The Canadian government plans to move forward with federal pay equity legislation this year, a commitment Prime Minister Justin Trudeau made during a recent speech at the World Economic Forum in Davos, Switzerland.
The impending legislation is long overdue. Pay equity requirements at the federal level have existed since 1977, yet Canada ranks 80 out of 145 countries in gender wage equality, according to the World Economic Forum’s 2015 gender gap report. The Liberal government has been under pressure to introduce more robust legislation based on a proactive model of compliance on the part of employers.
Now the stage is set for sweeping changes that will impact around 874,000 workers and 11,000 organizations, such as Crown corporations (including Canadian Broadcasting Corporation, VIA Rail, Canada Post and the Bank of Canada), and federal public service and federally-regulated companies, such as banks and airlines.
Expected in the fall of 2018, the new legislation will have a transformative impact on Canadian workplaces. In addition, these policies could have implications for other countries as more countries debate gender pay issues. Now is the time for HR managers to ensure their organizations are prepared to comply with the new rules.
A proactive approach to pay equity
A key feature expected within the new legislation is a proactive approach to pay equity that places the onus on employers to comply with the law and ensure any gender-based wage gaps are addressed. This could include an obligation for employers to review their organizational wage structure, identify gaps and develop a pay equity plan to eliminate these inequities. This shift away from the current complaints-based model (reactive approach) would also help in avoiding lengthy and costly legal disputes down the road.
Some recommendations from the 2016 Report of the Special Committee on Pay Equity that may set a precedent for current legislative efforts include:
• Pay equity committees: For organizations with 100 or more employees, committees comprising employees or employee representatives would have tobe established. These committees would be tasked with creating a pay equity plan and monitoring the elimination of wage gaps.
• Transparency: The results of an organization’s pay equity plan, such as information on wage adjustments, must be clearly communicated to all employees.
• Maintenance and reporting: Employers would need to monitor and maintain their pay equity plans on an ongoing basis and report to an oversight body.
• Inclusion: The new legislation is expected to apply to all employees, including part-time, seasonal and temporary workers.
• Enforcement: The government is expected to create a new federal pay equity commission and tribunal to administer and enforce the legislation.
Keeping ahead of legislation
Whatever the outcome of the Canadian legislation at the federal level, HR managers can take the following measures starting now, to help ensure future compliance with gender equality legislation. (Employers outside Canada that are concerned about pay equity may also want to consider the following actions.)
- Conduct a pay equity analysis: Identify female-dominant (e.g. nurses, receptionists, bank tellers) and male-dominant (e.g., truck drivers, engineers, equipment operators) job classes. Then develop measurement tools and processes to evaluate the pay levels of the men and women in these positions at your organization, with the goal of ensuring both receive equal pay for work of equal value. Note that legislation could mandate that the results of your gender-dominant job evaluations be posted publicly for all employees to view.
- Close pay gaps: If your pay equity analysis reveals some female-dominated job classes are undervalued, a pay equity plan should be created. When calculating wages, non-salary compensation such as bonuses and other benefits should be factored in. HR managers should inform their chief financial officers of costs associated with closing gaps and discuss actions required for compliance as advised by legal counsel.
- Create an action plan: Any issues identified through the pay equity analysis should be assigned a level of risk and prioritized accordingly. Determine how you will address each inequity and what budgetary impact this might have.
- Ensure robust data systems: Databases should contain up-to-date employee information so that jobs may be properly evaluated. Both current and historical job data, including salary, bonuses and other financial incentives, should be available and easy to access from internal systems.
- Ensure consistency in administration: In some cases, an organization’s HR policies may be sound, but their administration across all branches of a large organization may be inconsistent, resulting in wage inequities. For example, pay equity gaps may result from varying definitions of an average work week among different provinces, states or regions.
The benefits of pay equity
Both employers and employees stand to gain from proactive pay equity legislation. An equitable and transparent workplace will result in greater employee engagement and an improved ability to retain and attract talented employees. There is also a financial upside – under a proactive model, fewer complaints of inequality from employees will translate into cost savings in settling claims. Similarly, achieving pay equity in a timely manner will help employers avoid large retroactive payouts.
Organizations that proactively promote gender equality may also reap the rewards of more positive associations with their brand: Customers favorably view organizations that don’t just pay lip service to inclusion and diversity, but actually practice what they preach. It’s a win-win scenario for everyone, especially in light of today’s renewed focus on gender equality.
For a deeper dive into this topic, register to watch our recent webcast, where you’ll learn more about:
- The Parliamentary Committee’s main recommendations for this new legislation
- Potential implications for your organization and compensation programs
- Solutions, options and support available
Jean-François Vernier is a Senior Consultant and Canadian Pay Equity Practice Leader at Willis Towers Watson, Montreal.