Bill 124 retroactive pay in Ontario is being delivered to unionized public sector workers through renegotiated collective agreements and arbitration awards that top up the one-percent-per-year cap that applied during each bargaining unit’s three-year moderation period. Amounts vary by sector and bargaining unit, payments are landing as lump sums between 2024 and 2026, and both tax and pension calculations are affected.
Who Qualifies for a Retroactive Adjustment
Only unionized employees have a legal entitlement to retroactive pay. When the Ontario Court of Appeal ruled on February 12, 2024, the majority held that Bill 124 violated the Charter rights of workers who bargain collectively, but that non-unionized employees, who do not exercise the same collective bargaining right, had no constitutional remedy. The government committed to exempting non-unionized employees through regulation until full repeal took effect, but those workers have no legal entitlement to the retroactive adjustments their unionized counterparts are receiving.
If you worked in a unionized role at a covered employer during your bargaining unit’s moderation period, you are in line for an adjustment. Covered employers included the provincial government and its agencies, school boards, universities and colleges, public hospitals and the University of Ottawa Heart Institute, non-profit long-term care licensees, Ornge, children’s aid societies, and non-profits that received at least $1 million in provincial funding in 2018.1Government of Ontario. Protecting a Sustainable Public Sector for Future Generations Act, 2019 For-profit long-term care operators, municipal employees, police, and firefighters were never covered by the cap and are not part of the retroactive pay process.
Your moderation period was not the same as your neighbour’s. It was tied to when your collective agreement expired relative to June 5, 2019. If your agreement had already expired, the three-year clock started the day after it ended. If it was still in force, the clock started when it expired.1Government of Ontario. Protecting a Sustainable Public Sector for Future Generations Act, 2019 That is why bargaining units in the same sector can have different retroactive dates.
How the Amounts Are Being Set
After the government repealed Bill 124 by Order in Council following the Court of Appeal ruling,2Government of Ontario. Province Repeals Bill 124 unionized bargaining units entered re-opener negotiations to determine what wage increases should have been for the three moderation-period years. Where the parties could not agree, disputes went to interest arbitration. The amount you are owed depends on what your specific bargaining unit negotiated or was awarded, so the numbers differ across sectors.
Ontario hospital nurses were awarded additional increases of 0.75 percent, one percent, and two percent for each of the three moderation-period years respectively, on top of the one percent they had already received. A subsequent arbitration by William Kaplan awarded further increases of 3.5 percent and three percent for the years following the moderation period, partly to compensate for the compounding effect of years of suppressed wages. Paramedics at Ornge received an additional one percent per year for the three moderation years. Workers in the charitable long-term care sector received an additional 0.75 percent per year.
The one-percent cap during the moderation period applied to total compensation, not just base salary, so it captured benefits, shift premiums, and vacation entitlements as well.3Legislative Assembly of Ontario. Bill 124, Protecting a Sustainable Public Sector for Future Generations Act, 2019 The retroactive adjustments now flowing back to workers generally take the form of wage increases, with the lump sum reflecting the gap between what you were paid and what you should have been paid under the new rates.
When You Will Be Paid
Retroactive payments cover the difference between what you were actually paid during the moderation period and what you should have been paid under the renegotiated or arbitrated rates. The calculation accounts for every hour worked, including overtime and premium pay. Most employers are processing these payments as lump sums.
Timelines vary widely. Some bargaining units received their retroactive payments in 2024. Others are still waiting in 2026 as their arbitrations conclude and employers complete the audit process. If your union has not yet reached a re-opener agreement or received an arbitration award, your payment cannot be calculated until it does.
How the Lump Sum Is Taxed
A retroactive lump-sum payment from a Bill 124 arbitration award of $3,000 or more qualifies for a special tax calculation under the Canada Revenue Agency’s rules for qualifying retroactive lump-sum payments. The CRA has specifically confirmed that Bill 124 arbitration payments meet the eligibility criteria because they are employment income received under an arbitration award.4Canada.ca. Qualifying Retroactive Lump-Sum Payments
The special calculation lets the payment be taxed as though you received it in the years it actually related to, rather than taxing the entire lump sum in the year you receive it. That matters because a large one-time payment can push you into a higher marginal bracket. Your employer must provide Form T1198, which breaks down how much of the payment relates to each prior year. Keep that form and submit it with your return; the CRA uses it to run the retroactive calculation and apply whichever treatment gives you the lower tax bill.
One distinction to be aware of: back pay from normal collective bargaining does not qualify for this special treatment. Bill 124 payments qualify because they arise from arbitration awards or tribunal orders. CPP contributions, EI premiums, and income tax are all deducted from the lump sum at source, calculated under the CRA’s rules for retroactive pay increases.4Canada.ca. Qualifying Retroactive Lump-Sum Payments
How Your Pension Is Affected
Retroactive salary increases also flow through to your pension, because Ontario’s public sector defined benefit plans base your benefit on your highest-earning years. The Ontario Pension Board is incorporating Bill 124 retroactive salary adjustments into pension records. For active members, OPB updates your record once it receives the corrected salary information and the additional contributions from your employer.5Ontario Pension Board. Retroactive Salary Adjustment FAQ (Including Bill 124)
If you have already retired, OPB is recalculating pensions based on the updated salaries. That work is expected to continue into spring 2026. Once your benefit is recalculated, OPB will notify you of your updated monthly amount and any retroactive lump-sum pension payment owed. You do not need to contact OPB to start the process.5Ontario Pension Board. Retroactive Salary Adjustment FAQ (Including Bill 124)
If you left the public service and already transferred out or received your pension entitlement before your former employer submitted the updated salary data, OPB will contact you to explain the next steps for any additional payment. The timing depends on when your former employer provides the corrected information, and some employers have moved faster than others.