,995
 Hall Beach                    37         10,469                963             573       143    2,138        14,878         29,164               10,154               22,439           6,725         -12,285           830,243      1,079,064       952,455
 Igloolik                     110         9,793                 963             573       143    1,287        14,861         27,620                9,129               21,504           6,116         -12,375          2,365,440     3,038,173     2,672,056
 Iqaluit                     1,106        7,505                 434             440       231    1,190        8,183          17,983                6,217               14,289           3,694          -8,072          15,803,634   19,889,093     17,546,668
 Kimmirut                      29         8,129                 701             526       155    2,623        9,477          21,611                8,407               18,212           3,399          -9,805           528,148       626,729        557,801
 Kugaaruk                      33         10,053                812             597       229    3,071        14,869         29,631               10,939               25,371           4,260         -14,432           837,243       977,838        866,808
 Kugluktuk                    115         10,781                533             763       229    2,383        8,326          23,014                8,684               20,992           2,022         -12,308          2,414,080     2,646,639     2,350,001
 Pangnirtung                  109         10,677                817             526       161    1,369        10,165         23,716                8,084               18,177           5,539         -10,093          1,981,293     2,585,010     2,278,309
 Pond Inlet                   118         7,401               1,459             597       155    2,168        15,827         27,608               10,187               23,061           4,547         -12,874          2,721,198     3,257,716     2,887,689
 Qikiqtarjuaq                  37         9,845                 988             597       185    1,771        11,425         24,812                8,859               21,560           3,252         -12,701           797,720       918,054        811,807
 Rankin Inlet                 295         9,377                 386             404       136    1,446        6,636          18,385                6,375               17,635            750          -11,260          5,202,325     5,423,496     4,785,765
 Repulse Bay                   32         9,013                 757             573       142    2,200        7,190          19,875                7,722               20,851            -976         -13,129           667,232       635,985        565,985
 Resolute                      20         9,585               1,054             597       107    2,545        27,770         41,658               13,642               27,121          14,537         -13,479           542,420       833,170        732,309
 Sanikiluaq                    40         9,117                 413             573       195    1,914        7,221          19,433                7,179               19,327            106          -12,148           773,080       777,336        689,108
 Taloyoak                      36         10,885                755             763       218    2,549        13,206         28,377               10,308               28,975            -598         -18,667          1,043,100     1,021,555       904,470
 Whale Cove                    25         8,597                 757             404       166    2,376        5,662          17,962                7,267               20,537          -2,575         -13,270           513,425       449,041        400,917
                                  TOTAL 238,645             20,364             14,638    4,317   51,527      307,305        636,795              227,333                                                               54,234,421   62,530,782     55,264,214
                                %of total  37%                  3%              2%        1%       8%          48%            100%                                                                  ADDITIONAL COST:        --       8,296,361     1,029,793
 Notes:                                                                                                                                                                     22,016          3,456           -12,923
   Assumes that food consumption is linear (i.e. the cost to feed one person is exactly 25% of the cost to feed a family of four)
   Source is latest Public Service Annual Report from GN HR website
 3
    Represents the cost of the NNA to the GN as per the current collective agreement (i.e. what the GN will pay if no changes to the formula or variables are made).
 4
   R epresents the results of updating all the variables and leaving the formula untouched, with the exception of removing the access to services allowance (scenario 1).
 5
   Represents the results of our assumptions based on dividing the food and travel allowances by four for an employee without dependents.
  Scenario 3 – Adjust NNA (per IPGHD differential) to Address Dependants

  The IPGHD provides employees without dependants approximately 60% of the allowance for employees with dependants.


  Using the assumption that 82% of employees would have dependants and 18% would not, updating the variables and providing employees
  without dependants 60% of the updated NNA returns the following results:




