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A Look at Canada Post’s Sick Leave

An examination of Canada Post’s present sick-leave program, its role in the postal culture, the problem of the lack of data, its weaknesses, and what initial step is required to make it properly work.

Reader note: this article was written when the old contract was still in effect and no longer applies to the present sick-leave program at Canada Post. It should be read for historical reasons only, not for present-day application.

There are no official documents that detail the annual cost, except unsubstantiated accounts that Moya Greene, ex-ceo of Canada Post has claimed that it costs $300 million annually.(1) How she arrived at this figure is unknown.

Judging by Canada Post’s insistence to change this program at the bargaining table, whatever the real amount is, must be significant.

It is also not known what the specific problems of the program are at this time. There is no public statistical breakdowns available for short or long-term absences, types of sickness, absence or injuries. Since there are no official documents, it is difficult to make a comparison to a similar occupation to see if Canada Post ranks higher or lower.

Neither does it contain information on whether the supposed $300 million are costs created for that year only, or portions are the cumulative continued costs from injuries or disabilities from prior years. This is a big unanswered question.

Over 40,000 employees of Canada Post are between the ages of 40-59 and the age bracket between 50-59 is the single largest group of workers.(2) Many of these employees have been doing physical duties throughout their careers. It is inevitable that injuries are going to occur and progressively continue to be aggravated or get worse over time.

It would appear that sick leave costs will be significantly rising because of the age factor and Canada Post is attempting to be financially pro-active in dealing with this.

The Human Resources and Skills Development Canada has statistics on the rate of injuries at Canada Post. It was 7.42 percent per 100 persons in 2007. It does not break down the difference between inside, outside or office workers at the Post Office nor for how long the injury lasted or why. It could be one day, or 1 year. The only other industry with a higher rate is being a longshoreman.(3)

The United States Postal System had an injury rate of 5.1 per 100 during this same 2007 period.(4)

The United States Postal System has a slightly less percentage of injury rates, but one must keep in mind the geographic area of the United States varies much more than our northern Canadian climate. The environmental variables are different as well as their work systems.

It is difficult to compare Canada Post’s injury rate with other couriers, and especially flyer delivery companies. These are transitory positions and rarely are employees able to continue economically with these jobs at middle age. Therefore it cannot be compared for injury rates.

32% of all sick-leave costs at Canada Post are mental health related.(5) Nobody officially has given a reason why, nor have any studies provided any clues on what factors may be contributing to this total at Canada Post.

Is this above the corporate norm in Canada? Don Drummond in a speech for the Psychology Foundation of Canada pegs mental health issues costing as much as 12 percent of a company’s payroll.(6) If this statistic holds true, Canada Post is well under the industry average. However, Canada Post figures that their percentage of mental illness is close to the business norm in Canada.(7)

But who are the most likely to claim mental health issues at Canada Post? Is it letter carriers? Inside workers? Is it more common with night-shift? None of these questions have been effectually documented nor has there been any effort from either the Unions or Management to rectify any contributing work factors to this health problem.

What is known is that the overall health and quality of life of the typical night-shift worker is significantly less than that of the letter-carrier. Letter carriers typically work days, Monday to Friday, whereas night-shift workers work 8 hours somewhere between 10 pm and 8 am, depending on location. These workers do not consistently have two set days off, sometimes they are broken into one day pieces throughout the week.

With the changes to new workflow patterns and infrastructure, it may take over 20 years before a night-shift worker can get a day position.

Night shift is most likely where the majority of mental health issues are being produced

One would think with the Postal Transformation underway, this would be one of the best opportunities to address such an issue with more day jobs and rotating shifts.

Mental Health is the cause of choice for Canada Post and established in October 2007, The Canada Post Foundation for Mental Health. Janie Randolph, Director of Canada Post’s cause of choice, has stated that, “two of the top five prescription drugs taken by its employees are for depression and anxiety. “Canada Post has productivity issues, we have absenteeism issues, and mental health–related pharmaceuticals are among the highest costs in our benefits program.”(8)

The Canada Post culture has embraced sick-leave for two other reasons. These reasons are a result of Canada Post not having an effective and systematic conflict resolution policy. Whether it is between employees themselves, manager to employee or manager to manager, their are no effectual conflict resolution steps in place.

In the present system one typically has to make a human rights complaint to an officer of the corporation for investigation which may take days, or months before any conclusion, if any at all, is made. Or if in case of a conflict between a management representative and employee, filing a grievance. This can take years to process. These systems are too large and bulky for most inter-personal conflicts which are seldom major in nature but the everyday trivial problems of human co-existence.

Instead the sick-leave policy is used as an alternative. One way an employee typically expresses his frustration in unresolved conflict is to take one or more days of sick-leave as a time-out. Instead of being angry or fighting, the person stays home until the anger has abated. This unofficial policy has saved many confrontations.

