Pay Equity Short Explainers

The Pay Equity Act requires federally regulated employers, with an average of 10 or more employees, to take a proactive approach to correct gender wage gaps within their organization. 


Introduction – What is Pay Equity?

What is pay equity about?

  • Pay equity is about “equal pay for work of equal value”.
  • “Equal pay for work of equal value” means that if two different jobs contribute equal value to an employer’s operations, then the employees in those jobs should receive equal pay
  • “Equal pay for work of equal value” is like comparing apples to oranges – They are different, but equally nutritious – for example:
    • Comparing the value of a truck mechanic job class (commonly held by men) to that of an account technician job class (commonly held by women).
  • Pay equity is internationally recognized as a fundamental human right.

What is pay equity not about?

Pay equity is not about “equal pay for equal work”.

  • “Equal pay for equal work” is like comparing apples to apples.
  • “Equal pay for equal work” compares the pay of similar jobs, where women and men are doing the same work, for example:
    • Comparing a female truck mechanic’s pay to a male truck mechanic’s pay; or,
    • Comparing a female bank teller’s pay to a male bank teller’s pay.

Why is pay equity important?

Pay equity is important because it addresses the undervaluation of women’s work, which contributes to the gender wage gap.

Jobs that are commonly held by women tend to be paid less than jobs commonly held by men – even when the work is comparable in value based on skill, effort, responsibility and working conditions.

The gender wage gap is a persistent problem: in 2019, a woman in Canada earned 0.88 centsNote de bas de page 1 for every dollar a man earned. That is equivalent to a $3.87 hourly wage rate gap (or 12%) between men and women.

What is the federal pay equity legislation?

While not yet in effect, the Pay Equity Act was passed by Parliament and received Royal Assent on December 13, 2018.

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.

Who will be covered by the federal pay equity legislation?

Once in force, the Act will apply to federally regulated employers with an average of 10 employees or more.

About 4,500 federally regulated employers with an average of 10 or more employees and about 1.2 million employees will be covered by the Act.

Those employers that will be covered will be required, among other things, to:

  • Create and post a pay equity plan within three years;
  • Pay any increases in compensation;
  • Report through annual statements (not until three years after the coming into force); and,
  • Update the pay equity plan at least every five years.

Those employers with an average of fewer than 10 employees will remain subject to section 11 of the Canadian Human Rights Act.

What is different between the federal Pay Equity Act and Section 11 of the Canadian Human Rights Act?

The federal Pay Equity Act is proactive.

Proactive pay equity legislation puts the onus on employers to assess, at set points in time, whether employees in jobs commonly held by women are earning equal pay for work of equal value in their workplace.

Section 11 of the Canadian Human Rights Act is complaint-based. This means that the onus is on individuals filing a complaint.

Application – Who will be covered by the federal pay equity legislation?

Who does the Pay Equity Act apply to?

The Pay Equity Act is not in force yet. Once in force, it will apply to federally regulated public and private sector employers with, on average, 10 or more employees.

What if my workplace has fewer than 10 employees?

Federally regulated workplaces with fewer than 10 employees will remain subject to pay equity requirements in section 11 of the Canadian Human Rights Act.

How do I know if the law applies to my workplace?

The Act covers three types of workplaces:

  • Federally regulated private-sector workplaces – e.g. banking, communications and transportation sectors;
  • Federally regulated public-sector workplaces – e.g. government departments and agencies, Minister’s – including the Prime Minister offices, the Royal Canadian Mounted Police and Canadian Armed Forces; and,
  • Parliamentary institutions – such as the House of Commons, Senate, Library of Parliament, Parliamentary Protective Service and the offices of Members of Parliament.

Who is not covered? Territories and Indigenous governing bodies

The Act does not currently apply to the governments of Yukon, the Northwest Territories and Nunavut, or Indigenous governing bodies, including First Nations Governments.

Pay equity in these workplaces is still protected through section 11 of the Canadian Human Rights Act or territorial legislation.

Examples of federally regulated private-sector workplaces

The type of activities done at a workplace determine whether it is federally regulated.

Banking Activities

Banking services by banks or authorized foreign banks.

Navigation and Shipping Activities

Any water transportation of goods or passengers that involve the crossing of provincial, territorial or international bordersNote de bas de page 2 on a regular basis. This includes:

  • Port services, including loading and unloading vessels, ship repair and salvage services; and,
  • Navigational, tug, pilot or other harbour services.

Air Transportation Activities

Including airports, airfields, aerodromes, flight and air traffic controllers’ schools and airlines:

  • Airplane hangar parking, refuelling or rental services;
  • Aircraft servicing and maintenance, including cleaning services and maintaining runways;
  • Airline baggage or cargo services; and,
  • Airport security guard services.

Rail Transportation Activities

Rail transportation of goods or passengers that involve the crossing of borders on a regular basis, maintenance or other support services.

Road Transportation Activities

Road transportation of goods or passengers that involve the crossing of borders on a regular basis, maintenance or other support services.