  Table 8: Scenario 3

Current variables updated, Employees without dependants at 60%
                                                                                                                                                                           Current     Difference    Difference                      Full Update
                          # ees per          Food         Air Freight      Sealift      Fuel       Utilities     T r a v el    Total With          Total Without          Allowance       With        Without          2009/2010       T ot a l     Scenario 3
Community                community            F1               AF            GS          F2           U             TC         Dependents           Dependents             Apr-09     Dependents    Dependents           T ot a l   (Scenario 1)      T ot a l 4
Arctic Bay                   43             8,337           1,054           597         161        2,100         25,748          37,997               22,798               24,249       13,748         -1,451          1,042,707     1,633,884     1,516,244
Arviat                      163             8,857             578           573         166        2,004         6,636           18,813               11,288               20,108       -1,295         -8,820          3,277,604     3,066,573     2,845,779
Baker Lake                  130             10,417            578           573         160        1,713         8,467           21,907               13,144               23,220       -1,313        -10,076          3,018,600     2,847,916     2,642,866
Cambridge Bay               170             8,493             442           763         229        1,814         8,443           20,183               12,110               18,777        1,406         -6,667          3,192,090     3,431,124     3,184,083
Cape Dorset                  98             8,129             909           526         155        1,464         9,141           20,323               12,194               19,981         342          -7,787          1,958,138     1,991,675     1,848,274
Chesterfield Inlet            25             10,937            757           573         166        2,611         7,207           22,251               13,351               22,045         206          -8,694           551,125       556,273        516,222
Clyde River                  45             10,677          1,308           597         143        1,780         14,701          29,207               17,524               21,884        7,323         -4,360           984,780      1,314,308     1,219,677
Coral Harbour                45             11,405            757           573         176        2,516         7,190           22,617               13,570               22,182         435          -8,612           998,190      1,017,783       944,503
Gjoa Haven                   69             11,405            690           763         229        2,255         11,845          27,187               16,312               25,090        2,097         -8,778          1,731,210     1,875,898     1,740,833
Grise Fiord                  14             8,753           1,501           597         143        2,239         32,228          45,461               27,276               32,814       12,647         -5,538           459,396       636,449        590,625
Hall Beach                   37             10,469            963           573         143        2,138         14,878          29,164               17,498               22,439        6,725         -4,941           830,243      1,079,064     1,001,371
Igloolik                    110             9,793             963           573         143        1,287         14,861          27,620               16,572               21,504        6,116         -4,932          2,365,440     3,038,173     2,819,424
Iqaluit                    1,106            7,505             434           440         231        1,190         8,183           17,983               10,790               14,289        3,694         -3,499          15,803,634   19,889,093     18,457,079
Kimmirut                     29             8,129             701           526         155        2,623         9,477           21,611               12,967               18,212        3,399         -5,245           528,148       626,729        581,604
Kugaaruk                     33             10,053            812           597         229        3,071         14,869          29,631               17,779               25,371        4,260         -7,592           837,243       977,838        907,434
Kugluktuk                   115             10,781            533           763         229        2,383         8,326           23,014               13,809               20,992        2,022         -7,183          2,414,080     2,646,639     2,456,081
Pangnirtung                 109             10,677            817           526         161        1,369         10,165          23,716               14,229               18,177        5,539         -3,948          1,981,293     2,585,010     2,398,889
Pond Inlet                  118             7,401           1,459           597         155        2,168         15,827          27,608               16,565               23,061        4,547         -6,496          2,721,198     3,257,716     3,023,161
Qikiqtarjuaq                 37             9,845             988           597         185        1,771         11,425          24,812               14,887               21,560        3,252         -6,673           797,720       918,054        851,954
Rankin Inlet                295             9,377             386           404         136        1,446         6,636           18,385               11,031               17,635         750          -6,604          5,202,325     5,423,496     5,033,005
Repulse Bay                  32             9,013             757           573         142        2,200         7,190           19,875               11,925               20,851         -976         -8,926           667,232       635,985        590,194
Resolute                     20             9,585           1,054           597         107        2,545         27,770          41,658               24,995               27,121       14,537         -2,126           542,420       833,170        773,181
Sanikiluaq                   40             9,117             413           573         195        1,914         7,221           19,433               11,660               19,327         106          -7,667           773,080       777,336        721,368
Taloyoak                     36             10,885            755           763         218        2,549         13,206          28,377               17,026               28,975         -598        -11,949          1,043,100     1,021,555       948,003
Whale Cove                   25             8,597             757           404         166        2,376         5,662           17,962               10,777               20,537       -2,575         -9,760           513,425       449,041        416,710
                                 TOTAL     238,645         20,364          14,638      4,317       51,527       307,305         636,795              382,077                                                           54,234,421   62,530,782     58,028,565
                              % of total     37%              3%             2%         1%           8%           48%             100%                                                              ADDITIONAL COST:        --       8,296,361     3,794,144
Notes:                                                                                                                                                                                 #DIV/0!       #DIV/0!
 Source is latest Public Service Annual Report from GN HR website
  Represents the cost of the NNA to the GN as per the current collective agreement (i.e. what the GN will pay if no changes to the formula or variables are made).
  Represents the results of updating all the variables and leaving the formula untouched, with the exception of removing the access to services allowance (scenario 1).
4
   Represents the results of our assumptions based on paying an employee without dependents 60% of the value of an employee with dependents.                                               $3,456
Final Report                                                                              Nunavut Northern Allowance




    In this scenario an employee in Arctic Bay with dependants would still receive an increase of $13,748
    while an employee without dependants would have their allowance reduced by $1,451. While this
    is still a reduction it is far less than the reduction of almost $12,000 in Scenario 2.


