Canadian business leaders are preparing themselves for new salary transparency legislation. While requirements only apply to some Canadian businesses, organizations across the country have begun enacting pay transparency measures.

What impact can increased transparency have on the bottom line? A lot! In this article we delve into why pay transparency is good for business transparency, employee morale and even better for your employer branding.

Salary transparency in Canada addresses inequities

While the salary gap between genders has narrowed in recent years, it has not closed. According to Statistics Canada, in 2021, women employees aged 25 to 54 earned $0.89 for every dollar earned by men. The gap is considerably wider among other demographic groups. Visible minority women in Ontario can experience a wage gap as large as 47%. Studies have also reported a 21.4% pay gap where persons with disabilities earned 79 cents to every dollar earned by persons without disabilities.

Pay transparency is one way to address gaps. While the federal Pay Equity Act only applies to specific businesses, provincial legislation has also started to require greater disclosure in employee pay. In the past few years, multiple provinces have enacted pay transparency laws that require salary disclosures in public job postings, restrict employers from asking about candidate salaries, or prohibit retaliation when employees discuss wages, including:

While multiple jurisdictions have reported that their salary transparency laws are having a positive effect on the gender wage gap, some experts argue that the rules don’t go far enough to address systemic inequalities or that legislative loopholes allow some employers to adhere to the letter of the law while eluding its spirit.

Pay transparency and fairness are powerful candidate attraction tools

In a 2022 pay transparency study, Indeed found that only 52% of surveyed Canadians believed that they were paid fairly for their work. Concerns about unfair pay have only been exacerbated in recent years, with rising inflation, increased rental costs and mortgage rates, and other market pressures leaving many workers wondering how to make ends meet.

Companies that pay fairly and publicize salary ranges on job ads can have an edge in a tight labour market. In a recent study, Indeed found:

  • 83% of Canadian respondents said fair pay was a very important factor to consider in a new job
  • 75% said that they are more likely to apply for a job that lists a salary range in the job posting
  • 70% indicated that they’re more likely to apply for a job with an organization that publicly shares salary bands for its positions

In fact, job listings with salary information in Canada receive up to 90% more applications than those without. Pay transparency does wonders for a company's employer brand too. Recruiters have a wider applicant pool, increased candidate quality, and reduced bias in the recruitment process.

Pay transparency builds a happier, more equitable workplace

Salary transparency can also impact workplace culture and day-to-day office culture, as well as contribute to business transparency. With increased transparency, employees have greater confidence that they are compensated fairly for their work. Pay transparency can facilitate a range of positive “downstream” impacts, like increased employee loyalty, tenure time and commitment to the role. In a recent Indeed survey, 63% of Canadians now believe that all companies should disclose salaries in the hiring process,1 and nearly 75% of people — including 81% of women — say they would be comfortable with their salary being made public if it could reveal unfair discrepancies between men and women’s wages.

Openness about pay structures and compensation also solidifies the business’ commitment to fairness, equity, and equal growth opportunities. And, when it comes time for promotions or lateral moves, employees from all demographic groups have a more level playing field from which to negotiate. Companies are fostering a more open, honest workplace where employees feel they belong.

Moving forward with salary transparency

In 2022, Indeed surveyed 100 Canadian HR executives to better understand the current pay transparency landscape: 99% of respondents indicated that they intended to improve [their business’] salary transparency practices within the next 18 months; 88% have or are moving toward a defined pay structure, and only 12% are or will address pay on a case-by-case basis. Since 2019, Indeed has started including pay ranges in open roles.2

However, pay transparency can’t be implemented overnight or haphazardly. At a minimum, businesses should:

  • Conduct a full payroll audit to understand the current state and identify and address any critical salary discrepancies
  • Ensure there are clearly defined roles, responsibilities, and business hierarchies so that all employees can better understand the determining factors for pay, seniority, and job progression
  • Compare proposed changes in compensation to competitors’ pay, and identify if further adjustments may be needed to protect against turnover.

While the implementation of pay transparency can be a daunting prospect—and is often seen as a costly endeavour—in the long run, it can save money in reduced recruitment costs and turnover, and improved employee engagement.

Whether in response to legislation or national trends, organizations that move forward with salary transparency may reap the rewards across their business: increased retention and improved employee morale; improved candidate pool; better candidate quality; and, reputational gains in the wider market.

1 Censuswide survey on behalf of Indeed, n=1006

2 Search jobs on Indeed