Time to retire pre-retirement bonuses

There are some things people are generally willing to do without being paid: have a nap, eat ice cream, take a day off, etc. Most people, after decades at a good job with a generous pension, aren’t short of reasons to retire so the concept of giving employees a pre-retirement bonus is a bit odd. For those unfamiliar with the concept of a pre-retirement bonus, the Manitoba Government and General Employees’ Union describes this benefit under the title Pre-Retirement Bonus in its collective bargaining agreement with the Winnipeg Region Health Authority.

“A full-time employee who retires at or after age 55 with 10 or more years of service … shall be granted four days of paid pre-retirement leave per year of service,” states the agreement. For example, healthcare workers with 20 years on the job can stop going to work four months before actually retiring while still collecting a paycheque and all of the benefits that come with it. Or they can take the cash in a lump sum. Either way, pre-retirement bonuses cost the healthcare system millions. And let’s be clear about what a pre-retirement bonus isn’t. It’s not to get retired healthcare workers through their senior years – generously funded pensions with guaranteed benefits do that. Nor is this a buyout offered to employees who might otherwise be laid off. The pre-retirement bonus is just what it sounds like: a bonus provided just before retirement. It’s strange to see a system-wide pre-retirement bonus in Manitoba’s struggling healthcare system. Manitoba spends $7,182 per person on healthcare, the third highest spending level among the provinces, but it lags behind on many wait times measured by the Canadian Institute of Healthcare Information. Healthcare costs are a big part of Manitoba’s unsustainable $827-million deficit. Everyone in healthcare is searching for savings and the province commissioned accounting firm KPMG to produce a report entitled Health System Sustainability & Innovation Review. Tucked away on page 171 of the report, KPMG mentions pre-retirement bonuses as an opportunity to save millions. “Manitoba has a significant unfunded liability across the system for pre-retirement leave of $297 million,” wrote KPMG. “All management stakeholders suggested the overall level of benefit is not consistent with other health systems and should be scaled back or eliminated altogether. KPMG estimated that 30 per cent of this liability could be eliminated through negotiating changes or cancellation of the benefit with current employees.”

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It’s strange that such a huge amount of money merits only a single bullet point in a 216-page report. Even worse, the fact that it’s an unfunded liability means the government has no plan in place to cover the bill. It’s hard to imagine how a pre-retirement bonus provides any value to the healthcare system. Signing bonuses might help recruitment. Retention bonuses might keep select employees from leaving. But there’s no justification for paying people not show up to work right before they retire. Obviously, healthcare employees won’t be eager to give up their pre-retirement bonuses. Who wouldn’t want a few months of paid vacation before easing into retirement? But it’s important to consider the options. Doing nothing isn’t an option. Manitoba can’t afford to continually increase health spending while failing to improve care. And the mathematical reality of Manitoba’s financial situation is that hundreds of millions in annual deficits are forcing the province to spend nearly a billion dollars a year on interest charges. Other options, such as streamlining services and reducing wages, are tough pills to swallow even if they’re necessary. The inescapable reality is that ending the pre-retirement bonus benefit is a relatively small sacrifice in the grand scheme of the work needed to make Manitoba’s healthcare system sustainable. Numerous healthcare contracts are due for negotiation. This is the right time to retire pre-retirement bonuses.