    Scenario 4 – Remove Travel from NNA, Provide 1 Trip Per Person, Capped at Four

    When all the variables are updated to current costs, the travel allowance accounts for 48% of the
    revised amounts. Vacation Travel Assistance has consistently been an issue for a number of years. This
    scenario models the potential impact of removing that allowance from the NNA and providing one
    round trip per employee and their dependants capped at a maximum of four.


    For the purposes of this exercise we have used Table 6 to make the following assumptions:


               • 71% of employees would receive the maximum of four round trips (A couple with children
                and other households)
               • 11% of employees would receive two round trips (couple without children)
               • 18% of employees would receive one round trip (one-person households)


    Again, we must stress that there are many variables that we have not taken into account, but the
    results of these assumptions are:




                                                       38
Table 9: Scenario 4
Current variables updated and travel dealt with on an application basis - one round trip capped at four people
                                                                                                                                                                            Current                       Full Update
                          # ees per         F o od       Air Freight      Sealift      Fuel       Utilities         T ot a l      Travel With         Travel Without       Allowance        2009/2010       Total        Scenario 4
Community                community            F1             AF             GS          F2           U            Allowance      Dependents            Dependents            Apr-09            Total     (Scenario 1)      Total
Arctic Bay                   43            8,337           1,054           597         161        2,100            12,249          846,980               30,447             24,249          1,042,707    1,633,884      1,404,148
Arviat                      163            8,857            578            573         166        2,004            12,177          827,476               29,746             20,108          3,277,604    3,066,573      2,842,126
Baker Lake                  130           10,417            578            573         160        1,713            13,440          842,063               30,270             23,220          3,018,600    2,847,916      2,619,514
Cambridge Bay               170            8,493            442            763         229        1,814            11,740         1,098,064              39,473             18,777          3,192,090    3,431,124      3,133,283
Cape Dorset                  98            8,129            909            526         155        1,464            11,183          685,271               24,634             19,981          1,958,138    1,991,675      1,805,801
Chesterfield Inlet            25           10,937            757            573         166        2,611            15,044          137,838                4,955             22,045           551,125       556,273       518,886
Clyde River                  45           10,677           1,308           597         143        1,780            14,505          506,096               18,193             21,884           984,780     1,314,308      1,177,033
Coral Harbour                45           11,405            757            573         176        2,516            15,427          247,530                8,898             22,182           998,190     1,017,783       950,643
Gjoa Haven                   69           11,405            690            763         229        2,255            15,342          625,259               22,477             25,090          1,731,210    1,875,898      1,706,301
Grise Fiord                  14            8,753           1,501           597         143        2,239            13,233          345,162               12,408             32,814           459,396       636,449       542,827
Hall Beach                   37           10,469            963            573         143        2,138            14,286          421,116               15,138             22,439           830,243     1,079,064       964,840
Igloolik                    110            9,793            963            573         143        1,287            12,759         1,250,553              44,955             21,504          2,365,440    3,038,173      2,698,970
Iqaluit                    1,106           7,505            434            440         231        1,190            9,800          6,923,554              248,886            14,289          15,803,634   19,889,093     18,011,136
Kimmirut                     29            8,129            701            526         155        2,623            12,135          210,238                7,558             18,212           528,148       626,729       569,703
Kugaaruk                     33           10,053            812            597         229        3,071            14,762          375,378               13,494             25,371           837,243       977,838       876,020
Kugluktuk                   115           10,781            533            763         229        2,383            14,688          732,462               26,330             20,992          2,414,080    2,646,639      2,447,965
Pangnirtung                 109           10,677            817            526         161        1,369            13,550          847,642               30,471             18,177          1,981,293    2,585,010      2,355,094
Pond Inlet                  118            7,401           1,459           597         155        2,168            11,781         1,428,703              51,359             23,061          2,721,198    3,257,716      2,870,192
Qikiqtarjuaq                 37            9,845            988            597         185        1,771            13,387          323,396               11,625             21,560           797,720       918,054       830,335
Rankin Inlet                295            9,377            386            404         136        1,446            11,749         1,497,579              53,835             17,635          5,202,325    5,423,496      5,017,290
Repulse Bay                  32            9,013            757            573         142        2,200            12,684          176,021                6,328             20,851           667,232       635,985       588,241
Resolute                     20            9,585           1,054           597         107        2,545            13,888          424,887               15,274             27,121           542,420       833,170       717,923
Sanikiluaq                   40            9,117            413            573         195        1,914            12,212          268,629               31,773             19,327           773,080       777,336       788,890
Taloyoak                     36           10,885            755            763         218        2,549            15,170          363,699               13,074             28,975          1,043,100    1,021,555       922,905
Whale Cove                   25            8,597            757            404         166        2,376            12,300          108,278                3,892             20,537           513,425       449,041       419,671
                                TOTAL     238,645         20,364         14,638       4,317       51,527          329,491        21,513,876              795,491                            54,234,421   62,530,782     56,779,736
                             % of total     72%              6%             4%          1%         16%              100%                                                ADDITIONAL COST:         --       8,296,361      2,545,315
Notes:                                                                                                                $13,180                                                     $22,016
 Represents the cost of the NNA to the GN as per the current collective agreement (i.e. what the GN will pay if no changes to the formula or variables are made).
 R epresents the results of updating all the variables and leaving the formula untouched, with the exception of removing the access to services allowance (scenario 1).
 Represents the results of our assumptions based on removing the travel allowance from the NNA and providing up to a maximum of four round trip tickets based on the number of dependants
an employee may have (71% receive 4 round trips 11% receive 2 round trips and 18% receive one round trip)