There are also protest sick-leave days. This is used by some employees who feel forced to change or do new duties without any concern by the management to their physical or mental well-being. When experienced workers are missing, it often takes 1.5 to 2 newer workers to do their job. Often management backs off after this protest and treat workers who do this with a little bit more care and concern, not so rude and abrupt as before. This is not always the case, often protest sick-leave results in no change towards the employee, but the employee feels less frustrated and has a channel to vent his or her frustrations.

If there is no change in the conflict resolution protocol and the sick-leave is amended so that protest and cool-down days are removed, there will be a significant increase in physical violence within Canada Post.

Last of all there is simply abuse of sick-leave days. The Collective Agreement is designed with the moral understanding that everyone wants to work hard and contribute to the best of their ability. When this is not done, the Agreement can easily be abused because there are no safeguards against people who, for whatever reason, don’t want to work. The majority of workers follow the moral law of the agreement, but a few, which is not unlike any other corporate institution, take advantage of this. The big difference between Canada Post and any other institution is that co-workers are prohibited from safeguarding the collective agreement from this type of abuse. Any confrontation towards a fellow employee on the perceived misuse of sick-leave can constitute harassment and a human rights complaint can be filed. Therefore this type of abuse is left unchecked. Most employees know the irreparable harm this causes within the corporate morale, and visually see how managers have to turn their back on such behaviour and cannot discipline.

There has to be a mutually agreed mechanism put into place where it cannot so easily be taken advantage of.

The creation of a clear-cut and transparent document on the nature, type and duration of sick leave would go a long way in developing a proper strategy for managing this area. It would foster a positive dialogue between the corporation and its employees and could ultimately lead to solutions that both parties could be happy with.

(1) It has flowed around the internet and in a number of articles, such as, http://www.workink.com/articles.php?prID=11146&pgID=11159&art=386 but these articles do not name the source and therefore cannot be completely construed as accurate but it is the only source available so far.
(2) Canada Post Pension Plan 2010 Annual Report. Pg. 7
(3) http://www.hrsdc.gc.ca/eng/labour/publications/health_safety/pdf/oiacfje.pdf
(4) http://www.usps.com/strategicplanning/cs07/chpt3_008.htm
(5) http://www.ontario.cmha.ca/network_story.asp?cID=117085
(6) http://www.cbc.ca/news/health/story/2009/11/25/canada-economy-mental-health-cost.html
(7) http://www.canadapost.ca/cpo/mc/aboutus/news/pr/2007/2007_oct_news_cause.jsf
(8) http://www.ontario.cmha.ca/network_story.asp?cID=117085

More on the History of Canada’s Postal Transformation

Sean Silcoff wrote in April 22, 2008 edition of the Financial Post that Canada Post’s transformation program could jeopardize the overall health of the company pension plan:

“But volatile markets mean Ms. Greene may need to conserve cash in case there is a shortfall in the post office’s pension plan. Ms. Greene inherited a $1.4-billion plan deficit when she joined in 2005. That was gradually whittled down by rising markets and $719-million in special contributions.”(1)

This work has been added to a previous article on the subject, A Brief History of Canada’s Postal Transformation, the conserving of cash was not done, and the amount now owing to the current pension deficit is 3.2 billion dollars, (see What are Solvency and Going Concern Deficits? for more info on the current pension deficit).

Canada Post’s blueprint for the future did not calculate a market crash and did not conserve any cash for a just-in-case scenario. Now they do not have the money, as Mr. Silcoff predicted, for the pension.

Canada Post is now looking to recover this miscalculation through the bargaining of a new collective agreement with their largest union, the Canadian Union of Postal Workers.

If the cost savings in the new collective agreement are not met, especially in relation to the unforeseen requirement to pay for the pension deficit, Canada Post will not be able to meet its target of turning a $250 million dollar profit in 2017.(2)

Canada Post is also not financially in the position to sustain the pension plan if another market crash occurs again. There are no cash reserves for this.

The corporate decisions of the last four years have put Canada Post into a financial crisis and it will be interesting to see how it will overcome the financial obstacles it has created. That is if it can, or it may have to be overhauled.

(1) http://www.financialpost.com/related/topics/Volatility+Canada+Post+upgrades+hold/464307/story.html
(2) http://www.dbrs.com/research/233704

What are Solvency and Going Concern Deficits?

The Canada Post Pension Plan 2010 Annual Report declared:

“The Plan ended 2010 with an estimated solvency deficit of $3.2 billion and a going-concern deficit of $174 million. These deficits resulted from the sharp declines in global capital markets in 2008 and lower discount rates (long-term interest rates used to calculate pension liabilities). Lower discount rates increase pension liabilities and make it more costly to fund pension benefits.”(1)

It appears to be a critically important statement, but what exactly does “solvency deficit” and “going-concern deficit”mean?

A phone call to Canada Post’s Pension centre did not clarify the situation but some searching on the internet gave some important clues.

What is a solvency deficit?

