It's time to get ready for new pay equity rules

In Canada, the wage gap continues to be a key issue when it comes to gender equality. Both pay equity and pay equality laws aim to address the gap; these are two different legal concepts that are often confused.

What’s the difference?
Pay equity legislation addresses equal pay for work of equal value. Generally, in Canadian jurisdictions with pay equity legislation, achieving pay equity means that jobs traditionally held by women are paid the same as jobs traditionally held by men. Pay equity laws address the rights of female-dominated occupations as groups, meaning that male- and female-dominated occupations of comparable value with the same employer must be paid equally.

Pay equality provisions, which are required under employment standards or human rights legislation across Canada, address the rights of women employees as individuals. Pay equality or “equal pay for equal work” is the concept that men and women must be paid the same for performing the same job in the same organization. It means a female engineer must be paid equally as a male engineer with the same employer, although reasonable differences due to factors such as seniority or merit are permitted.

The wage gap
There is still a lot of work to do to eliminate the pay gap in Canada. The average salary for Canadian men in 2019 was $67,704, which is 24 per cent higher than women, who earned $51,352 on average, according to ADP Canada, which conducted market research in 2020 in partnership with Leger.

The gender wage gap is also reflected in additional compensation (bonuses) where men reported receiving more than double the amount reported by women ($7,647 compared to $3,251 on average).

Women are more likely to report earning less than $30,000 in pre-tax salary (22 per cent compared to 14 per cent for men), while men are significantly more likely to report earning $80,000 or more (30 per cent compared to 13 per cent for women), found the research.

The Pay Equity Act
While the federal Pay Equity Actis not in effect at the time of writing, its expected entry into force in 2020 reflects a global trend toward more proactive pay equity and equality obligations for employers.

The act is new proactive pay equity legislation for the federally regulated sector that passed in December 2018 and is intended to come into effect in 2020. The act will replace the existing complaint-based system and expand employer obligations, placing the onus of pay equity analysis on employers. It will apply to all federally regulated public and private sector employers with 10 or more employees, as well as ministers’ offices.

Here are some ways employers can better navigate the act, if it applies.

Review compensation practices and research the new provisions: Organizations should familiarize themselves with the act’s detailed provisions and be ready to develop an implementation plan for the upcoming changes. Different obligations will apply to small employers (10 to 99 employees), large employers (100-plus employees) and unionized employers, so it’s extremely important for organizations to review their current compensation practices and become familiar with the act and its regulations (when the regulations become available).

It’s important to note that any complaints filed before the act is in force will continue to be resolved under the Canadian Human Rights Act’s existing complaint-based model.

Prepare to make a pay equity plan: Within three years of becoming subject to the act, employers will need to establish a pay equity plan. The plan will need to indicate the number of employees and identify job classes in the workplace. It will need to indicate the gender predominance of the identified job classes (such as female or male predominant or gender neutral) and evaluate the value of work performed by each job class.

The compensation associated with each job class will need to be identified and the compensation associated with female- and male-predominant job classes of similar value will need to be compared.

The plan will need to set out the results of this comparison and identify which female-predominant job classes will require an increase in compensation and when such increases are due. The plan will also need to provide information on dispute resolution procedures available to employees.

Employers will need to review and update pay equity plans at least once every five years. Additionally, employers will be required to provide employees with the opportunity to comment on a proposed pay equity plan or any updates to a plan before it is finalized.

Think about your pay equity committee: Under the act, unionized and non-unionized employers with 100 or more employees will be required to establish a pay equity committee to develop or update the pay equity plan. Committee members will need to include employer, union and non-unionized employee representatives, as applicable.

While not explicitly addressed in the act, consider creating terms of reference for the pay equity committee to address issues such as confidentiality, stages in the pay equity process and target completion dates, the process for selection or replacement of committee members and the process for resolving disagreements or a tie vote.

Existing pay equity specialists or HR leaders may be able to lead this initiative. For example, ADP has established a global pay equity group. This team looks at implementing policies and practices to maintain pay equity across jurisdictions. This team developed a global job architecture — a structure to classify jobs, determine pay levels per role and create a job market classification system.

Consider legal advice and an external consultant
Employers’ needs and obligations can vary greatly depending on geographic scope, size, industry and more. If your organization is unsure of what obligations apply or how to meet them, consider getting legal advice or using an external pay equity consultant.

Professionals with pay equity expertise can assist with staying on top of legislative changes in all relevant jurisdictions (provincial, territorial as well as the federally regulated sector); they should understand the context of various jurisdictions’ approaches to pay equity (such as Quebec and Ontario).

A third-party consultant may be able to file reports on a client’s behalf and help develop pay equity plans and maintenance exercises in the most efficient manner possible.

Going further
While pay equity legislation represents advancement, these types of laws won’t address all factors contributing to the gender pay gap in Canada. Complying with laws is table stakes, especially when employers want to attract and retain top talent.

At ADP, we want to go further. We recently implemented a “salary history ban” in the U.S., so recruiters cannot ask candidates their past salary. This is just one example of how organizations can prevent the perpetuation of salary gaps from a previous external role.

We also work hard to promote a culture of equality and transparency, and we encourage other organizations to consider additional approaches to the gender pay gap. When every organization embraces equal pay, everyone wins.

Natalka Haras is legal counsel at ADP Canada in Montreal. For more information, visit www.adp.ca.

$66,504 
Average pay for men per year in 2019.

$49,721 
Average pay for women per year in 2019.

80% 
Number of men who believe that men and women are compensated equally within their workplace.

62%
Number of women who believe that men and women are compensated equally in the workplace.

45%
Number of workers who would leave their current employer if they found out that a colleague of equal standing received preferential compensation based on gender

63% 
Number of executives who believe men and women are equally compensated.

31% 
Number of executives who feel pay equity is a priority within their organization.

Source: ADP