Other Interprovincial Connections

Activities related to interprovincial connections, such as:

  • Canals, pipelines, tunnels and bridges that cross borders; and,
  • Pipeline transportation of oil, natural gas, or petroleum products across borders.

Telecommunications Activities

Such as those related to telecommunications (e.g. telephone, satellite and internet providers) and radio and television broadcasting.

Postal Services Activities

Postal services, including courier services that cross borders and those that are essential to the work of Canada Post.

Works declared to be for the general advantage of Canada

An organization or activity that has been declared by Parliament to be for the general advantage of Canada, such as:

  • Grain handling, including grain elevators, flour, feed and seed mills;
  • Livestock food manufacturing; and,
  • Uranium mining and processing, including nuclear power plants.

Protection of Fisheries

Businesses whose activities deal with the protection of fisheries as a natural resource.

Crown Corporations

Crown corporations that perform duties on behalf of the Government of Canada – Any corporation or subsidiaries established as agents of the Crown and / or who employ employees in connection with the operation of any federal work, undertaking or business, such as:

  • Business Development Bank of Canada;
  • Canada Mortgage and Housing Corporation; and,
  • Export Development Canada.

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

The Pay Equity Act is not in force yet, but it is a good idea to get a head start in order to understand the law’s implications for your organization.

Once the law comes into force, the obligations will be as follows…

Year 1 to Year 3 – Develop and post a pay equity plan

Federally regulated workplaces with fewer than 10 employees will remain subject to pay equity requirements in section 11 of the Canadian Human Rights Act.

The Act requires employers to develop a pay equity plan within three years

This includes the following steps:

Post a notice in the workplace to inform employees about the pay equity process.

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.

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).

Year 3 to Year 8 – 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.

Five years after posing the plan – Maintain and update your pay equity plan

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

How can you prepare for the Pay Equity Act?

Federally regulated workplaces can prepare for the Pay Equity Act in many different ways. For example, they can:

  1. Increase awareness of pay equity;
  2. Set the foundation for a pay equity committee;
  3. Create or update job descriptions;
  4. Use gender-inclusive language;
  5. Look into a job evaluation tool;
  6. Gather the data required to develop a pay equity plan; and
  7. Collect compensation information.

A. Increase awareness of pay equity

As you prepare to implement the requirements under the Pay Equity Act, it is a good idea to provide straightforward information to employees about pay equity and the process that will be undertaken.

  • For example, employees may benefit from knowing that a pay equity analysis will be conducted to determine the value of jobs done mainly by women and the value of jobs done mainly by men in the organization and to determine if there is a pay gap between male and female jobs that are the same value.

By informing employees about pay equity and the process by which the organization will comply with the Pay Equity Act (i.e. the creation of a pay equity plan), organizations can create the optimal conditions for implementing pay equity.

It is important that employees understand not only what pay equity is, but also what their role is in the process:

  • For those organizations where a pay equity committee will be required (see below), employees will need to understand how they will be represented on the committee and what the representatives will do.
  • In organizations where the employer is responsible for preparing the pay equity plan (see below), employees should be informed that they may be involved in reviewing job descriptions and providing information about their job duties. Employees should be informed that their participation in the pay equity process is important to meeting the requirements of the Act.

B. Set the foundation for a pay equity committee

Pay equity plans will be either employer-led or, depending on the employer size and employees’ unionization, committee-led.

The following employers will need to establish a pay equity committee made up of employer and employee representatives:

  • Employers with 100 or more employees; and,
  • Employers with 10 to 99 employees, some of whom are unionized.

To prepare for creating a pay equity committee, it will be beneficial to think about the following:

  • Consider what the pay equity committee will look like in terms of size and composition, based on both the minimum requirements in section 19 of the Act, and your own organizational reality.
  • As an employer or a bargaining agent representing employees, decide in advance who is going to represent you on the pay equity committee and provide training in areas that are relevant to pay equity, such as:
    • job evaluation;
    • compensation analysis; and
    • unconscious bias identification.
  • As an employee interested in putting your candidacy forward to be on the pay equity committee, you may also benefit from training.
  • As an employer, you may develop internal policies and think about what the terms of reference for the pay equity committee may look like. Remember, however, that the committee will have a say about its own governance structure.
  • As an employer, you may also consider how to support employees non-represented by a union in their election of committee members.

C. Create or update job descriptions

Job descriptions for job positions in the workplace will facilitate the value of work assessment required under the Pay Equity Act. A strong job description will make this work much easier.

  • Consider job duties and the range of skill, effort, responsibility and working conditions associated with the job.
  • Consider jobs where workers are unionized and non-unionized.
  • Consider how job content data will be collected, for example through:
    • Interviews with those who do the job and their managers;
    • Questionnaires to employees to collect or revise job content information;
    • Desk audits to observe the work being completed; or
    • Validation exercises (such as taking an existing job description and verifying that the content is accurate and complete).

A good job description will:

  • List the primary duties and responsibilities assigned to the position;
  • List the required skills or competencies;
  • Identify the effort required to complete the duties/responsibilities and the working conditions under which the position is performed; and
  • Include any other job-related information as needed.

