What is pay equity?
Pay equity in Canada is the principle of equal pay for work of equal value. It means that compensation should be the same regardless of gender. Effective August 31, 2021, the Pay Equity Act states, “The purpose of the act is to achieve pay equity for employees in jobs that are commonly held by women by addressing gender-based discrimination in the pay practices and systems of employers.”
The Act applies to all federally regulated public and private employers with 10 or more employees. Employers are required to conduct pay equity audits to identify and correct gender-based pay disparities and prepare annual statements. This includes forming a pay equity committee, developing a pay equity plan, identifying gender-based pay gaps, and updating it at least every five years. The first annual reports are due in June 2025.
Related: Guide to Canada Labour Code
Provincial pay equity laws
Some provinces have also introduced pay equity laws, which can extend the scope of the federal Act and apply to a broader range of employers, including provincially regulated businesses. For example, British Columbia, Quebec, Ontario, Prince Edward Island, Manitoba, and Nova Scotia have pay transparency and/or pay equity legislation. Pay equity legislation might include annual pay gap reporting, and pay transparency measures may mandate salary ranges in job postings.
It’s important to note that even if an employer is not directly covered by the federal Pay Equity Act or a provincial pay equity law, they have a legal obligation to ensure equal pay for work of equal value under human rights legislation.
Related: Maintaining Equal Employment Opportunities (EEO) through HR
Why pay equity matters
Pay equity is a competitive advantage, and companies committed to this approach attract and retain top talent and reduce turnover costs. It helps build a more diverse and inclusive workplace, leading to increased innovation and creativity. Here are some more reasons why pay equity matters:
Enhanced productivity and performance
- Increased employee engagement and productivity levels
- Improved job satisfaction and stronger motivation
- More effective in problem-solving and decision-making
- Helps employees maintain a healthy work-life balance and improves employee well-being
Positive public image
- Favourably viewed by consumers, investors, and the public, creating stronger employer branding
- Enhanced social responsibility image
Legal compliance
- Avoids costly lawsuits and legal penalties
Related: How to Develop a Culture of Wellness in the Workplace
What constitutes fair compensation?
Fair compensation goes beyond an equitable salary and includes perks, comprehensive benefits packages, performance incentives, overtime pay, or parental leave for improved work-life balance. It may also include salary adjustments based on regional cost-of-living differences, flexible and remote work options, generous time-off policies, and transparent compensation practices.
By considering these factors, employers can create a fair and equitable compensation system that attracts and retains top talent, boosts employee morale, and contributes to overall organizational success.
Related: Equity vs. Equality in the Workplace: Knowing the Difference
How reaching pay equity can be part of a DEIB strategy
As the makeup of the Canadian workforce shifts and employees focus on inclusivity and fairness, reaching pay equity can be part of a diversity, equity, inclusion, and belonging (DEIB) strategy. For example, an Indeed and Glassdoor survey found that 72% of workers aged 18-34 said they might reject a job offer or resign if they felt company leaders didn’t understand and support DEI initiatives.
While the Pay Equity Act targets gender-based inequities, there are other forms of equity employers can consider to create inclusive working environments based on race, gender, disability, social mobility, and LGBTQ+ pay gaps.
Related: DEIB+: What It Means, Why It Matters and How to Do the Work
How to develop a pay equity plan
Developing a pay equity plan involves several steps that must be agreed on at a pay equity committee with representatives from the employer, the bargaining agents, and non-unionized employees. Here’s a step-by-step guide to help employers create an effective pay equity plan:
- Understand pay equity requirements
- Familiarize yourself with applicable laws, such as the Pay Equity Act and provincial/territorial regulations. These laws often define the criteria for compliance and set timelines.
- Understand whether the plan needs to address gender-based pay disparities or broader equity concerns, such as race, disability, or other protected grounds, depending on your organization’s policies or regional requirements.
- Assemble a pay equity committee
- Form a team of HR professionals, management, and employee representatives to ensure diverse perspectives and collaboration, and designate roles accordingly.
- Train committee members to ensure they understand pay equity principles and the legal framework to assess and address disparities accurately.
- Conduct a pay equity audit
- List all job titles and group similar roles into job classes based on responsibilities, required skills, and qualifications.
- Use a consistent method to evaluate job value, considering factors such as skill, effort, responsibility, and working conditions.
- Analyze compensation data to compare wages, bonuses, and benefits across job classes to identify disparities.
- Determine if disparities are due to systemic biases, historical practices, or other barriers.
- Develop and implement a plan
- Establish measurable objectives to address disparities
- Allocate resources to close wage gaps with realistic timelines that ensure timely progress.
- Revise company policies and processes to prevent future inequities.
- Communicate the plan
- Share the plan with employees to promote transparency and trust and highlight your commitment to fairness and inclusivity.
- Train managers and educate leaders on pay equity principles and their role in maintaining fair practices.
- Monitor and maintain equity
- Schedule periodic reviews of pay practices to ensure continued compliance and equity.
- Submit compliance reports to government bodies and share updates with your workforce as required.
- Adjust the plan to account for new roles, organizational changes, or evolving legal requirements.
Related: What Is Ageism in the Workplace and How Do I Prevent It?
Pay equity is essential to eliminate systemic gender-based discrimination and ensure that everyone has equal opportunities to earn a living. Employees deserve equal pay for work of equal value, regardless of gender, race, or other characteristics. Employers prioritizing a more equitable workplace build trust among their employees, strengthen their employer brand, and cultivate a more engaged and productive workforce. Creating a pay equity plan helps meet legal obligations while fostering a culture of fairness and inclusivity that benefits the entire organization.
