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Hewlett Packard Advance Solutions Vice President of Human Resources, Greg Conner, left, and President Jim Hamilton at HP Advance Solutions headquarters in Vancouver Island Technology Park. (Chad Hipolito For The Globe And Mail)
Hewlett Packard Advance Solutions Vice President of Human Resources, Greg Conner, left, and President Jim Hamilton at HP Advance Solutions headquarters in Vancouver Island Technology Park. (Chad Hipolito For The Globe And Mail)

Retirement plans

DB or not DB? That's the pension question Add to ...

Having a secure, defined benefit pension for retirement is a luxury that increasingly few private sector employers provide, as employers steadily switch from old-style pensions to defined contribution plans, in which the employee contributes money but the payout is not guaranteed.

Staff at HP Advanced Solutions Inc. in Victoria, one of Canada’s Top 100 Employers for 2012, are among the fortunate. Company leaders feel the merits of continuing to offer defined benefit pensions outweighs the cost.

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“Our retention rates are great; much higher than those of our competitors,” says Greg Conner, vice-president of human resources. And it also “absolutely” aids in recruiting new staff, he says.

A report prepared for the federal government by the Certified General Accountants Association of Canada notes the rapid move away from defined benefit (DB) pensions in the private sector, as firms replace them with defined contribution (DC) plans that offer more certainty about what pension payouts will cost a company and their impact on its cash flow.

DC plan membership in the private sector nearly doubled between 1991 and 2006, increasing the coverage rate to 27 per cent from 14 per cent – a trend that continues to accelerate, according to the report.

But while this trend may be financially helpful to employers, the report notes that “declining [DB]pension plan coverage is received as bad news to many,” as it puts a comfortable retirement out of reach for a growing number of Canadians.

That won’t happen at firms like HP Advanced Solutions, where Mr. Conner says the plus side of sticking with a DB plan offsets the cost. “I know that defined pensions are considered expensive, but we make up for it in other ways – in our retention rates, especially. Recruiting new people is horrifically expensive.”

HP Advanced Solutions was formed in 2004 to provide outsourced business functions for the B.C. government and, in its infancy, recruited many unionized former government workers. The company has since grown to more than 400 employees from 160, and has expanded its services and the size of the contracts it takes on. It now runs a call centre in addition to its information technology branch; two fields that are noted for having notoriously high turnover rates – except at HP Advanced Solutions.

“Our retention rate was 93 per cent last year and the year before,” says Mr. Conner. “Those are amazing figures for our industry.”

He credits the company’s community-minded focus and generous benefits, including DB pensions, with retaining a content work force.

Some other private sector firms on the Top 100 list are also sticking with DB plans, at least to a degree. Bombardier Inc. provides unionized employees with DB plans, while newly-hired salaried non-union employees are given a choice between a combination of both defined benefit and defined contribution plans, or a full defined contribution plan, according to communications manager Haley Dunne.

For Bombardier’s corporate and transportation divisions, the DB portion of the plan is fully paid by the company, which also matches employee contributions to the DC portion of the plan at 50 per cent. For the aerospace division, employees contribute a small percentage to the DB plan, and Bombardier matches 50 per cent to 100 per cent for the DC component, depending on location.

The variation in offerings reflects the fact that Bombardier is a large global company – employing 65,400 people at 69 production and engineering sites in 23 countries, as well as at a worldwide network of service centres. A one-size-fits-all approach to pensions and benefits wouldn’t work, the company says. In addition, many of the plans existed at firms that were bought up by Bombardier over the past four decades and, while the earlier plans have been amended, they’ve largely stayed as they were before the acquisitions.

Like all manufacturing firms, Bombardier faces a talent crunch as a large number of engineers and skilled tradespeople reach retirement age. Finding and keeping people with specialized skills is a growing challenge.

Asked if offering defined benefit pensions helps to make Bombardier attractive to young engineers and other potential new employees, Ms. Dunne said it “certainly helps when we want to hire people with great experience.”

It also helps with retention, but only to a degree. “Probably less than generally thought. People usually seek the best employment opportunities first.”

At HP Advanced Solutions, offering a DB pension is just one part of their community-minded ethos, which also includes significant involvement in United Way and a company-wide commitment to sustainability. The whole package contributes significantly to job satisfaction and retention.

Annual surveys show the company regularly scores 87 per cent in terms of engaging employees. “It is a very labour-friendly environment … and the benefits, including DB pensions, are part of that,” says Mr. Conner.

Consequently, there are no plans to move to DC plans or to modify the pension plan as a cost-saving measure. “Can you imagine the reaction if we said we’re getting rid of DB pensions?” asked Mr. Conner. “It’s not where we would go.”

Added company president Jim Hamilton: “The pension plan is working. It’s very successful. We have a good return as far as investment is concerned.… We’ve become the largest service provider to the B.C. government. It’s all good.”

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