THE WAY IT IS
The lure of the West has left many employers in Atlantic Canada scrambling today to find skilled workers, particularly in the trades. Electric utilities need engineers and linespeople, the construction industry is facing a shortage of carpenters, electricians and plumbers, and a growing technology industry has a dwindling number of programmers.
“Finding skilled workers is one of the most significant human resource challenges facing our company,” says Patricia Cantwell, manager, human resources at Newfoundland and Labrador Hydro in St. John’s, Nfld., the fourth-largest generator of energy in Canada. More than 40% of the company’s workforce will retire in the next 10 years, and nearly 25% will retire in the next five years. This is in an industry where 60% of the jobs are in engineering, operations and maintenance, and where the learning curve is typically three to five years. Another recruiting challenge is that 65% of the workforce is located in rural and often remote areas of the province.
“We know we will never compete with Western Canada salaries, so we have to provide our own internal development programs,” says Cantwell. Therefore, one of Newfoundland and Labrador Hydro’s initiatives is partnering with the university and colleges in the province to identify opportunities at the community level and train workers who wish to stay in these areas.
Irving Oil, operators of Canada’s largest oil refinery, is another Atlantic-based company facing worker shortages. It is planning an expansion by building a $7-billion refinery, slated to open in 2012 in Saint John, N.B. According to media reports, Irving Oil will likely need 5,000 skilled workers during construction and 1,000 new workers once the refinery is completed.
Proposed pipeline and liquefied natural gas projects and spin-off industries will further fuel the economy in Newfoundland and Labrador, Nova Scotia and New Brunswick. A massive $6- to $9-billion proposal for the Lower Churchill hydro development in Labrador is slated to begin in three years. And the recent decision by Research in Motion to locate 1,200 jobs at its new Halifax facility will see further growth in the technology sector. This economic boost will create competition for a limited supply of skilled workers, and companies are hoping to entice Atlantic Canadians to come back home and work.
Similar to other skilled workers, in the past there has been out migration of physicians. Fortunately, this is changing. The Canadian Institute for Health Information (CIHI)reports that from 2001 to 2005, all Atlantic provinces saw an increase in the number of practicing physicians. This increase ranged from 4.7% in Prince Edward Island to 9.8% in New Brunswick. While there are still physician shortages, this growth will aid employers in their efforts to promote healthy lifestyles by improving access to necessary medical resources for their workforce.
The optimistic outlook for Atlantic Canada’s economic growth can’t compare with the 7.3% expected in Alberta this year, or the 4.5% expected in British Columbia. However, growth in 2006 in Newfoundland and Labrador is expected to be more than 3%, Nova Scotia and New Brunswick by 2.5%, and Prince Edward Island by 2%. The national average is 2.2%, and Ontario’s slump will see it grow by only 1.4%.
With a population of only 2.4 million people, or about 7.5% of the total Canadian population, even a small number of large projects can have a significant impact in Atlantic Canada. To put this into perspective, the $130 billion being spent over the next number of years on oil sands projects and infrastructure is more than six times the 2006-2007 budget expenditures of all four Atlantic provinces.
CULTIVATING THE COAST
Today, if you drive down the streets of Atlantic Canadian cities, you are more likely to see a barrage of Help Wanted signs than at any time in recent memory. Atlantic Canadian companies are taking an aggressive approach to courting workers to come back home, with some employers now holding job fairs and recruiting workers in Western Canada. While Atlantic companies may not be able to match the salaries of the wealthy West, they can offer a less stressful East coast lifestyle and affordable housing for workers. Real estate in Western Canada has hit record highs with average house prices well above $300,000. In comparison, on the East Coast, a home is much more affordable with average prices in the mid-$100,000 to mid- $200,000 range.
