At press time, the Liberal Legacy Pay Transparency Act in Ontario was still being mulled by Doug Ford’s Conservatives. Are employers ready for the next steps?
The Pay Transparency Act, introduced by Kathleen Wynne’s Liberals in March 2018, is set to come into effect in Ontario on Jan. 1, 2019. This Act (known as Bill 203) will now require employers to provide an expected salary or range (i.e., actual numbers) in their publicly advertised job postings. Employers can no longer ask about an applicant’s compensation history or punish employees who disclose or inquire about compensation. And, they must track and report compensation gaps to the province. According to the Act, “Every prescribed employer shall … prepare a pay transparency report … that contains … the employer’s workforce composition and differences in compensation in the employer’s workforce with respect to gender and other prescribed characteristics.”
“By having more transparency, employees would then have a greater ability to accurately negotiate with their employers as to what their compensation should be,” says Andrew Monkhouse, managing partner and owner of Monkhouse Law. “It doesn’t say people have to be paid the same; it just says it gives people more information.”
The Act benefits employees in knowing compensation rates for their positions, as well as those positions above them. “That means then they know where their career path leads to, so that’s all transparent, which is really positive,” says Susan Klunder, associate director HR for FreshBooks, an accounting software firm.
However, this transparency can be a negative, according to Alexander Bell, a principal at the consulting firm Mercer. “That’s going to be a potential point of employee dissatisfaction, where you’re making a range available and people don’t understand why they’re at a certain point in the range, or they think they’re too low in the range,” says Bell. “I think it’s going to be hard for employers to win and make this something that makes people happy.”
But Monkhouse hasn’t heard of too many companies fervently preparing for the Pay Transparency Act. “I think a lot of people feel that if the Conservative government is going to roll back the protections under Bill 148 (Fair Workplaces, Better Jobs Act), then rolling back an Act that they didn’t support to begin with — and has not come into force yet — is probably even more likely,” he says.
Monkhouse could be right. In an interview at Queen’s Park in late October 2018, Ontario Labour Minister Laurie Scott said, “We’re looking at the Pay Transparency Act in all reality to see how it fits with businesses …We’re committed to the principle of pay transparency. It’s just the timing we’re looking at.”
Still, Bell says the Act has been on clients’ radars for about the last six months. “The clients with the most questions are the ones that are currently the least transparent with their pay practices,” he says, pointing out that these are primarily from the private sector.
In addition, a lot of employers “depending on the size of the companies don’t have anything like a job evaluation policy or process in place,” says Joseph Chan, senior vice-president, Stem Capital Inc., a professional advisory services firm.
Actually Chan says his clients are more concerned with pay equity. And they should be. There’s not only Bill 203, mandating reporting of gender-based compensation stats, but now there’s also new federal pay equity legislation, recently announced at the end of October 2018.
According to the legislation, the new Pay Equity Act will mean employers with at least 10 employees will have three years to develop a pay equity plan. The legislation will apply to federal public servants and political staff and federally regulated sectors such as banking.
Employers, get ready
So, are employers ready? FreshBooks, a Toronto-based cloud accounting company with roughly 300 employees, is. Klunder isn’t concerned about no longer being able to ask about past compensation. “We’re absolutely prepared for that because it’s not necessary,” she says. “Even though we do ask those questions to get some market data, we have other sources from market data.” In fact FreshBooks does a market analysis every six months of each position at the company, along with audits every quarter. “When we do these market reviews, we take our current population, their titles, their positions and then look at the marketplace to see if our current employees are in line with what the market pays,” Klunder says. “If they’re not, we do market rate adjustments to ensure they’re at the level of the market or above.”
Gender pay equity isn’t an issue either. “We increase people’s compensation based on promotion and their skill set,” she says. “Other companies will increase pay based on performance review ratings. At FreshBooks, we don’t believe in ratings. Ratings are very backward-thinking; they’re not forward-thinking.”
Still, for Monkhouse, the Pay Transparency Act, and the media attention around it, should give employers pause. “No matter what shape the Act eventually has, now is a good time for employers to consider how they’re paying their workers,” he says.
Anand Parsan, vice-president, compensation consulting practice, with Morneau Shepell, a human resources services and technology company, agrees. “Companies need to look at their compensation and identify where the gaps are, where the issues potentially could be, and proactively address them,” he says. “I think that would be prudent on their part while everyone is waiting with bated breath to see what happens.”
History of Pay Equity in Canada
The International Labour Organization adopts the Equal Remuneration Convention. Canada signs on to the convention concerning “Equal Remuneration for Men and Women Workers for Work of Equal Value” and ratifies this in 1972.
The Canadian Human Rights Act states: “It is a discriminatory practice for an employer to establish or maintain differences in wages between male and female employees employed in the same establishment who are performing work of equal value.”
The Act establishes the Canadian Human Rights Commission, which investigates wage discrimination complaints to see if these complaints can be referred to the Canadian Human Rights Tribunal.
A number of pay equity complaints are filed against the Treasury Board and other federal public sector employers.
The Equal Wages Guidelines, 1986 (first established in 1978, then revised in 1982 and 1986) indicate factors that may justify wage differences.
These provincial governments enact pay equity legislation: Manitoba, 1986; Ontario, 1987; P.E.I., 1988; New Brunswick and Nova Scotia, 1989; and Quebec, 1996. This new legislation applies only to public sector employers, except for Ontario and Quebec, which include some private sector employers.
Fifteen years after it was first filed against the Treasury Board and following two decisions from the Tribunal, the complaint involving the largest group of employees is settled. It involves significant financial settlements and wage adjustments.
In “Time for Action,” a special report on pay equity tabled in Parliament in February 2001, the Canadian Human Rights Commission notes that the complaints-based approach is not well suited to address systemic discrimination. The Commission recommends that the government establish a proactive pay equity system.
The Government of Canada appoints an independent Pay Equity Task Force (the Bilson Task Force) to review Section 11 of the Canadian Human Rights Acts.
In May 2004, the Bilson Task Force submits the “Pay Equity: A New Approach to a Fundamental Right” report, which includes 113 recommendations, including the need to not only achieve but also maintain pay equity.
In October 2005, in response to the Bilson Task Force report, the Government says the report “does not provide an adequate blueprint for the implementation of pay equity in a broad range of federally-regulated workplaces.”
Parliament enacts the Public Sector Equitable Compensation Act.
The federal government does not bring the Public Sector Equitable Compensation Act into force; instead it develops a new direction for pay equity.
On June 9, the Special Committee on Pay Equity tables its report, “It’s Time to Act.” The report recommends that the government draft proactive pay equity legislation applying to the federal public service, Crown corporations, and all federally regulated companies with 15-plus employees.
On October 5, the federal government responds to the Special Committee on Pay Equity’s report, stating that it strongly believes in the principle of equal pay for work of equal value and the fair treatment of all workers, regardless of gender.
While Ontario employers wait to find out if and when the Pay Transparency Act will come into force, Alexander Bell, a principal with Mercer, says they should be proactive anyway.
- Educate your recruiters If you can no longer ask candidates for their compensation history, Bell says you’ll “need to be ready to launch with education sessions and updated processes for your recruitment specialists.”
- Scrutinize your pay structure “Confirm that the ranges are in line with your compensation strategies,” he says. “Then analyze where your employees are within these ranges and ensure you’re comfortable that those outcomes are equitable and fair.”
- Examine gender equity “It’s never too early to take a look at the equity of your pay practices along gender lines,” says Bell. “The majority of organizations that go through the calculation of the average pay for men and women are going to find that the average pay for men is higher,” he says.