New Democrat Gilles Bisson's private member's bill passed second reading in the legislature Thursday and will go to committee for review.
The NDP says if passed, the bill would eliminate performance pay and all forms of incentive pay for the next two years.
The legislation was drafted after The Canadian Press reported that nearly 98 per cent of eligible civil servants received performance pay last year when their wages were frozen, costing the province $35.6 million.
Greg Reed, the CEO of eHealth Ontario, also returned his $81,250 bonus — which came on top of his $329,000 salary — after The Canadian Press reported it.
The New Democrats say managers are using bonuses to bump up their salaries under the radar and at the expense of taxpayers.
But private member's bills rarely become law without the backing of the government.
The NDP said the ban on bonuses would only apply to new contracts, not existing ones, of civil servants as well as managers in publicly funded boards, agencies and entities, including school boards, universities, colleges and hospitals.
The bonuses are an embarrassment for the minority Liberals, who have been pushing for zero pay increases as they battle a $15-billion deficit.
They've clashed with both teachers and doctors in their battle to freeze pay, slashing fees doctors receive and introducing a controversial bill that would impose new contracts on teachers.
Premier Dalton McGuinty directed Finance Minister Dwight Duncan to review the performance pay system, saying it doesn't appear to be working the way it should.