If you worked in Ontario’s public sector under a union contract between 2019 and 2022, Bill 124 retroactive pay in Ontario is the money your employer owes you to make up the difference between the one percent annual cap the law imposed and the higher raises your union has since negotiated or won in arbitration. Payments are being calculated based on the hours you worked during the moderation period, processed through payroll, and rolled out on timelines that stretch into 2026 for some pension recalculations. Non-unionized employees are in a different position, and the details below explain why.
Who Is Owed Retroactive Pay
Eligibility turns on one question: were you covered by a collective agreement during your employer’s moderation period? If yes, and your union has since reached a settlement or arbitration award providing raises above one percent, you’re entitled to the difference. This includes current employees, retirees, and people who have since left their public sector positions.
The Ontario Court of Appeal ruled on February 12, 2024 that Bill 124 was unconstitutional as it applied to unionized workers, finding it interfered with the Charter-protected right to meaningful collective bargaining. The Court did not extend that finding to non-unionized employees, and the government’s February 23, 2024 repeal of the entire Act ended the cap going forward but did not create a right to back pay for non-union staff. Some employers have chosen to give non-union employees retroactive adjustments voluntarily, often to keep pace with unionized colleagues for retention reasons, but there’s no legal requirement.
The law covered a wide slice of the province: the Ontario government, its agencies, school boards, public hospitals, universities and colleges, non-profit long-term care homes, children’s aid societies, Ornge, and non-profit organizations receiving at least $1,000,000 in provincial funding. Roughly a million workers were affected. If your employer fits one of those categories and you were in a bargaining unit, your union will be handling the settlement on your behalf.
How Much You Can Expect
The amount depends entirely on what your union negotiated or was awarded, and outcomes vary widely by bargaining unit. A few concrete examples give a sense of the range:
- Ontario Public Service employees represented by OPSEU received an additional 6.5 percent across their three-year contract, bringing raises to three percent in years one and three and 3.5 percent in year two.
- Hospital nurses secured average raises of roughly 11 percent over two years.
- Teachers’ unions reached arbitration awards that exceeded the original cap by substantial margins.
Your specific figure will depend on your employer, your union, the settlement terms, and the hours you logged during the moderation period. Your union or HR department should be able to give you the per-year percentage increases that apply to your unit.
How and When Payments Are Made
Employers calculate what you’re owed by taking the hours you worked during the moderation period and applying the difference between the one percent that was originally paid and the new negotiated or arbitrated rate. Current employees usually receive the money as a lump sum through regular payroll, with the standard deductions taken off: income tax, pension contributions, and other withholdings.
For teachers, arbitration awards required school boards to calculate and distribute the payments within 120 days of the decision.1Ministry of Education. Ministry of Education – 2024: B02 Monetary Resolution to Bill 124 Other bargaining units have their own timelines built into their settlements.
If you’ve left your public sector job since the moderation period, your former employer is responsible for finding you using its last known contact information or union records. That process is slower than payroll for current staff. The single most useful thing a former employee can do is make sure the old employer and the union both have a current mailing address on file.
Tax Treatment: The QRLSP Election
Retroactive pay is taxed as income in the year you receive it, and it appears on that year’s T4. Getting a lump sum covering two or three years of suppressed wages all at once can push you into a higher tax bracket for a single year, which is exactly what the qualifying retroactive lump-sum payment (QRLSP) rules are designed to address.
If your Bill 124 retroactive payment is $3,000 or more, you can ask the Canada Revenue Agency to apply a special calculation that spreads the income across the prior years it actually relates to, so you aren’t taxed at a higher marginal rate simply because the money arrived in one payment. The CRA has confirmed that retroactive payments resulting from Bill 124 arbitration awards qualify.2Canada.ca. Qualifying Retroactive Lump-Sum Payments
To use it, ask your employer for a completed Form T1198 (or an equivalent written breakdown) showing the total payment, how much relates to each prior year, and any interest portion. You file your return normally, reporting the full amount in the year received, and request the special calculation from the CRA. Electronic filing is fine; keep the T1198 in case the CRA asks. Whether the calculation actually saves you money depends on your income across the affected years, so it’s worth running the numbers or asking a tax professional before requesting it.2Canada.ca. Qualifying Retroactive Lump-Sum Payments
What Happens to Your Pension
Because pensions are calculated on salary, retroactive raises change your pension entitlements too. For active members of the Public Service Pension Plan, the Ontario Pension Board coordinates directly with employers to receive updated salary and contribution data, and you don’t need to do anything to trigger the process.3Ontario Pension Board. Retroactive Salary Adjustment FAQ (Including Bill 124)
Retirees who started collecting before the adjustments were processed will have their benefits recalculated. The Ontario Pension Board expects to continue those recalculations into the spring of 2026, and affected members will be notified once the updated monthly pension amount and any retroactive lump sum are ready.3Ontario Pension Board. Retroactive Salary Adjustment FAQ (Including Bill 124) People who transferred or cashed out their pension before the updated salary data came through will be contacted directly to arrange adjustments.
For teachers, the Ontario Teachers’ Pension Plan is aiming to complete retroactive salary adjustments by the end of summer 2026. Retired teachers who left during the 2019–2022 school years have already been processed; more recent retirees may still be waiting.4Ontario Teachers’ Pension Plan. Progress Update on Bill 124 and Collective Agreement Adjustments
If your contact information has changed since you left the public service, update it with your pension plan now. Public Service Pension Plan members can update their e-services account or call the OPB Client Care Centre at 416-364-5035 or 1-800-668-6203. Hospital workers and other public sector employees are covered by their own plans, each running its own recalculation process, so check directly with yours if you haven’t heard anything.
A Quick Note on the Law Itself
Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, capped total compensation increases at one percent per year for three years for covered public sector employers.5Government of Ontario. Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12 “Compensation” was defined broadly to include salary, benefits, and discretionary and non-discretionary payments. Progression-based raises tied to seniority, performance, or completing a professional education program were still allowed under existing collective agreements, so a nurse moving up a pay grid based on years of service, for instance, could still receive that step increase.6Legislative Assembly of Ontario. Bill 124, Protecting a Sustainable Public Sector for Future Generations Act, 2019 What the law blocked, and what unions have now recovered, was the negotiated raise above one percent that would otherwise have been on the table.
The moderation period didn’t start on the same day for everyone. For unionized workers, it began the day after their existing collective agreement expired, which is why the retroactive settlements now being paid out cover different date ranges depending on the bargaining unit.