  Under this scenario, the GN’s average NNA value across all communities would be $13,180. The market provides, on average, one or two
  round trips as a travel benefit. By providing one round trip the GN will be close to the market average in terms of the travel benefit but
  will trail it in terms of the NNA amount.


  NOTE: Removing the travel portion does not allow for complete accuracy of comparison with the Treasury Board allowance as the TSB includes
              a full shelter cost differential.
Final Report                                                                              Nunavut Northern Allowance




    7. Options

    1. Update Variables and Apply Formula. Based on our assumptions, the removal of the access to
       services allowance and available data, our research suggested that updating the variables would
       cost the GN an additional $8 to $9 million in 2009/2010.


    The advantages of this option are:


               • The formula is understood by both parties and, for the most part, accepted;
               • It is a relatively straightforward exercise to update the variables in whatever time frame is
                agreed upon;
               • While some communities would see a reduction in their total allowance per employee,
                these exceptions are the minority and can be fairly easily addressed by grandfathering
                employees in those situations at their current levels.


    The disadvantages are:


               • It is unlikely that the GN would be able to afford such a dramatic increase in payroll costs
                without major impacts on other services and programs;
                      - The GN could consider options to help address the increase in cost including:
                             A) Phase in the increase to the NNA over a number of years. For example,
                                the GN could phase in the increase over the period of the next collective
                                agreement (20% over each of the five years) or over another
                                pre-determined period of time.
                             B) Complete an analysis of employee demographics to provide for potential
                                savings. For example, in cases where both spouses work for the GN,
                                consideration could be given to only one spouse receiving the NNA.
                      - The formula does not address inequities between employees with dependants and
                       employees without dependants.




                                                         40
Final Report                                                                                  Nunavut Northern Allowance




    2. Update Variables and Adjust For Dependants. Two scenarios attempted to model this op-
        tion. In Scenario 2 the food and travel allowances were divided by four to determine what the
        allowance would be for an employee with no dependants. In Scenario 3 an employee with no
        dependants would receive 60% of the allowance of those with dependants. In both cases a
        simple “yes/no” would be used to determine which amount would be appropriate – no attempt
        was made to prorate the amounts based on the number of dependants.


     The advantages of this option are:


               • In addition to the advantages in Option 1, this option is more equitable for employees with
                dependants. Currently those with and without dependants are receiving the same
                allowance, despite the fact that the two key variables are calculated for a family of four.
               • This may be more affordable and realistic for the GN given its fiscal limitations.


    The disadvantages are:


               • These options produce substantial decreases in the allowances paid to employees without
                dependants. While Scenario 3 reduces the impact, it is still substantial. Similar to option 1,
                this can be addressed by grandfathering employees in these situations.


    3. Update Variables, Remove Travel Allowance and Adjust for Dependants. Scenario 4
        attempts to project the impact of this option. The travel allowance would be removed from the
        NNA and each employee would apply for up to one round trip for themselves and dependants.
        The maximum trips would be capped at four which would appear reasonable given the average
        Nunavut family size of 3.7.