The creation or updating of job descriptions can be advanced by employers ahead of time. However, if you anticipate establishing a pay equity committee, remember that committee members will have a role to play in the review of job descriptions. Note that job descriptions will have to provide sufficient information to adequately evaluate the work using the job evaluation method selected by the committee. For example, if the job evaluation method assesses mental effort, job descriptions will need to cover this aspect of the work.

D. Use gender-Inclusive language

When creating or reviewing job descriptions, as well as throughout the pay equity process, it is important to use gender-inclusive language to overcome gender discrimination. Organizations should be aware of unconscious gender biases that may show in the language used. These can stem from traditions, norms, values, culture and experiences.

  • Using gender-inclusive language means speaking and writing in a way that does not discriminate against a particular sex, social gender or gender identity, and does not maintain or promote gender stereotypes. It is a powerful way to promote gender equality and to get rid of gender bias.
  • Using gender-inclusive language might require you to avoid certain terminology that is traditionally associated with men or women. For example, attributes such as aggressiveness, independence and courage might be unconsciously associated with men while gentleness, sensitivity and intuitiveness might be associated with women.
  • Promote the use of gender-neutral language in your communications.

E. Look into a job evaluation method

The employer or pay equity committee must choose a job evaluation method to determine the value of work for all of their predominantly female and male job classes.

  • If there is no job evaluation method in place to assess job value, workplaces should start looking into options to obtain or build a method that is adapted to their organization.
  • However, workplaces should be careful not to get too far ahead in the process given that many of them will create the pay equity plan jointly with a pay equity committee. The committee will make the final decision on the choice of a method.
  • Even if employers already have a method, they have to ensure that it meets the three requirements set out under the Pay Equity Act (sections 42 and 43):
    • Accounts for skill, effort and responsibility required to perform the work and the conditions under which the work is performed;
    • Does not discriminate on the basis of gender, and;
    • Makes it possible to determine the value of the work for all predominantly female and male job classes identified under a given pay equity plan.

F. Gather the data required to develop a pay equity plan

Federally regulated workplaces should consider updating or collecting the data that will be necessary to develop a pay equity plan, including:

  • List of job positions and dates when these positions were first created or used in organization;
  • List of employees holding each position both currently and, if available, in the past (e.g. 5 years);
  • Self-identified gender, including non-binary, of employees;
  • Job descriptions;
  • Standard hours of work for each position (if not available, track actual hours of work to ensure that hourly rates of pay can be easily determined);
  • List of compensation elements provided to each position, which can include hourly pay, salary, commission, pay per kilometer, pay per piece, benefits plans, vacation pay and allowances granted when on call (see Diagram 1: Total Compensation Model); and
  • Salary range for each position (if available).

G. Collect compensation information

For some employers, there may be some work to do in compensation systems, for example to combine all elements of pay within a single database.

  • Compensation: refers to all payments and benefits, (directly or indirectly paid) provided to a person who performs functions for the organization. The Pay Equity Act provides a definition under subsection 3(1).
  • Compensation plan: refers to the way organizations pay their employees for the work that they do. This can include direct payments (e.g. salary), indirect payments (e.g. contributions to a pension plan) and benefits (e.g. medical plan).
  • Workplaces would benefit from having a clear compensation plan/pay policy in writing. (see Total Compensation Model below)

Total Compensation Model

Base Compensation Benefits Paid Time Off Performance Pay Indirect Pay

Base Pay

Commission

Piecework

KM rate based pay

Severance entitlements

Tips

Health and Dental Plans

Health Savings Accounts

Counselling Services

Income Protection Short Term Disability/Long Term Disability/Life

Pension or RRSP plans

Vacation, sick, personal, management leave (as examples)

Recognition awards

Individual bonus plans

Profit or gain sharing

Mid- or long-term incentive plans

Wellness/Fitness benefits

Payments in kind

Interest free loans

Personal cellular/computer allowances

Social or recreational memberships

Professional memberships (when not a condition of employment)

Parking & car allowances

Quick Tips: Thinking about hiring a consultant?

Some workplaces may decide to call on an external resource or a consultant to help them carry out the pay equity process for their organization. Using a consultant can assist you in finding out about different approaches to assessing and comparing the jobs in your workplace. Elements that may be taken into account if you are considering using the services of a consultant include:

  • If you have decided to form a pay equity committee or if the law requires you to form one, it is suggested that the committee members participate in the decision of whether or not to use a consultant.
  • Make sure that the consultant has a good knowledge of the principles of pay equity and the law.
  • Membership of a consultant in a professional order ensures that the latter is subject to a code of ethics in their field of practice.

Thematic External Resources:

*Note that the Canadian Human Rights Commission is not responsible for the contents of these resources and these do not reflect the federal Pay Equity Act requirements. They are provided for information only.

Increase awareness of pay equity

Set the foundation for pay equity committee

Create or update job descriptions

Use gender-inclusive language

Look into a job evaluation tool

Gather the data required to develop a pay equity plan

Collect compensation information

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