All of the migration happening in Atlantic Canada isn’t out migration—people are moving in great numbers from rural areas to the cities. The Atlantic provinces have between 42% and 55% of their populations living in rural areas, compared to the national average of 20%. But this is changing, according to the Strategic Planning Initiative 2006-2016 done by Dalhousie University Faculty of Medicine. The report showed there is a movement now in Atlantic Canada toward greater urbanization and that the regions six fastest-growing cities—St. John’s, Halifax, Moncton, Saint John, Fredericton and Charlottetown—expanded by 50,000 people between 1995 and 2004, despite a drop in the region’s population over this period. The report also found that over the same 10-year period, Moncton and Halifax matched the growth of similarsize cities elsewhere in Canada. These statistics clearly show that employment opportunities for Atlantic Canadians are much greater in the urban centres.
Out migration skews the demographics because it is typically young people who leave. And because this has been occurring for generations, a large number of people who spent their working life outside Atlantic Canada are returning to enjoy the East coast lifestyle in their retirement. These and other factors make the average age of Atlantic Canadians the oldest in the country. According to Statistics Canada, the median age for all Canadians is 38.8 years, whereas for the Atlantic provinces, median ages range from 39.8 years in Prince Edward Island to 41.3 in Newfoundland and Labrador.
This demographic profile has a significant impact on provincial healthcare costs and the cost of pension and benefit plans. Benefit plans are affected because, on average, workers are older and the medical issues of illness and disability are more prevalent. For example, prescription drug use is higher, and drugs being prescribed are often more expensive. For employers with a defined benefit(DB) pension plan, the aging of an employee group increases employer ongoing pension costs.
According to the CIHI, drug expenditures in Atlantic Canada are approximately 13% higher than in Western Canada.
An aging workforce, combined with a tight economy, has meant that East coast employers have had to aggressively manage their plan costs. Atlantic Canadian companies were some of the first in Canada to adopt managed formulary designs and spending caps for dispensing fees and ingredient cost markups. During the 1990s, employers also reduced benefits to combat rising costs, but today that trend is subsiding. Also, most employers in Atlantic Canada have 50/50 cost sharing for benefit plans with their employees.
Many companies also recognize that health costs in the region are being driven by health risk indicators for conditions such as diabetes and obesity, which are much higher than the national average. As a result, they are taking preventative measures by implementing health promotion programs with the expectation they will have a long-term impact on health-related costs.
Maurice Poirier, manager of pension and benefits at NB Power Holding Corporation in Fredericton, N.B.(NBP), says that for many years New Brunswick Power has worked in conjunction with the International Brotherhood of Electrical Workers(IBEW), the union representing more than 85% of its workforce, to control healthcare and disability costs. New Brunswick Power has linked its flexible benefits program, Enerflex, to several of its internal wellness programs such as Healthy Workplace, Mind Health, Work/Life Effectiveness and Ability Management. These prevention programs are working and have resulted in a 26% reduction in longterm disability paid claims since 1999, and healthcare cost increases well below the industry average.
Heather Beaudoin, HR administrator, disability management at energy and service company Emera in Halifax, says health promotion activities are underway at the Nova Scotia company. The Heart at Work and Play program, introduced in 2004 (with the help of Dr. Mike Ryan, an occupational physician for Emera), aimed at improving the cardiovascular health of its employees and has resulted in weight loss and the lowering of cholesterol levels for many employees. The Stress/Depression Information program provides employees with strategies for dealing with stress and depression. These initiatives, along with others, have resulted in a decline in disability incidence for Emera.
JUST SAY NO
With an increased awareness of health-related issues, Eastern Canadians can look forward to a healthier and longer retirement. However, the volatility of world markets and continued lower interest rates have created significant solvency funding challenges for sponsors of defined benefit (DB)plans in Atlantic Canada. Changes in pension legislation over recent years have helped to reduce solvency funding requirements by extending amortization periods. Within the last year, the Newfoundland and Labrador Pension Benefits Act has granted a temporary exemption from solvency funding to a plan covering many of the municipalities in that province. Whether other jurisdictions should follow suit is a tough question as the aim of provincial pension legislation is to provide security of benefits for all plan members, and security of benefits on wind-up of a plan that is vital. For instance, should wind-up funding be required where plan sponsor bankruptcy is improbable? Plans covering municipal employees, for example, are where alternative approaches could be considered. While deficit funding is not unique to Atlantic Canada, plan sponsors are examining other avenues to stabilize funding while ensuring that their employees are well provided for in retirement.