Barbara Austin, Blake, Cassels & Graydon LLP in a document published in 2007 gave a good description:

“Pension standards legislation in every jurisdiction includes minimum funding rules for defined benefit plans. The purpose of these rules is to provide assurance that adequate funds will exist to pay for all defined benefits promised, with due regard to stability of contribution levels and the possibility of unfavourable outcomes now and in the future.”(2)

In other words, the pension plan has to have enough money to be self-sufficient regardless of the state of the parent company. If the company goes under, in receivership, liquidated, etc. the pension can continue with its commitments.(3)

In the case of Canada Post, it needs to contribute $3.2 billion dollars over the next five years, as required by law, to meet the solvency requirement.

This is a complex formula that is calculated for Canada Post by an actuarial company by the name of Mercer.

It is not predictable at all. Moya Greene, ex-CEO of Canada Post documented how volatile this solvency requirement can be.(4) The company cannot properly budget for this on a yearly basis.

An important question should be raised, why should Canada Post be obligated to have a solvency deficit when it can’t go bankrupt? It is a crown corporation with assets guaranteed by the Government of Canada. The answer is not known.

What is an on-going deficit?

This phrase is not commonly found. The Department of Justice has it broken into three categories:

“going concern assets” means the value of the assets of a plan, including income due and accrued, determined on the basis of a going concern valuation; (actif évalué sur une base de permanence)

“going concern liabilities” means the present value of the accrued benefits of a plan, including amounts due and unpaid, determined on the basis of a going concern valuation; (passif évalué sur une base de permanence)

“going concern valuation” means a valuation of the assets and liabilities of a plan using actuarial assumptions and methods that are in accordance with accepted actuarial practice for the valuation of a plan that is not expected to be terminated or wound up; (évaluation sur une base de permanence)”(5)

What Canada Post means by on-going deficit is the going concern valuation.

What it means for Canada Post today is this: how much extra do they need to contribute, over and above regular payments, to insure that the daily operations have enough cashflow for the next year?

This is all based on a complex formula that sometimes puts Canada Post in a positive position and other times negative. It is not entirely predictable.

This explanation is written and researched by a letter carrier at Canada Post with a background in literature, language and international development, not economics. This is for information purposes only and if further clarifications are required, please contact a professional in this area.

(1) Canada Post Pension Plan 2010 Annual Report. ND. NP. Pg. 1
(2) http://goliath.ecnext.com/coms2/gi_0199-7032692/Update-Pension-Solvency-Funding-Relief.html
(3) The Government of Alberta has published an even more detailed description than this that can be found by clicking on this link.
(4)http://www.parl.gc.ca/Content/SEN/Committee/403/fina/04evb-e.htm?Language=F&Parl=40&Ses=3&comm_id=13
(5) http://laws-lois.justice.gc.ca/eng/regulations/SOR-87-19/section-2-20060322.html

The MIA 2010 Canada Post Annual Report

This blog went through a number of theories why the 2010 Annual Report issued by Canada Post was delayed by almost four months.

It went from accusing Canada Post, to the Government, to a new accounting system bringing on delays, and referred to some conspiracy theories out in the general public.

All of these are wrong. The Federal election caused the delay.

Therefore this article in its original form has been withdrawn and replaced by this short statement.

Canada Post and the Cost of Delivery

A serious discrepancy in Canada Post’s 2009 Annual Report on how much it costs to deliver to every point of call.

How can such a large corporation with two external auditors, the Auditor General of Canada and KPMG, make such a major perceived error?

As per requirement by the Canadian Postal Service Charter, Canada Post outlined in its annual report that it delivered to 14,874,358 points of call in that one year period. This is every home, apartment and lobby box, group or community mailbox, postal box, general delivery or rural mailbox combined. They have also provided a breakdown of how much it annually costs to deliver to each point of call:

$253.00: Door to door
$119.00: Apartment or Lobby box
$100.00: Group Mailbox, Community Mailbox, Kiosk
$63.00: Postal Box General Delivery, etc.
$168.00: Rural Mailbox

This averages out to $140.60 per point of call per year. Canada Post stated in its Annual Report that the average was $156.00. Why Canada Post’s average number is higher than the actual math is not known.

Another mathematical problem is the total yearly sum of all these points of call versus Canada Post’s yearly revenue. There is a non-described discrepancy between the two. The sum Canada Post claims to have cost them to deliver to every point of call over a one year period adds up to $2,314,034,142.00 – far short of the $5,840,000,000.00 that Canada Post claimed as the 2009 annual revenue for Canada Post only (not other parts of its ownership such as Purolator and other sub-companies).

This sum includes payments towards the pension plan shortfall according to the Annual Report (page 28). This suggests all expenses are included in this cost breakdown.

Why a difference of $3,525,965,858 billion dollars? If it cost Canada Post over 2.3 billion dollars to deliver the mail, and they have an annual revenue over 5.8 billion, where is the other 3.5 billion going to?

Could it be Canada Post made 3.5 billion dollars in profit? Probably not, other portions of the Annual Report demonstrate a break even or close to loss point.

Canada Post nowhere has given an answer to such a discrepancy.

The current numbers provided by Canada Post on the cost to each point of delivery are useless for any real calculations. It calls into question the rest of the Annual Report as well. Are the numbers in other parts of the document as poorly edited or oblique as this?