Timelines – What are the key timelines under the new federal pay equity legislation?

Year 1 to Year 3 – Establish the foundation and create a pay equity plan 

The Pay Equity Act requires employers to develop a pay equity plan within three years.  
 
This includes the following steps: 

  • Post a notice by November 1, 2021, in the workplace to inform employees about the pay equity process.  Please find templates of Pay Equity notices addressed to employees.
  • Establish a pay equity committee (mandatory depending on size and employee unionization). 
  • Develop a pay equity plan 
    • Identify job classes in the workplace (i.e. positions that share certain similarities); 
    • Determine which job classes are commonly held by women and which ones are commonly held by men; 
    • Value the work done in each of these job classes; 
    • Calculate total compensation in dollars per hour for each predominantly male and female job class; and, 
    • Determine whether there are differences in compensation between jobs of equal value. 
  • Post a draft of the pay equity plan and a notice to employees of their right to provide comments on the draft plan.
  • Employees must be given 60 days to provide written comments on the plan.
  • Year 3 - Post the final version of the pay equity plan and the notice of increases.

From Year 3 – Increase employee compensation

Once the final version of the pay equity plan has been posted, employers must correct any pay equity gaps. This is done by increasing the compensation of employees in jobs that are not receiving equal pay for work of equal value.

These increases in compensation are payable in full the day after the final version of the plan is posted; however, employers may be allowed to phase in these increases (please see below).

Phase in the increases

If the total amount of the increases in compensation that are owed to all employees is greater than one percent of the employer’s annual payroll, the employer may phase in the increases over a number of years. Timelines for doing so differ depending on the number of employees.

  • Employers with 10 to 99 employees who qualify, must phase in the increases in compensation within five years of posting their plan.
  • Employers with 100 or more employees who qualify, must phase in the increases in compensation within three years of posting their plan.

Each annual increase must be equal or greater than 1% of the employer’s payroll costs for the year preceding the posting of the plan.

After Year 3 – File your annual statement

The filing of your annual statement is required after the three-year period in which you develop and post your pay equity plan.

Five year after posting the plan – Update your pay equity plan

All employers must update their pay equity plan every five years.

Who is counted as an employee?

The definition of “employee” in the Act includes:

  • Non-management and management, which generally includes executives and Chief Executive Officers;
  • Unionized and non-unionized employees;
  • Full-time and part-time employees;
  • Permanent, casual and temporary employees;
  • Dependent contractors;
  • Employees performing federally regulated activities as part of a separate unit for a provincial employer; and,
  • Employees on leave, including long-term leave (e.g. sick leave, maternity leave).

This means that in federally regulated private-sector workplaces – all employees, even those employed through a secondment agreement or working as a casual or through a staffing agency, are an executive or on long-term leave – are to be included in the employee count.

This means that in federally regaled public-sector workplaces – employees appointed as a public servant under the Public Service Employment Act or other applicable Acts regulating appointments in the federal public service– are to be included in the employee count.

For more information, please consult the Definition of Employee - Interpretations, Policies and Guidelines

What is an employee count?

An employee count is done on the basis of the average number of employees working for an employer in a given year – the “reference year”. The employee count determines whether and when an employer is subject to the requirements of the Act.

In conducting an employee count, the Act distinguishes between a fiscal year and calendar year.

Public sector employers – Fiscal year

Public-sector employers must count the average number of their employees in the previous fiscal year – April 1 to March 31. If the average number of employees in a given fiscal year increases to 10 or more, the employer will become subject to the Act on April 1 of the next fiscal year.

  • April 1st, 2020
    • Reference Year 1 - Employer X counts an average of 8 employees employed between April 1, 2020 and March 31, 2021.
    • Employer X is not subject to the Act at coming into force.
  • April 1st, 2021
    • Reference Year 2 - Employer X counts an average of 14 employees employed between April 1, 2021 and March 31, 2022
    • Employer X is subject to the Act as of April 1st, 2022.
  • August 31, 2021 - Act comes into force

Private-sector employers – Calendar year

Private-sector employers must count the average number of their employees in the previous calendar year – January 1 to December 31. If the average number of employees in a given calendar year increases to 10 or more, the employer will become subject to the Act on January 1 of the next calendar year.

  • January 1st, 2020
    • Reference Year 1 - Employer X counts an average of 8 employees employed between January 1, 2020 and December 31, 2020.
    • Employer X is not subject to the Act at coming into force.
  • January 1st, 2021
    • Reference Year 2 - Employer X counts an average of 14 employees employed between January 1, 2021 and December 31, 2021
    • Employer X is subject to the Act as of January 1st, 2022.
  • August 31, 2021 - Act comes into force

Can you show me an example of how to do an employee count?

Simple method for calculating the number of employees from payroll records

  • Review payroll records to determine the number of employees paid during each pay period (usually 26 per year);
  • Adjust the number of employees over the 26 pay periods based on the definition of employee under the Act:
    1. Remove employees whose employment relationships are excluded under the Act (students working through a student employment program, etc.); and,
    2. Include employees who may be considered to be dependent contractors under the Act.
  • Calculate the average number of employees for the year by
    1. Adding up the adjusted number of employees for each of the 26 pay periods; and,
    2. Dividing the total adjusted number of employees by 26.
Table 1 : Simple method for calculating the number of employees from payroll records
Pay period Total employess on payrol   Pay period Adjusted number of employees
on payroll per Pay Equity Act
1 85   1 83
2 87 2 84
3 87 3 84
4 106 4 100
... ... ... ...
26 117 26 103
Total 2,735 Total 2,706
Average by pay period =
Sum of number of employees on payroll
/ 26 = 105
  Average by pay period =
Sum of number of ajusted employees on payroll
/ 26 = 104

Does an employee count ever have to be updated?

Employers subject to the Act must update the employee count as part of the requirement to review and update their pay equity plan. This must be done at least once every five years.

Should employers learn that the average number of employees they have has declined to less than 10 while updating the employee count, they are still subject to the Act and still have to update their pay equity plan. Once an employer becomes subject to the Act, they remain subject to the Act.

How does a group of employers conduct an employee count?

The process for conducting an employee count is largely the same for a group of employers.

A group of employers must determine the sum of all the employees employed by all the employers that are a part of the group. This sum, and the presence of unionized employees, is what the group of employers will use to determine if they must establish a pay equity committee to develop their pay equity plan.

Table 2 : Process for conducting an employee count
Employer # Non-unionized employees # Unionized employees Total # employees
A 50 44 94
B 13 37 63
C 27 9 36
D 12 76 88
Total 102 166 281
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