The importance of funding stability has become a hot topic in the last few years. In Atlantic Canada, although DB to defined contribution(DC)conversions are still occurring, the number has slowed somewhat in recent years as plan sponsors re-evaluate the pros and cons of both types of arrangements. While DC pension plans are more attractive for companies to offer their employees because of their cost predictability, some employers are now looking at ways to better manage that risk with DB plans.
So the question is why aren’t sponsors turning away from DB plans in greater numbers? For one thing, a conversion to DC does not allow sponsors to walk away from these deficiencies, unless they choose to wind up the DB plan altogether. For many Atlantic Canadian plan sponsors, there is a level of loyalty to employees that prevents them from taking this road. In addition, the governance of DC plans is no less significant than that of DB plans, and many employers in Atlantic Canada are concerned about the inability of DC plans to guarantee a particular target pension at retirement.
To establish a longer term predictability of DB pension costs, some employers are reassessing the appropriateness of their investment policy based on their DB liability structure and creating a detailed funding policy as an alternative to converting from DB to DC. Greater emphasis on investment policy and funding policy makes sense from a “cost control” perspective, but plan sponsors see this as a way to improve the overall governance of their plans.
In the short term, employers who are committed to DB plans and are adopting one of these approaches are biting the bullet and meeting their significant solvency funding requirements. Longer term, the changes that they have made should create DB plans in which funding risk is better understood and under greater control.
SMOOTHER SAILING
Atlantic Canada will need to address these issues when developing its recruiting and retention strategies. Companies need to communicate the vast opportunities to young people, before they pack their bags to leave, and to workers who have left. The labour shortage pits regions in Canada against one another to compete for skilled workers—will the lucrative dollars in the West win out over the agreeable lifestyle and affordable housing of the East?
RIDING THE WAVE
Atlantic Canadians are known for their tenacity so, despite the challenges employers in the region are facing, smoother sailing is on the horizon. With an economy that’s on an upswing and better prospects for workers wishing to come back home, Atlantic Canada is looking to the future with optimism.
Pension on sale It isn’t easy convincing members to increase contributions and share responsibility for the plan deficit when they get nothing extra. But Acadia University did it. When the HR department at Acadia University in Wolfville, N.S., announced it wanted to increase pension contributions and share the responsibility of the plan’s deficit, members were not happy. “We had a huge meeting in March, and it was packed to the rafters,” says Kerry Dunphy, human resources officer, employee pension and benefits for Acadia. “Of course, any time we want to change anything in the plan there is a backlash.” HR had determined what needed to change in order to keep the full-time employees’ defined benefit(DB)pension plan intact. The time had come to get members on side. Acadia has three employee groups, two of which are unions. To make modifications to the plan, HR needed a “yes” vote from the unions. The biggest change was increasing contributions. “While people were contributing, it was not actually enough to cover what they were accruing in benefits,” says Dunphy. “Over time it was driving us further into deficit. ‘Pension on sale’ was what we called it.” HR wanted to increase the member contribution rate to cover the cost of the plan instead of cutting back benefits to reduce cost. But that wasn’t the only thing that needed to be altered. “Pension plans don’t change very often, so if we’re going to do it then we might as well do whatever else we need to,” says Dunphy, referring to two other measures suggested to prevent the plan from going further into deficit. The first was increasing the excess interest indexing average from a rolling four-year average to a rolling eight-year average. “Four years wasn’t long enough. On a good few years it was just too generous,” she says. “It was really draining.” The second was sharing the plan deficit or surplus. Once the deficit as of December 2005 is paid off, the pension committee will decide if contribution rates or benefits will change when there is a surplus or deficit. All of these adjustments translated into the staff paying more and taking on more responsibility while not getting