    The advantages of this option are:

               • As per the previous two options, the formula is understandable and objectively measurable.
               • Providing one round trip for each employee and each dependant, capped at a maximum of
                 four, is more equitable for those employees with dependants and is more representative of
                 the actual travel costs once the variables are updated.
               • Increases in the other allowances (food, fuel, utilities, etc) could possibly be partially offset
                 by pro-rating travel to the actual number of people travelling – thus more affordable and
                 potentially achievable.



                                                           41
Final Report                                                                            Nunavut Northern Allowance




    The disadvantages are:


               • Implementation of these changes would have to be very carefully planned. While the
                balance of the NNA to be payable to each employee is fairly easy to determine, removing
                the travel portion until such time as an application could be made, verified and approved,
                could mean a substantial reduction in employees’ bi-weekly paycheques;
               • The transition to this new NNA methodology may be difficult but once it is complete,
                 overall administration of the new program should be straightforward. A strong change
                 management plan, including communications, would be required to ensure a smooth
                 transition;
               • Ultimately, while this option does not have quite the same impact on employees without
                dependants, it could still represent a substantial decrease in their current benefits. Once
                again, this could be immediately addressed by grandfathering employees in this situation.




                                                       42
Final Report                                                                              Nunavut Northern Allowance




    8. Conclusions

    The objectives of the NNA, the direction of the Joint Committee based on MOU # 9 and the results
    of the research, employer survey and analysis lead to a number of conclusions. The most important
    of these conclusions are:


    1.         The NNA is intended to meet two objectives:
                      • to address the difference in the cost of living between Nunavut communities and
                       designated southern communities
                      • to equalize the compensation of GN employees across Nunavut who may face
                       different economic conditions in different communities


               While these are the stated objectives, there must be complete clarity of understanding
               between employer and employees. If there is agreement between employer and employee
               as to the stated and achieved objectives of the NNA there will be less confusion. This will
               result in higher acceptance and support by all parties.


    2.         In the past the amount of the allowance to be paid to employees was reduced from the
               amount that resulted from the application of the formula. The effect of this change was to
               make the amount of the allowance a function of negotiation as opposed to a process of
               updating variables and applying them. This also led to the allowance becoming a point of
               contention during negotiations and requiring an inordinate amount of effort between the
               two parties attempting to reach an agreement.


               The other effect of this change was to dissociate the allowance from its intended objectives
               and reduce its perceived effectiveness in addressing the different costs of living between
               north and south and between northern communities.


    3.         There is no best practice. Each organization must, therefore, establish a methodology to
               determine the value of a northern allowance that is appropriate, given the specific objectives
               and the total reward framework of the organization. The use of information that is widely
               available is recommended when determining the values noted above. In conducting our
               research through the survey, the most formal reason for declining to participate was lack of



                                                         43
Final Report                                                                               Nunavut Northern Allowance




               resources. If the data that is used in determining the value is not widely available and
               easily accessible, this could factor into maintaining current data. The survey results also note
               that only a few participating organizations have an in-depth methodology and most use the
               values of other larger organizations.


               The NNA formula is a reasonable methodology for attempting to meet the objectives and is
               comparable to other northern employers’ methodologies. It provides an objective means of
               agreeing to adjustments during bargaining. While the overall methodology is reasonable,
               we were unable to validate some of the individual variables such as air cargo and sealift
               freight.


    4.         The key differences between comparable programs are how vacation travel allowances and
               employees with/without dependants are addressed.


               Comparison of other organizations shows that the majority provide a separate vacation travel
               allowance. All five of the participating organizations shown in the analysis on page 16 pay
               a travel allowance separate from the northern allowance. The removal of the vacation travel
               allowance as a separate component and incorporating it into the NNA has contributed to
               the NNA becoming dissociated from its original objective of equalizing the cost of living in
               the north and south.


               Different amounts for employees with dependants and employees without dependants are
               used in the majority of participating organizations. Consideration should be given to this
               approach for the NNA. Components like the cost of food and travel are better suited to
               equalizing the cost of living in the north and south if they are also linked to family size.


               The travel and food variables are the largest components of the current NNA, representing
               48% and 37% respectively. Changes to these two components will have a more significant
               effect than changes to any of the other components.




                                                          44
Final Report                                                                                                       Nunavut Northern Allowance




     Appendix A: Survey of Household Spending3
                                             N.W.T.                                  Y.T.                                 Nvt.

