What employers need to know about pay equity

'The most important thing right now is for employers to be aware of key milestones to ensure they're not missing a deadline'

What employers need to know about pay equity

New pay equity rules for federally regulated businesses took effect Nov. 1 – so what should employers be thinking about to be compliant?

“The federal Pay Equity Act is quite process-heavy and there’s key milestones that are associated with specific dates that employers have to be aware of,” says Wendy Glaser, director of pay equity at KPMG Canada in Toronto.

“The most important thing right now is for employers to be aware of those key milestones to ensure that they’re not missing a deadline.”

By Nov. 1, employers were required to “post a notice to all of their employees informing them of the employer’s obligation to create a pay equity committee and develop a pay equity plan,” says Glaser.

The second big deadline will be in 2024, she says.

“Employers have those three years between 2021 and 2024 to create their pay equity plan… [by] Sept. 3, 2024. They have to post their final pay equity plan, and then begin compensation increases on the next day on Sept. 4, which is third major milestone.”

Within that time frame, a number of steps have to be completed, says Glaser

“Those steps are to classify all of the jobs within the company; to calculate total compensation; to determine a gender predominance for every job class; to evaluate all of the job classes using a gender-neutral job evaluation system or tool to analyze female- and male-dominated jobs; to identify the increases that are required for your female-dominated position; and then of course, to actually do the compensation increases.”

And there’s no sense delaying the process, says Paola Accettola, principal at True North HR Consulting in Collingwood, Ont.

“If you leave it, it will just keep getting bigger and bigger. It gets complicated when you have many unique jobs. [But] it’s not as complicated [if, for example] you’re a call centre or you are a retail location where you might have three unique roles; then it’s actually quite simple to do the pay equity exercise.”

For a more detailed overview of the pay equity requirements, Canadian HR Reporter also spoke with legal experts earlier.

Documentation key to process

As part of the examination, delineating a structure of compensation is a key step, she says.

“If you have job grades and you have a structure in compensation, it inherently will help you to avoid getting into the trap of gut-feel type decisions but most employers need to have a structure in place.”

There is some room for variance, but employers should “have a really good, documented understanding of why you’re making that concession for the individual,” says Accettola.

“If a pay equity commissioner were to walk through the door, [can you] explain why does this male make more than the female counterpart? There may be very good reason for that and that’s fine.”

Documenting the progress is key to ensuring the pay equity commission is satisfied, says Glaser.

“In addition to that, there are annual statements that have to be submitted to the pay equity commissioner stating you’re in compliance with pay equity laws and, of course, the pay equity commissioner is allowed to come and ask questions about your equity plan or ask to see your pay equity plan. It’s important that employers really keep good documentation on everything that they have done and all of the steps they have taken, just in case it’s ever needed to be shown.”

And for those employers found to be non-compliant, financial consequences may be forthcoming, she says.

“There could be penalties for being late in posting your pay equity plan; there could be lump-sum payments that are required in addition to retroactive payments to employees that would have been eligible for an increase. There also could be administrative penalties that are applied if an order is issued by the pay equity commission.”

Ontario nurses recently celebrated a pay equity victory, after a long court battle.

‘Ongoing process’

The process is not simply a one-time effort, says Glaser

“You can look at it as an ongoing process for employers. From a legal perspective, the entire pay equity process must be carried out every five years; however, employers who can make pay equity part of their routine annual process will find that it’s easier to carry out the analyses, and it’s easier for them to have ongoing insight into their pay equity data, and make sure that their practices remain in compliance on an ongoing basis.”

Buy-in from the top is also key in a successful implementation, says Accettola.

“The life you breathe into it, and the message behind it, has got to come from an executive level; it can’t be just the exercise of pay equity, it has to be the spirit of pay equity, which is people should be paid for their skills, period.”

That effort will be worthwhile, according to Glaser, as it is the right and just thing to do.

“There’s a reason why employers have to go through all of these steps and the spirit or the purpose of pay equity is really to redress systemic gender-based discrimination in compensation practices, and to hold employers accountable to make sure that they are achieving pay equity within their company.”

One software company recently launched an effort to solve the gender pay disparity.

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