The Trudeau government is changing the rules to claw back the performance pay and bonuses paid to deputy ministers and other top-ranking federal executives if they are found guilty of misconduct or mismanagement.

For the first time, the government will be able to recoup performance pay from its most senior executives should information come to light that would have changed the performance rating they were given that year.

The new rules will affect 160 full-time governor-in-council appointees (GICs) who are appointed by cabinet and eligible for performance pay – these include deputy ministers, associate deputy ministers, heads of agencies and CEOs of Crown corporations. Nearly half are deputy ministers and associate deputy ministers. Most GICs serve “at pleasure.”

But there are another 6,480 executives working in government entitled to performance pay who won’t be affected by the new rules.

They are the five levels of executives below the ranks of deputy ministers and CEOs — from EX-1 or entry level executives to EX-5s or assistant deputy ministers. They are not appointed by cabinet, but are hired under the Public Service Employment Act.

Deputy ministers and the GIC appointees have been notified of the changes, which will take effect for their 2018-2019 performance reviews. Performance agreements are drawn up every year in the spring, laying out what individual, management and corporate goals these senior executives are expected to achieve in the year.

At the same time, they are assessed on the previous year’s commitments and those eligible for performance payments receive them in the fall.

Under the new rules, the government can recoup all performance pay for those found guilty of mismanagement or misconduct, which if known when performance was evaluated, would have resulted in a failed or “did not meet” rating.

They will also lose their performance pay if found to have “willfully or recklessly” hid or misrepresented their achievements” during performance evaluations so that any “deficiencies” would be hard to detect.

The size of the performance packages depends on which of the five performance ratings an executive is given – ranging from failed or “did not succeed” to “surpassed” all expectations.

The amendments, however, stress that no performance pay will be clawed back without due process, such as a formal investigation into a harassment complaint, a grievance or a finding of wrongdoing or ‘gross mismanagement’ by Public Sector Integrity Commissioner Joe Friday.

All performance pay will be eligible for recovery – including any bonus, the at-risk pay, and in-range increases during that period. The payments are also pensionable so anyone who has retired will have their pensions recalculated.

The money recovered will be handled as an overpayment under the Financial Administration Act.

Base salaries for the four levels of deputy ministers range from $192,600 to $326,500. The greater the responsibility, the more performance pay they can receive, from a maximum of 15 per cent of salary for DM-1s to 39 per cent for DM-4s.

Similarly, salaries for the CEOs of Crown corporations range between $124,700 and $523,900 and their maximum performance pay ranges between 15 per cent and 33 per cent of salary.

The claw back policy is the biggest shakeup in the way performance pay is managed since the late 1990s and some say the change is a long time in coming.

One long-time deputy minister called the claw back “a good idea,” but said performance pay in the public service is flawed because it typically measures what can be performed in a year, which is not necessarily what constitutes good management over the long run.

“The question about performance pay is what are we measuring. That is what matters.”

The move also follows the lead of the private sector, where huge bonus packages are paid to executives.

Claw back policies became common among financial institutions and large public companies after the 2008 financial crisis to recover bonuses paid to executives if financial results had to be restated or mismanagement came to light.

It also comes at a time when there has been much discussion about bullying and harassment in the public service.

One senior bureaucrat called the claw back a “time’s up clause” because the impetus came from the #MeToo and Time’s Up movements — and realization that public servants are not immune to the harassment and sexual violence behind those campaigns.

The decision was made to extend it to mismanagement, an issue that’s top-of-mind for many public servants whose pay has been botched by the disastrous Phoenix pay system. That project is widely considered one of the biggest pubic service management failures in history.

Public Sector Integrity Commissioner Joe Friday put the spotlight on harassment and bullying in the public service with several scathing reports on abusive executive behaviour.

Friday has since voiced his concerns that such behaviour is ‘systemic;’ appears to be on the rise and only leadership from deputy ministers can change the culture.

In all cases, Friday found the alleged abuses and botched handling of the harassment complaints were egregious enough to meet the test of gross mismanagement under the Public Servants Disclosure Protection Act.

In most cases, the harassment complaints were against managers in executive positions and senior management, such as deputy ministers or assistant deputy ministers, were rapped for not doing enough to stop the behaviour.

The integrity commissioner has tabled 16 reports of wrongdoing in Parliament over the years. He can recommend disciplinary action, but any action is up to departments.

There have also been several high-profile cases of misconduct and mismanagement among top-ranking executives over the years, including Former Integrity Commissioner Christiane Ouimet and Shirish Chotalia, former chair of the Canadian Human Rights Tribunal.

Privy Council Clerk Michael Wernick voiced his concerns about “inappropriate behaviours” in his recent annual report on the public service to Prime Minister Justin Trudeau.

He also appointed an internal term, headed by PCO Deputy Secretary Janine Sherman, to examine the culture of the public service, its harassment policies and a better way to support employees. That group has held several roundtables and Sherman will deliver Wernick a final report.

But some argue the malfunctioning Phoenix pay systems raises questions about the effectiveness of performance pay as an incentive for all executives, especially for managing large “enterprise-wide” projects with many players that take years to design and roll out.

It’s a debate that erupts whenever bureaucrats bungle a project or get caught in a scandal.

Performance pay in government has been dogged by controversy since it was introduced in the 1980s. Many argue it’s too difficult to measure performance in the public sector, compared with the bottom-line-driven private sector.

Performance pay become a flashpoint for many public servants and Canadians alike who have demanded to know how many executives collected performance pay over the decade it took to plan, build and implement Phoenix.

This claw back won’t apply to deputy ministers or associate deputy ministers accountable for Phoenix because they are grandfathered under the old rules.

The Public Service Alliance of Canada, which is ramping up its campaign to make the government more accountable for Phoenix, is demanding the government stop paying performance bonuses to all executives until rank-and-file employees are paid properly.