                               Average             Households        Average             Households       Average       Households
                               expenditure         reporting         expenditure         reporting        expenditure   reporting
                               per household       expenditures      per household       expenditures     per household expenditures

Total Expenditures             89,075              100.0             76,997              100.0            73,747            100.0

Total current consumption 63,369                   100.0             53,929              100.0            54,400            100.0

Food                           9,096               100.0             7,078               100.0            14,057            100.0

Shelter                        18,249              98.1              14,058              99.1             11,547            99.1

Household Operation            4,110               97.5              3,831               100.0            3,445             99.8

Household furnishings &        2,466               90.7              2,707               97.4             2,082             91.0
equipment

Clothing                       3,844               98.1              2,915               100.0            3,345             98.8

Transportation                 11,439              96.3              10,775              98.0             5,456             81.0

Health Care                    1,306               92.8              1,603               98.6             874               82.1

Personal Care                  1,351               96.9              1,193               99.8             1,123             97.8

Recreation                     6,132               97.6              4,860               99.8             6,855             95.0

Reading materials & other 312                      78.0              415                 84.4             201               48.0
printed matter

Education                      503                 29.6              739                 31.6             No data           No data
                                                                                                          available         available
Tobacco products &             2,792               90.4              2,236               83.9             3,506             92.9
alcoholic beverages

Games of chance (net          653                 54.4               308                48.5              465               40.8
amount)
Miscellaneous                 1,116               84.8               1,212              96.3              1,144             78.1

Personal income taxes         17,751              97.7               16,437             93.8              13,312            93.6

Personal insurance            6,228               88.2               4,961              90.8              4,742             89.7
payments & pension
contributions

Gifts of money &              1,727               70.0               1,670              75.1              1,293             63.7
contributions

3 Source: Statistics Canada (Dec 2008). Average household expenditures, by province and territory in 2007. Retrieved from http://www40.stat-
  can.gc.ca/l01/cst01/famil16g-eng.htm on April 23, 2009.

                                                                      45
Final Report                                                                     Nunavut Northern Allowance




    Appendix B: All Solicited Organizations



               Participating Organizations         Non-Participating Organizations

               Canadian North Inc                  City of Iqaluit

               Federal Government of Canada        Government of Newfoundland and
               (Treasury Board of Canada Secre-    Labrador
               tariat)

               First Air                           Kitikmeot Inuit Association

               Government of the Northwest Ter-    Qikiqtani Inuit Association
               ritories

               Government of Yukon                 Qulliq Energy Corporation

               Inuvialuit Regional Corporation

               Kativik Regional Government

               Kivalliq Inuit Association

               Nunatsiavut Government

               Nunavut Tunngavik Incorporated

               Public Service Alliance of Canada

               Royal Canadian Mounted Police




                                                   46
Final Report                                                                          Nunavut Northern Allowance




   Appendix C: Questionnaire

   2009 Review of Northern Allowance Methodology
   Introduction

   Hay Group is pleased to present this questionnaire as part of a review we are conducting for the
   Government of Nunavut regarding their Northern Allowance Methodology. Thank you for taking
   the time to accurately respond to all questions in each of the 4 sections of this questionnaire.


   Section 1 collects your contact information so that we may send you a copy of the participant report
   and so that we may contact you to clarify any information provided in your responses, if necessary.


   Section 2 collects information about your organization and its operations.


   Sections 3 and 4 collect detailed information regarding your organization's Northern Allowance
   and the associated methodology.


   Please do not hesitate to contact us with any questions or concerns you may have. Our contact
   information is listed in Part 1 of the questionnaire.




                                                      47
2009 Review of Northern Allowance Methodology
Part 1: Contact Information

Organization Name:
Completed By:
Name:
Title:
Address:
Telephone:
Fax:
Email:
Send Report findings to:
Name:
Title:
Email:


                     Please send your completed questionnaire no later than April 3, 2009 to:
                                                  Kristin Korim
                                              Hay Group Limited
                                           81 Metcalfe Street, Suite 1200

                                                  Ottawa, Ontario

                                                     K1P 6K7

                                        Telephone: (613) 238-4785 ext 241

                                                Fax:(613) 238-3405

                                       E-Mail: kristin.korim@haygroup.com
2009 Review of Northern Allowance Methodology
Part 2: Organization Information

Organization Name:


Please provide the following information for your organization:


Operating Budget ($ Millions):




Sector/Industry of Operations:


If other, please specify:




Head Office Location:




Please list the total number of employees working in each community (Full Time Equivalent):
          Location               Number of Employees
2009 Review of Northern Allowance Methodology
2009 Review of Northern Allowance Methodology
Part 3: General Plan Information

Organization Name:


Please provide a list of the current value of the Northern Allowance being paid to employees in each community.
Please also provide any policy and/or procedure documents you may have regarding your organization's
Northern Allowance Methodology.