any increases or new benefits. “Communication to the employees was a huge undertaking,” recalls Dunphy. It started with the March information session. Since it was so packed, HR held 10 additional presentations over four weeks for the unions, the non-union group and any department in the University that wanted more information. “It started off a bit negative. We were pretty worried there for a while that it was going to be a ‘no’ vote,” she says. “But as more information got out there on why we were doing it, then things started to turn around.” The vote happened in April, and 80% of eligible employees turned out. They voted 80% in favour of the adjustments. Dunphy says the members recognized the value of the plan and didn’t want to sacrifice any of the benefits. Besides being able to make the needed plan changes, Dunphy believes a major bonus of the whole process was how much members learned about their plan. “When we discussed it, they realized all the extra benefits and appreciated it a lot more. Even if the vote went no, people understood what is going on with their pension plan.”—Leigh Doyle |
Road to wellville Through its inConfidence and inConnection programs, Medavie Blue Cross is keeping its employees in tune with their health. The work/life balance may become a little easier for Medavie Blue Cross’s 1,400 regular full-time employees. New this year to the Moncton, N.B.-based health benefits coverage provider are two health and wellness benefits programs. The first, rolled out in January of this year, is an extensive Employee Family Assistance Program(EFAP)to replace the rather limited 10-year-old Employee Assistance Program(EAP). “It [the EAP] was really not a well-used service,” says Ruth Rappini, vice-president, human resources. “People were suspicious about it. Now, not only have we added on the extended family side of it, but it’s a much more comprehensive program with some proactive parts like Lunch and Learns and a lot of wellness strategies that we’ve done in-house.” The motive behind it was to develop a “comprehensive corporate approach.” Previously, Medavie’s original EAP was offered by various local providers in different provinces where it conducts business. Medavie investigated Shepell. fgi, whose EFAP program was offered as one of Medavie’s sales products. After six to eight months of discussion and deliberation, Medavie rolled out the new inConfidence program with a “formal communication launch.” The launch was done through an email letter to first management and then employees, followed by training and orientation sessions for each. This was company-wide, across the four Atlantic provinces and Ontario and Quebec. “We’ve done a lot of one-on-one sessions with employees so they learn about the services offered and the importance that they shouldn’t feel shy to use it, that there’s no stigma attached.” Rappini says employees have been receptive, with a 12% to 15% participation rate, which is what HR was targeting. And Rappini and her team refer employees to inConfidence for just about everything: from grief counselling to stress reduction to financial and legal assistance. Linking to inConfidence is the second program, inConnection, which looks at employee attendance and provides support for those who are off on sick leave. If an employee is off for three or more days consecutively, then a case manager will telephone that individual at home. The employee is not required to speak to the case manager, but Rappini says this is less than 1% of employees. “The majority of people who have been called have actually spoken to the case manager. And we’re very sensitive that case managers are not located in the same city as the employee being called.” Case managers may offer advice or direct an employee to counselling or a clinic, or suggest a family doctor. Medavie piloted inConnection in January 2006 with 463 employees in two locations, Moncton and Halifax. This year, the average number of days off for incidental illness decreased from 4.25 to 2.35. And the company is getting ready to roll it out again in 2007 and 2008. Down the road, Rappini would like to look at the benefit plan and the employee population. “Perhaps look more at a flex ben plan with a health spending account to allow flexibility in how employees use it.” For now, however, with inConnection set to roll in Dartmouth and Saint John, N.B., P.E.I., St. John’s, N.L., Toronto and the rest of Moncton on Jan. 1, 2007, and Quebec the following year, Medavie employees are well on their way to health and wellness.—Brooke Smith |
Wade Harding, Greg Forbes and Mike O’Connell are partners with Morneau Sobeco in Halifax. wharding@morneausobeco.com; gforbes@morneausobeco.com; moconnell@ morneausobeco.com
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