In December 2018, the Canadian Parliament passed the Pay Equity Act. The law establishes proactive pay obligations on employers in the public and private sectors. Although the law’s effective date is still to be determined, it will be in 2021. The law will likely impact 18,000 organizations and nearly 1 million employees, according to the Canadian government.
The Act applies to federally regulated public and private workplaces with 10 or more employees. These organizations must develop a pay equity plan and ensure that it is kept up to date. The law applies as follows:
- Employers with 100 or more employees have the additional obligation of forming a pay equity committee.
- Employers with 10-99 employees, at least some of which are unionized, must abide by the same requirement.
- Employers with 10-99 employees, none of which are unionized, must still produce a pay equity plan that identifies and remediates gender-based pay gaps. They do not need to form a pay equity committee but may do so voluntarily.
“Pay equity” as defined by Canada’s Department of Employment and Social Development, as “the concept of equal pay for work of equal value.” A pay equity plan is geared toward 1) making determinations about “work of equal value,” and 2) rectifying gender-based wage disparities.
A single-pay equity plan is required and will include all employee groups from executives to front-line and entry-level employees. A pay equity plan, as required by the Act, must, at minimum, do the following:
- Identify the different job classes made up of positions in their workplace
- Job classes are defined as positions with similar duties, responsibilities, and qualifications within the same salary range
- To determine classes, each organization will need to use one enterprise-wide job evaluation method – the procedure or tools for comparing the internal value of different jobs (e.g. a mechanic, a life guard, an accounts payable clerk) – and will use a common set of factors. The method must measure skill, responsibility, effort and working conditions.
- Determine whether each job class is predominantly male, predominantly female, or gender-neutral
- Determine the value of work of each predominantly female or male job class
- Calculate the compensation of each predominantly female or male job class
- Compare the compensation between predominantly female and male job classes doing work of equal or comparable value
In some cases, an organization may consider requesting an exception from the Pay Equity Commissioner to allow for more than one plan.
The plan is not sufficient by itself. There are other obligations that the employer must comply with:
- Employers must increase pay for identified, underpaid female job classes within three to five years of the Act’s effective date.
- Employers have the obligation to close newly identified pay gaps disclosed during the regular updates required by the Act, which must occur at least every five years.
A Pay Equity Committee is required to review results of analysis. According to a Regulatory Impact Analysis Statement by the Canadian Department of Employment and Social Development, a Pay Equity Committee consists of employer and employee representatives. The committee, according to the statement, “will be responsible for developing a pay equity plan for the employees employed by that employer that will identify pay equity gaps that exist between predominantly male and female job classes of equal value and determine any increases in compensation owed to employees in those female job classes that the employer must pay to close those gaps.” Employers must form a committee every five years to update and maintain the pay equity plan.
A phase-in approach is allowed as long as payments are at least 1% of the organization’s annual payroll. Employers must post a notice to employees providing information with respect to the date on which any increase becomes payable, including if the increase will be phased in.
Enforcement of this law is assigned to the Pay Equity Commissioner who is part of the Canadian Human Rights Commission. Under Part 5, Section 104 of the Pay Equity Act, the Commissioner is empowered to:
- Ensure the administration and enforcement of the Act, including auditing and investigating covered employers
- Assist persons in understanding their rights and obligations under this Act
- Facilitate the resolution of disputes relating to pay equity
Under the Act, maximum statutory penalties ranging from $30,000 to $50,000 can be levied by the Commissioner. ASE recommends that employers with operations in Canada contact their Canadian Counsel to ensure compliance with this law.
Additional ASE Resources
Compensation Consulting - When effectively planned and executed, a comprehensive compensation program can provide a clear understanding of how pay is administered within the organization and what are proper and improper pay practices. ASE can help you design a compensation program that ensures pay discrimination and internal inequity are avoided. ASE can also help you evaluate your current compensation to highlight potential pay disparities. For more information, contact Kevin Marrs.
Source: Mercer, PayParityPost 4/22/21