Please provide the following information for your organization:
Does your organization provide a Northern Allowance payment to its employees?              Yes     No

If yes, what is the purpose/objective of the payment?




How frequently is the payment made to employees (i.e. annual lump sum, bi-weekly, etc)?




Who is eligible to receive the payment?




Is the Northern Allowance pro-rated for part-time employees or for employees who do not complete a full year of work
for the organization? Please explain.




Are employees who are assigned to short-term work assignments in the North entitled to receive the Northern Allowance?
Does your organization provide any allowances or special provisions to employees temporarily relocated to the North
for short-term work assignments?




Does your organization provide any other type of benefits, including non-monetary benefits, to compensate employees
working and living in remote locations (for example, extra vacation days, additional travel allowance, isolated location
2009 Review of Northern Allowance Methodology
premium, additional/different health benefits, etc)? Please explain.




Does your organization have employees based in both northern and southern Canadian cities?            Yes     No
If yes, are there any differences in compensation policies for northern and southern based employees? Please explain.




How long has your organization been using its current Northern Allowance Methodology?
2009 Review of Northern Allowance Methodology
Part 4: Northern Allowance Methodology

Organization Name:


Please provide the following information for your organization:


Is the Northern Allowance calculated for each individual community where employees are located?           Yes   No

If no, how are the communities grouped into zones?




Please describe the main elements included in the calculation of the Northern Allowance.




What are the sub-elements, if any, of each main element (for example, what are the items contained in the basket of food)?




How are both the main and sub- elements of the Northern Allowance determined?




How is the value of each main and sub- element determined (for example, how to price each item in the basket of food
and then how to determine the overall value of the cost of food in the Northern Allowance formula)?
2009 Review of Northern Allowance Methodology




What is the weight of each element in the overall calculation of the Northern Allowance?
How is the weight of each element determined?




Does your organization compare the cost of living in northern Canadian cities to that in southern Canadian cities?         Yes   No

If yes, what is the base city in the North and which southern city (or cities) is (are) this base city compared against?
How does your organization determine the cost of living in each northern and southern city?




How often is the Northern Allowance calculated?
How often does your organization modify the amount of the Allowance paid to employees?




How does your organization react, in terms of the Northern Allowance, to changes in the cost of living?
(for example, the recent increase and decrease in the cost of fuel)
2009 Review of Northern Allowance Methodology




Please provide the formula that is used to calculate the Northern Allowance.
Final Report                                                Nunavut Northern Allowance




