Ontario group joins global push for greater salary transparency

Enforcement of employers’ legal obligations necessary to close gender wage gap: Lawyer
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 05/18/2017

Thirty years after pay equity legislation was introduced in Ontario, the gender wage gap remains a major crisis here and across the country, according to an advocacy group.

With this in mind, Toronto’s Equal Pay Coalition issued draft legislation to the Ontario Ministry of Labour last month in a bid for expanded salary transparency that would require employers in the province to report hourly wage and pay arrangements.

“Currently, Ontario doesn’t have a pay transparency act,” said Toronto lawyer Fay Faraday, co-chair of the coalition. “This is a piece of legislation that is really about filling that gap, and using this as another tool to shine a light on what employer practices are, and supporting robust enforcement of existing legal obligations.”

“Pay transparency legislation is the next wave of tools that are being adopted globally to address the pay gap, because it is so entrenched and there’s been so little movement.”

Proactive legal obligations regarding pay equity are already in place across Canada, she said. Various pieces of pay equity legislation alongside federal and provincial human rights codes are intended to prevent systematic pay discrimination.

When Ontario introduced the Pay Equity Act in 1987, looking for progress on the gender wage gap, it was a world-leading piece of legislation, said Faraday.

“It really was a global trailblazer in that it put positive obligations on employers to actively analyze what was happening in their workplaces.”

But, three decades later, that gap remains wide open at 30 per cent, while more than half of Ontario employers remain non-compliant with the legislation, she said.

The coalition’s draft legislation addresses: employees’ right to know what the pay structure formulae and gender wage gap is at their workplace; employers’ obligation to disclose; and employee protection from reprisal for talking about wages. Employers would also be required to disclose annual pay transparency reports to employees, shareholders and the Ministry of Labour.

“This isn’t about creating new obligations to close the wage gap,” said Faraday. “Those legal obligations already exist. This is about enforcing accountability for what’s actually happening in practice. The whole point is about ensuring public accountability for pay practices. It would apply to all employers in the public sector as well as the private sector with 10 or more employees.”

While the federal government announced in October it will implement proactive pay equity legislation for federally regulated employers by 2018, more needs to be done, she said, noting that in Ontario alone, women lose $18 billion in wages each year via the gender wage gap.

“The gender pay gap is an enormous human rights crisis that needs to be addressed now,” said Faraday. 

Growing focus

Legislation regarding pay equity and delivering equal pay for work of equal or comparable value is not a new concept, but it is gaining steam across the globe, said Claudine Kapel, principal at Kapel and Associates in Toronto.

“We’re definitely seeing a growing focus on the issue of the gender wage gap and how to close it, which is really a big impetus behind all of these different pieces of legislation.”

The United Kingdom introduced similar legislation in April, requiring large firms to report pay discrepancies between male and female employees. And in March, Iceland became the first country in the world to require both public and private sector employers to prove they offer equal pay to both genders. Germany also adopted an Equal Pay Act that will give workers the right to know the average compensation of colleagues in similar positions at companies of 200 employees or more.

Some companies already conduct business with a high level of pay transparency, while others share no information at all, said Kapel.

“They’re the ones under the most pressure because, in this day and age, employees are pressing for more information on how they’re paid,” she said.

“All of this mounting regulatory activity could even be seen as a clarion call for greater pay fairness.”

Organizations are facing pressure from employees to be more transparent about compensation, she said, “and, for some, this focus on legislation could provide some impetus for them to get their house in order and clamp down on pay decisions that could be leading to systemic bias.”

Privacy concerns

While there is a role for regulators to play in protecting workers from discrimination, laws forcing private sector companies to share information on individual salary totals remain unlikely, said Kapel. Though the highest public sector compensation in Ontario is revealed annually via the Sunshine List, these kinds of actions remain rare.

“We certainly wouldn’t expect to see that level of disclosure being mandated by the government over to the private sector,” she said.

The further companies drill down into revealing individual employee compensation, the more problematic it becomes with privacy concerns and the potential for employee backlash and poor morale, said Kapel.

“The closer you get to sharing individual pay, the juice isn’t going to be worth the squeeze as a practice because it’s probably going to create more problems than it’s worth.”

For companies where pay equity is already a corporate initiative, periodic reviews are critical to test for potential issues, she said.

“Most legislation isn’t saying that you have to pay everybody the same, but you have to demonstrate that you’re not discriminating against people or having systemic barriers. Things like time on the job and performance can legitimately create differences in how individuals are paid. That’s why looking at pay in isolation isn’t necessarily helpful.”

Engagement matters

Employers are pursuing salary transparency for a variety of reasons, and pay discrimination may not be the main driver, said Jérôme Côté, compensation expert at Normandin Beaudry in Montreal.

“It’s more about employee engagement,” he said. “If employees understand how compensation is established… they tend to be more favourable.”

Research has shown employees are more satisfied and engaged if they understand how their pay package is derived, while websites such as Glassdoor and Salary.com have pushed the conversation forward, said Côté.

“Employees have way more information than they used to on compensation and what’s being offered elsewhere, and it’s not as taboo a subject as it used to be,” he said. “As an employee, it would be nice to know your salary range and where you stand in your salary range, understanding how you’re going to be judged and how your salary will evolve over time, based on performance or seniority.”

Further, pay discrimination is often more of an issue at smaller companies, said Côté.

“This is probably where you would find the most potential for discrimination, just because they don’t have the policies or practices in place to manage compensation that equally.”

Broad solution needed

The gender wage gap isn’t going to be closed by government legislation alone, said Kapel.

“It’s rooted in a variety of factors, including societal norms,” she said. “Employers are going to have a part to play, but then so is every institution and individual that shapes how people view and value each other.”

But economic security for women remains an issue that needs to be remedied, said Faraday.

“Systemic discrimination impoverishes women in a very deep way across this country,” she said. “Our goal is to ensure that employers are actually complying with their existing legal obligations to ensure that women experience that equality which they’re entitled to.”

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