Obligation 2: Correct pay gaps

The second obligation of the pay equity process is to provide the required increases in compensation.

If employees are entitled to increases as a result of the analysis performed for the pay equity plan, employers must post a notice informing the employees about the increases in compensation and the date on which those increases are payable before making them.

Increases in compensation are payable in full on September 4th, 2024, or the day after the final pay equity plan is posted.

Starting the day after the final pay equity plan is posted, employers are required to correct any pay equity gaps. This entails:

  • Compensation increases: Increases in compensation must be paid to employees who occupy positions in any predominantly female job classes for which an increase is required, according to the final pay equity plan.
  • Timing of compensation increases: All compensation increases are due in full on September 4th, 2024, the day following the posting of the final pay equity plan. However, employers may be allowed to phase in these increases if they represent 1% of the employer's preceding year's payroll costs.
    • Phase-in of increases:
      • For employers with 10 to 99 employees, increases must be phased in within five years
      • For employers with 100 or more employees, increases must be phased in within three years
  • Interest accrual: Failure to pay any increase in compensation in full will result in interest accruing as per section 97(1) of the Pay Equity Act. Interest is calculated and compounded daily at a rate of 2% annually plus the bank rate in effect on the day for which the interest is calculated.

Important: The Act does not provide the Pay Equity Commissioner with the power to waive interest amounts or extend the deadlines by which they must be paid.

If the Pay Equity Commissioner finds that the employer incorrectly identified the differences in compensation and interest, the Pay Equity Commissioner may order the employer to pay any difference in compensation and interest that she determines, within the time specified in the order.

This means that even if an extension for posting a final pay equity plan is authorized, increases in compensation, lump sums and interest payments are still calculated based on September 4, 2024.

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