    Appendix D: Federal Departments/Organizations Following IPGHD




                                      57
Appendix E: Assumptions to Calculate Allowance by Community
Table 5: Results of the Current Formula



                                                         Based on current variables updated                                                       Difference                          Cost to update
                        # ees per         Food        Air Freight     Sealift       Fuel    Utilities   Tr ave l               Allowance         (updated vs       Cost to update   variables (excluding
     Community         community           F1              AF           GS           F2        U          TC        Total    as of April 08   current allowance)      variables     negative amounts)
Arctic Bay                 43            8,337          1,054          597          161      2,100      25,748     37,997       23,045             14,952             642,949             642,949
Arviat                     163           8,857            578          573          166      2,004      6,636      18,813       19,150               -337             -54,877                --
Baker Lake                 130           10,417           578          573          160      1,713      8,467      21,907       22,114               -207             -26,904                --
Cambridge Bay              170           8,493            442          763          229      1,814      8,443      20,183       17,883               2,300            391,014             391,014
Cape Dorset                98            8,129            909          526          155      1,464      9,141      20,323       19,029               1,294            126,833             126,833
Chesterfield Inlet          25            10,937           757          573          166      2,611      7,207      22,251       20,995               1,256             31,398              31,398
Clyde River                45            10,677         1,308          597          143      1,780      14,701     29,207       20,842               8,365            376,418             376,418
Coral Harbour              45            11,405           757          573          176      2,516      7,190      22,617       21,126               1,491             67,113              67,113
Gjoa Haven                 69            11,405           690          763          229      2,255      11,845     27,187       23,896               3,291            227,074             227,074
Grise Fiord                14            8,753          1,501          597          143      2,239      32,228     45,461       31,251             14,210             198,935             198,935
Hall Beach                 37            10,469           963          573          143      2,138      14,878     29,164       21,371               7,793            288,337             288,337
Igloolik                   110           9,793            963          573          143      1,287      14,861     27,620       20,480               7,140            785,373             785,373
Iqaluit                   1106           7,505            434          440          231      1,190      8,183      17,983       13,563               4,420           4,888,415           4,888,415
Kimmirut                   29            8,129            701          526          155      2,623      9,477      21,611       17,345               4,266            123,724             123,724
Kugaaruk                   33            10,053           812          597          229      3,071      14,869     29,631       24,162               5,469            180,492             180,492
Kugluktuk                  115           10,781           533          763          229      2,383      8,326      23,014       19,993               3,021            347,444             347,444
Pangnirtung                109           10,677           817          526          161      1,369      10,165     23,716       17,276               6,440            701,926             701,926
Pond Inlet                 118           7,401          1,459          597          155      2,168      15,827     27,608       21,963               5,645            666,082             666,082
Qikiqtarjuaq               37            9,845            988          597          185      1,771      11,425     24,812       20,533               4,279            158,333             158,333
Rankin Inlet               295           9,377            386          404          136      1,446      6,636      18,385       16,795               1,590            468,971             468,971
Repulse Bay                32            9,013            757          573          142      2,200      7,190      19,875       19,858                 17               529                 529
Resolute                   20            9,585          1,054          597          107      2,545      27,770     41,658       25,829             15,829             316,590             316,590
Sanikiluaq                 40            9,117            413          573          195      1,914      7,221      19,433       18,406               1,027             41,096              41,096
Taloyoak                   36            10,885           755          763          218      2,549      13,206     28,377       27,596                781              28,099              28,099
Whale Cove                 25            8,597            757          404          166      2,376      5,662      17,962       19,559              -1,597            -39,934                --
                              TOTAL      238,645           20,364      14,638       4,317    51,527     307,305    636,795                                          10,935,430          11,057,145
                            % of total    37%             3%            2%          1%        8%         48%       100%
Notes:
 Source is latest Public Service Annual Report from GN HR website
Final Report                                                                         Nunavut Northern Allowance




    Appendix E: Assumptions to Calculate Allowance by Community

    The following table (table 5) was presented earlier in the report. As previously mentioned, we had
    to make some assumptions in order to calculate the amount that should be paid in order to apply
    the current formula and each of the variables. These assumptions are discussed below.


    Food Allowance

    We were unable to obtain data pertaining to the cost of the food basket in Cape Dorset so we
    assumed the value would be the same as in Kimmirut. All other values reflect the most recent value
    posted on the INAC website.


    Air Freight

    We used the average of rates available from First Air, Calm Air, Air Inuit and Kenn Borek Air
    (as applicable from each community) as the rate an employee would pay per kilogram.


    Sealift/Ground Freight

    We used the rates available from Arctic Sealift as the rate an employee would pay per kilogram.
    In cases where there is no GN negotiated rate, the NSSI private rate was used.


    Fuel

    We used the rates from the GN’s Petroleum Products Division as the rate an employee would pay for
    a litre of gas in each community. We used the rate quoted as of June 16, 2009 from the MJ Ervin and
    Associates Inc website for the southern cities.




                                                      59
Final Report                                                                          Nunavut Northern Allowance




    Utilities

    Nunavut: we used the rates as stated on the Qulliq Energy website.


    Ottawa: we used the residential, non-government rate for consumption above 600 kWh per month,
    as stated on the Hydro Ottawa website. The rate we used includes fees for transmission, Hydro
    Ottawa delivery, low voltage services charge, regulatory and debt retirement.


    Winnipeg: we used the non-residential, utility-owned transformation rate for consumption non
    exceeding 200 kV.A, as stated on the Manitoba Hydro website. The rate used is for the consumption
    of the first 11,000 kWh.


    Edmonton: we used the average of the residential rates for customers in the city of Edmonton
    during the months January – June.


    Travel

    We used rates from First Air, Calm Air, Air Inuit and Kenn Borek, as applicable. In cases where rates
    are quoted from First Air, we used the ‘Excursion’ rate. The rates we used include tax and reflect the
    cost of four return airline tickets.


    For Grise Fiord we used the rate from Resolute and added the cost of the rate from Resolute to Grise
    Fiord to arrive at the total cost.




                                                     60
Final Report   Nunavut Northern Allowance




    Notes

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:7
posted:10/1/2012
language:Unknown
pages:61