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Cost-reduction measures

How much money will be saved with a salary freeze?

Savings from the salary freeze total $14.9 million. 

Whose salaries are frozen? For how long? When does the freeze come into effect?

  • The one-year salary freeze will apply to the following groups, effective May 1st, 2013:
  • M group
  • 3 SEU bargaining units (trades downtown, powerhouse downtown, trades and powerhouse Mac campus)
  • Academics and academic administrators
  • Senior administration is also taking a 3% pay cut, on top of a salary freeze.

The above employee groups whose salaries were frozen will receive three (3) paid additional days off at Christmas 2013.

How much money will be saved with a hiring freeze?

The hiring freeze will not provide immediate savings, but it is an important step in containing costs. A hiring freeze has been in effect since April 2, 2013, and it will remain in place for an indefinite period of time.

Why does the University continue to advertise certain positions if there is a hiring freeze in place?

The hiring freeze applies only to regular administrative and support staff paid fully or partially from operating funds. While the hiring freeze remains in place, external hiring will be tightly controlled and limited only to those positions that are mission-critical to the University.  The priority will be to redeploy internal resources where fesasible, except in cases where special expertise is required and absent internally. In other cases, there may be postings of jobs that are  paid from soft funds such as research grants, which do not impact the University’s operating budget.

Why are the cost-reduction measures focused mainly on administrative and support staff?

The government cuts are targeted to universities’ operating budgets. Salaries and benefits represent about 75% of these costs. Our aim was also to make sure we protect our core academic and research missions. That said, Faculties will also contribute to the effort, though in smaller measures, with a 3 to 5 per cent reductions in their operating budgets. Professors have also agreed to take a one year salary freeze and growth in the academic sector will be closely managed.

How many employees opted to take the Voluntary Retirement Program (VRP)? Also, how much money will it save, and when will these retirements happen?

256 of our colleagues in administrative and support positions chose the Voluntary Retirement Program (VRP). We originally expected about $7.7 million in savings from the VRP, but the program was very successful, allowing the University to reach $21.1 million in annual operating savings, as of FY2014.

Employees who opted for the VRP will leave the University by August 31, 2013.

How many positions will be cut through the measures implemented by VPs and Deans?

The cost-cutting plans put forward by Vice-Principals and Deans will entail the elimination of some positions by the end of FY2014 at the latest, but we expect that these reductions will be achieved largely through measures such as the non-renewal of term contracts, attrition, workforce efficiencies, and reorganisations resulting in strategically targeted position abolitions. Decisions about these reductions will be made by individual units, based on their individual needs. If you have questions about plans in your unit, we encourage you to speak with your supervisors. 

Are academic and research jobs at risk?

The government requires the University to cut spending from our operating budget, which means that staff paid from non-operating funds (known as "soft" funds) will not be directly affected. While there is no hiring freeze on academic jobs, we will tightly manage growth in the academic sector to make sure it remains in line with our plans for balancing our budget by FY2015.

Are unionised jobs at risk?

Decisions about position reductions to meet the remaining 5% gap will be made by individual units, based on their individual needs. Managers will be required to continue to trim costs which will include measures such as attrition, the non-renewal of term contracts, workforce efficiencies and reorganisations, which will result in the abolition of some unionized positions. For more information, please speak with your manager.

Senior Administration is taking a 3% pay cut. Who is included in this cut?

The Principal, the Provost, the Vice-Principals and the Deans.

There’s a 7 to 9 % cut to the operating budgets of the Vice-Principals' portfolios and the Offices of the Principal and Provost. What does this include?

The percentage of total operating budget cuts for all units was calculated based on the overall savings that the University needs to achieve. It includes each unit’s share of compensation savings related to staff reductions (from voluntary retirement program and, where necessary, further non-salary related savings and payroll reductions).

The 3% cut in senior administrative salaries is in addition to the targeted cuts in administrative and academic units’ operating budgets.

Since the government is allowing universities to spread the FY2013 and FY 2014 cuts over a longer period of time, why is McGill aiming to reach the cuts by 2014?

