Canada’s federal bureaucracy paid itself $201 million in bonuses last year, even though government departments met only 54 percent of their own performance targets. At the same time, some of the poorest seniors in the country are losing up to half of every dollar they earn because of punitive tax and benefit clawback rules.
Two separate sets of data, one from the Canadian Taxpayers Federation (CTF), the other from the Montreal Economic Institute (MEI), reveal a federal system increasingly disconnected from the people it is supposed to serve.
On one side is a public service where 98 percent of executives received bonuses last year, regardless of performance. On the other is low‑income seniors who continue working out of necessity and are financially punished for doing so.
The contrast is stark, and it raises uncomfortable questions about priorities, fairness, and accountability.
Access‑to‑information records obtained by the CTF show that federal executives collected $201 million in bonuses in 2024–25, despite departments meeting barely half of their targets. The bonuses include “performance awards,” “at‑risk pay,” and a “bilingual bonus.”
“Why are most government executives rewarding themselves with bonus cheques when their departments can barely pass their own tests?” asked Franco Terrazzano, the CTF’s Federal Director. “Bonuses are supposed to be for doing a good job, but bureaucrats are handing them out like participation ribbons.”
The problem is not new. Since 2015, federal executives have received nearly $2 billion in bonuses. The Parliamentary Budget Officer has repeatedly warned that fewer than half of departmental targets are met in a typical year, yet the bonus system continues unchanged.
Former PBO Yves Giroux has noted that public servants set their own performance targets, which are often calibrated to be easily achievable. Even then, many departments still fall short.
Meanwhile, the federal bureaucracy has grown by 99,000 employees over the past decade, and its cost has surged by 80 percent. Yet service quality has not improved. A recent Leger poll found that half of Canadians believe federal services have worsened since 2016, and 54 percent want the size and cost of the bureaucracy reduced.
The federal government is borrowing $78 billion this year. More than half of its day‑to‑day operating spending now goes to the bureaucracy. Yet bonuses continue to be approved almost automatically.
“The government is broke, and taxpayers can’t afford to bankroll big bonus cheques each and every year for highly paid government executives,” Terrazzano said. “The government needs to stop rewarding failure with taxpayers’ money.”
While federal executives enjoy near‑guaranteed bonuses, a new report from the Montreal Economic Institute shows that low‑income seniors who continue working, often because they cannot afford not to, are losing up to 50 percent of their income to taxes and federal benefit clawbacks.
More than 600,000 Canadian seniors live below the poverty line. Many rely on Old Age Security (OAS), the Guaranteed Income Supplement (GIS), and the Canada Pension Plan (CPP). For seniors with no income beyond OAS, the GIS provides just over $13,000 a year.
But once a senior earns more than $5,000 in additional income, the federal government claws back 50 cents of every extra dollar. That clawback happens before income tax, payroll deductions, and reductions in other credits.
The result is that the poorest seniors in Canada face some of the highest effective tax rates in the country.
“A growing number of seniors are working to make ends meet; the very least Ottawa could do is not punish them for doing so,” said Jason Dean, associate researcher at the MEI. “A system that was designed to help those most in need is actually working against them due to poor design.”
The MEI calculates that a senior earning a modest full‑time wage of $20.50 an hour loses half of every dollar earned. These are tax rates normally associated with high‑income earners, yet the seniors facing them are anything but wealthy.
The federal government’s bonus culture and its treatment of low‑income seniors reveal the same underlying problem: a system that protects itself first and serves Canadians second.
Executives who miss targets receive bonuses. Seniors who work to survive lose half their income. The incentives are backwards, and Canadians know it.
The MEI argues that modest policy changes could dramatically improve the situation for seniors, including raising the GIS earnings exemption from $5,000 to $30,000 and eliminating payroll taxes for working seniors. These reforms would cost a fraction of what the federal government spends on bonuses and bureaucracy.
As Canada’s population ages and more seniors work out of necessity, the question becomes unavoidable: Why is the federal system rewarding itself while penalizing the people who need help the most?
If public servants want to rebuild trust, they should start by acknowledging the imbalance, and fixing it.
$201 million — Bonuses paid to federal executives in 2024–25
98% — Executives who received a bonus
54% — Performance targets met
$2 billion — Total bonuses since 2015
99,000 — New federal employees added in a decade
80% — Increase in bureaucracy cost
$78 billion — Federal borrowing this year
50% — Canadians who say services have worsened since 2016
54% — Canadians who want the bureaucracy reduced
Photo: Unsplash
