ARCHIVED - Post Living Differential

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Backgrounder / October 4, 2004 / Project number: BG 04.026

What is the Post Living Differential?

The Post Living Differential (PLD) is an allowance designed to stabilize the cost of living of Canadian Forces members and their families to ensure that they enjoy a relative and predictable cost of living no matter where they serve in Canada.

Background

Efforts to obtain a cost of living benefit for military personnel go back at least to the mid-1980s when the Canadian Forces surveyed selected military locations to determine variations in the cost of living.  However, over the next ten years, no progress was made in advancing the initiative. 

Then in 1998, the Parliamentary Standing Committee on National Defence and Veterans Affairs (SCONDVA) drew public attention to the cost of living difficulties facing many Canadian Forces members and their families. To counter these difficulties, SCONDVA recommended the creation of a cost of living allowance. In March 1999, the Federal Government responded positively to SCONDVA's recommendation and the Department of National Defence stated that it would look into the matter.

Later that year the Department of National Defence commissioned an independent study to look into a suitable compensation program to address the differences in the cost of living between different Canadian Forces locations within Canada. The study, conducted by Runzheimer Canada, looked at twenty-one locations, comprising over 85 per cent of the military population, to determine if there were sufficient cost of living differences to warrant a compensation program. As well, the study specifically looked at which cost of living categories contributed to the cost of living differences. 

The Runzheimer study was complemented by Canadian Forces family-specific information on household cash flow, spousal employment and homeowner versus renter situations. This information was gathered through the Canadian Forces Household Survey conducted in May to July 1999.

Both studies confirmed the requirement for a cost of living benefit and provided the substantiation needed to secure Treasury Board approval to create a new allowance.  Some of the factors that supported the establishment of this new allowance included:

  • There were notable differences in the cost of living amongst various Canadian Forces locations in Canada. In fact most of these locations exceeded the household costs for an average Canadian family;

  • The requirement for frequent transfers, combined with the unlimited liability required of military service is not shared by other Federal government departments;

  • Reductions in the number of personnel and an increased operational tempo, have increased the need to optimize personnel resources – right person, right time, right place – and thus to continue moving military members on a frequent basis for operations and training; and

  • The Canadian Forces is now an older, predominately married force, with families generally dependent on two incomes. Military members and their families are thus more vulnerable to the financial shocks of relocation than was the case in years past.

On June 8, 2000, Treasury Board approved the implementation of PLD, making this allowance the first of its kind for both the Canadian Forces and the Federal Government of Canada.

How does the Post Living Differential work?

As mentioned previously, the intent of PLD is to stabilize the overall cost of living for Canadian Forces members and their families residing in Canada. PLD is paid to help offset the impact of cost of living changes resulting from relocation, and is paid at locations within Canada where the local cost of living is assessed to be higher than the Canadian Forces ‘standard average cost of living.'

This standard cost of living for Canadian Forces members is determined based on a representative military family consisting of a Corporal with a working spouse and a family size of three. Each location is surveyed to determine the actual costs faced by the representative family.

The difference between the Canadian Forces standard cost of living and the actual cost of living for that location forms the basis for PLD for military members living in that area. Therefore, if the cost of living for a certain area is higher than the Canadian Forces standard of living, the military members living in that location will receive a PLD allowance.

Approximately 28,300 members, or 50% of the Regular Force and some 327 Reservists serve in locations that have a higher cost of living than the Canadian Forces standard cost of living. Therefore these personnel qualify for the PLD allowance.

How is Post Living Differential calculated?

Each year during the February to March timeframe, the PLD rate at each Canadian Forces location is reviewed based on the following information:

  • The latest Statistics Canada information on family spending patterns;

  • Canada Mortgage and Housing Corporation (CMHC) data on typical hosing types;

  • National Defence data on the military population at each place of duty. A location with a higher number of military personnel will have a larger impact on the local economy than a location with a lower Canadian Forces population. For example, Ottawa compared to Moncton; and

  • Actual cost of living data in a wide variety of categories at all places of duty in Canada. Examples of these categories include: total annual cost of transportation; household / renter insurance costs; the cost of utilities; and various goods and services like the cost of food and medical care.

Since these factors can sometime fluctuate from year to year, a three-year average has been adopted to ensure any radical variations do not have a large impact on the Canadian Forces members in that area.

PLD is a taxable benefit. As a result, an increment is added when calculating the rates to offset the income tax paid on the allowance. This means that the allowance is increased by the amount of marginal tax to allow for loss through taxation.

Once the data has been compiled, changes to the PLD amount for each location are calculated by May. By June/July the new figures are entered into the Canadian Forces pay system and the changes are announced to the military members and their families. By July/August, Canadian Forces members will see the changes to PLD on their monthly pay statements.

Summary

The Canadian Forces want its members to enjoy a relative and predictable standard of living no matter where they serve. Although it is recognized that every family's standard of living differs, PLD is an excellent process to try and stabilize the cost of living of Canadian Forces members and their families, as they relocate to different areas of Canada.

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