  • We need to change our financial model to make it sustainable in our new funding reality: we must re-adjust our spending to match our modified revenue in order to continue to manage McGill in a fiscally responsible way.
  • The $38.3 million in government-mandated operating cuts are not the only financial challenges we face.
  • Since McGill set a five-year budget plan in Spring 2012, a series of additional financial challenges, on top of the $38.3 million government cut, have either reduced our revenue or increased our costs:
  • McGill must deal with dramatically  reduced revenue:
    • The 2012 tuition increases promised by the previous government were first cut, than eliminated.
      • The government’s compensation for the cancellation of tuition increases does not cover all revenue lost, resulting in a loss of $1.6 million in 2012-13 and a loss of $3.2 million in 2013-14.
      • So-called “tuition compensation” after 2013-14 will be put back into the Quebec university system as a whole, but it is not yet known how it will be reallocated. In other words, it will not flow directly to the university that lost that money.
    • Our analysis of government budget figures indicates that the usual indexing of the government grant (increases to cover cost-of-living) does not seem to be covered. This represents a loss of $4 million in 2013-14, which will increase to $7 million by 2016-17.
  • At the same time, McGill must provide for increased costs:
    • As with many organizations in North America, McGill faces rising payments to fund its pension deficit. A new assessment this year predicts McGill will have to pay $8 million more per year than we anticipated last year, starting in 2013-14.
    • The government ruled in early 2013 that McGill would have to pay a total of $20 million in pay equity payments between 2014-15 and 2015-16
    • McGill foresees $5 million per year going forward in new mandatory commitments and other priority investments we expect to make to meet certain government requirements and invest in the future of our University.
  • In sum, if McGill continued on the same spending trajectory as anticipated in Budget FY2013, in FY2015 McGill’s projected annual deficit would reach $43M (due to lack of revenue anticipated in the FY2013 multi-year budget). In addition, we must also address some of our increasing additional liabilities, including the pension deficit, deferred maintenance and equity payments.
  • Our cost reduction strategy is in line with McGill’s strategic priorities, including ASAP 2012.

Are McGill's financial challenges greater than those of other Quebec universities?

  • Every university has different challenges and different circumstances. McGill operates under a very different model than other Quebec universities – to a greater extent than other institutions, we have full-time students and full-time faculty. This model has built-in quality assurance mechanisms, but it also reduces degrees of freedom available to us to deal with budget cuts of the magnitude we are facing.
  • Other universities may decide to take other actions, such as transferring funds from their capital budgets or increasing their deficits. For several reasons, these are not good choices for McGill:
    • Unlike some universities, we do not have any large building projects that we can delay as all our capital funding is spent maintaining our aging infrastructure – the oldest among Quebec universities.
    • Spreading out the cuts over several years, instead of making them now, would double our deficit.
    • Over the last few years we have already reduced spending by $37 million and relocated resources to our core priorities through the workforce planning initiatives and the Strategic Reframing initiatives, which makes further cuts difficult. McGill also has funding challenges different than those of other Quebec universities.
    • Compared to our counterparts in the rest of Canada, Quebec universities are underfunded by a total of $835 million each year. McGill also faces some additional disadvantages:
    • Each year, we are required to send more than $50 million of our tuition revenues from out-of-province and international students to the Quebec government.
    • We are one of the only two Quebec universities not to receive additional funding in the form of a "special mission" grant.
    • The government has also previously reduced our operating grant by an additional $80 million over eight years, in a policy known as the “McGill Adjustment.” 

Since the government says it will reinstate funding over time, starting in FY2015, why can’t we just run deficits in the meantime?

  • Because our operating budget is spent in 75 per cent on employee compensation, therefore on recurring expenses, delaying would double our accumulated deficit in less than 5 years which we will in any case have to repay sooner rather than later in order to comply with debt repayment rules set by the Quebec government. This means that spreading the pain would make it twice as painful in the long run – and of course we must pay interest on any borrowed funds, further cutting into our future operating funds.
  • Because the tuition freeze was announced with so little notice, and because of the further severe reductions to our government grant, the Board of Governors allowed us to place $29.8 million onto McGill’s accumulated deficit for FY2013. Even so, we won’t be able to produce a balanced budget for FY2014, and as a consequence we add another $10.4 million to our deficit in FY2014.
  • Further, the government says that if we increase in our accumulated deficit rather than making cuts, those funds must be repaid within seven years. We will need to find this money either way.
  • At best, the government’s proposed reinvestment starting in FY2015 – which itself is uncertain –will provide limited funds to help us start repaying the additional deficits we must incur, but no more.

Will the three per cent indexation of tuition and the compensation for the loss of tuition increases help our finances?

  • For the average student, indexation of 3 per cent means a tuition increase of about $70 per year. McGill can expect to receive around $1.4 million in additional tuition revenues starting in FY2014. This won’t cover even a small percentage of the revenue losses imposed by the government.
  • As noted above, compensation for the loss of tuition increases will be included in the overall provincial reinvestment promised starting FY2015, but the government has not yet decided how that amount will be distributed among universities. McGill will not be compensated directly for the amount of tuition it has lost, and our share of future funding is uncertain at best.

Which programs and services are at risk?

Our primary objective is to protectour core academic and research missions. Cuts to the University operating budget will affect administrative services across the University. That said, the University will continue to pursue initiatives including  support tools for managers, training, and programs aimed at organizational effectiveness. Human Resources and the senior administration are working with faculties and units across the University to develop plans to ensure that critical services are maintained. 

