Pay Equity Short Explainers

 

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.


Footnotes

Footnote 1

Statistics Canada. Average hourly gender wage ratio for both full-and part-time employees, aged25 to 54 years (2019). Table 14-10-0340-02 Average and median gender wage ratio, annual and Table 14-10-0340-01 –employee wages by occupation, annual

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Footnote 2

The term 'borders' used throughout this document includes provincial, territorial and international borders.

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