Rumor Mill

The Quebec government is allowing universities to spread the cuts over several years – effectively borrowing against future government funding.  Some universities have said they’ll do this – why not McGill?

For several reasons:

  • The government promises future reinvestment in good faith, but specifies that this reinvestment depends on Quebec’s economic situation, so it remains uncertain.
  • It is also uncertain today which share of this reinvestment would go to McGill. 
  • We are therfore being doubly cautious because in 2012 the government promised significant new funding in the form of tuition increases – these were cancelled after universities’ 2013-2014 budgets had been drafted, leaving holes in our budgets.
  • We also have to address a series of other large, and growing, financial pressures including a pension deficit, a large infrastructure deficit (because McGill has far more aging/heritage buildings than other universities), and pay equity issues.
  • Therefore, we must rein in our deficit and balance our spending with the revenue we know we can count on, today. This will put us in a solid position if the provincial government is able to follow through on its promised reinvestment in higher education. The best course of action for McGill’s long-term well-being is to stabilize our financial situation now – not add to our deficit and create more instability in the future. We cannot responsibly spend more money than we can count on receiving.

Why not wait to see if the government reinvests in universities?

  • The government has said it will reinvest only if Quebec’s economic circumstances permit, but the province’s economic situation is still very unstable, and reinvestment is far from certain.
  • The government is revising the formula that determines how funds are allocated among Quebec’s universities (known as the University funding formula). Even if the government decides that Quebec’s economic situation allows a reinvestment, under a new allocation plan there’s still no guarantee that McGill will receive more funds.  We’re especially concerned about this as it looks like the new plan will provide more funding to institutions with many part-time students, and students who are the first in their families to attend university.

Why not transfer funds from our capital budget to our operating budget?

  • McGill’s capital funding is fully spent on projects that cannot be delayed: urgent repairs for older buildings and needed classroom improvements. McGill already has to borrow money to make badly needed repairs, and to keep aging buildings operational and safe.
  • We have more historic buildings than any other Quebec university, and they are extremely expensive to maintain.

Can we use Campaign McGill money to fill the gap and save positions?

  • Virtually all of the gifts we receive are designated by donors to a specific purpose of their choosing – like student aid, specific academic or research programs, or better teaching equipment. When a donor opts to create a new bursary for students, say, we cannot simply reallocate his/her funds to cover operating shortfalls.

Why only a 3 per cent cut to senior salaries? Why not 5 or 10? 

Our approach was to spread the effort across all regular administrative and support staff paid from operating funds to meet the $43.5 million cost-reduction target. Senior administration members took a three-per-cent cut, on top of a salary freeze.

Since we met 95 per cent of our cost-reduction plan, can’t we borrow the missing money to save jobs?

  • Our plan was designed to guarantee McGill’s long-term well-being. This means we need to stay the course and meet the required cost-reduction target in full. We can’t spend money we don’t have – and then pay annual interest on the resulting debt – with future government funding so uncertain.
  • Vice-Principals and Deans are devising plans that will entail the abolition of some positions, by the end of FY2014 at the latest, which we expect will be achieved mainly through attrition, the non-renewal of term contracts, realizing workforce efficiencies, and reorganizations resulting in strategically targeted job abolitions.

Has administrative staff seen a substantial growth over the last 20 years?

  • McGill administrative expenses sit at about the Canadian average for research universities. Universities’ needs have changed substantially over the past 20 years, and staff needs have changed correspondingly. Today, modern universities are larger and more complex, and the expectations of governments, parents, students and the community have been significantly increased.
  • For example:
    • We must provide far more extensive reporting to government, a larger array of student services, and substantial IT support and technology for teaching, research and administration.
    • We have to compete internationally for students and faculty, form more complex international research partnerships, and diversify our funding through donations. All of these functions require support staff to make them happen.
    • Stewardship requirements imposed by governments, granting agencies and other funding contributors have greatly increased, along with annual reporting and additional disclosure requirements that add to the workload of already-thin staff levels in some areas.
  • To keep McGill successful and give today's students the education and services they need, our staffing model must address this current reality. Our challenge now, particularly in this tough financial context, is to ensure that we are being as efficient as possible in meeting these new needs.

Support Tools

How do I contact Human Resources to help me reorganise my department and support my team?

Our Organizational Development (OD) team will be as active as ever in supporting units in managing change and exploring opportunities for greater efficiencies and savings.

  • OD can provide you with expertise on:
    • Managing change in your unit
    • Re-organizing your unit’s work processes and priorities.
  • OD also offers a series of support tools for our managers and encourages all our staff to participate in the workshops and use the support tools available to help manage change and face workforce re-organization challenges: