Canada is making strides to close the gender wage gap with the adoption of its historic Pay Equity Act. Originally passed in December 2018, the Act goes into full effect August 31, 2021.

The Canada Pay Equity Act aims to address systemic gender-based discrimination, foster equal compensation for work of equal value, and proactively maintain pay equity going forward. To achieve these goals, the Act requires federal employers to establish a pay equity plan through a rigorous process, then create a pay equity committee to develop, execute, and maintain said plan.

Below we’ve outlined what employers need to know about designing a pay equity plan, how to create a pay equity committee, who the Act applies to and why organizations in the U.S. should start preparing now.

Impacted organizations

The Canada Pay Equity Act applies to federally regulated organizations in public and private sectors. Certain distinctions apply to organizations based on the total number of employees in their workforce and whether they are unionized:

  • Employers with 10 or more employees must establish a pay equity plan
  • Employers with 100 or more employees must additionally establish a pay equity committee
  • Employers with 10-99 employees must establish a pay equity committee if any of the employees are unionized
  • Employers with 10-99 non-unionized employees may voluntarily establish a pay equity committee, but are not required to do so

Establish a pay equity plan

Pay equity plans are intended to identify and remedy pay disparities based on gender. The Act requires employers pay equity plans to include the following:

  • Identification of job classes
  • Determination of predominantly female and predominantly male job classes
  • Determination of value of work
  • Calculation of compensation
  • Comparison of compensation

Notably, the Act broadly defines “compensation” to include salaries, commissions, bonuses, and paid time off; in-kind payments; employer contributions to retirement, long-term disability, and health insurance plans; and any other “advantage” received directly or indirectly from the employer. 

Create a pay equity committee

The Canada Pay Equity Act requires employers to form representative pay equity committees that will develop, execute, and maintain the pay equity plans. Specifically, “At least two-thirds of the members must represent the employees to whom the pay equity plan relates.” There are other stipulations for establishing membership – for example, women should compose at least 50% of the pay equity committee.

Pay equity committees will be responsible for reviewing and updating pay equity plans at least once every five years.

Built-in accountability

The work doesn’t end with establishing pay equity plans and committees. The Act includes measures for accountability and maintenance to allow for continuous improvement. These measures require employers to:

  • Post a draft pay equity plan, with an opportunity for employees to comment (Employee feedback must be taken into consideration.)
  • Implement the pay equity plan within three years
  • Increase compensation for the predominantly female job classes that are comparatively underpaid
  • Maintain pay equity and review the pay equity plan at least once every five years
  • Provide certain information/notices to their pay equity committee, employees, and the Pay Equity Commissioner

Pay Equity Act non-compliance

The Act penalizes employers that fail to comply. Specifically, Canada’s Pay Equity Commissioner is responsible for enforcing the Act and may impose penalties between $30,000 to $50,000 for violations.

International efforts foreshadow changes to U.S. legislation

Canada’s recent action to confront systemic gender-based discrimination may herald change in the U.S. and other countries throughout the world.

Equal pay is already rising as a top concern in both American legislative board rooms and employee break rooms alike. Last spring, Congress reviewed policies aimed at resolving pay disparities for protected classes. The heads of U.S. labor and employment organizations, including the chair of the Equal Employment Opportunity Commission (EEOC) and the director of the Office of Federal Contractors Compliance Programs (OFCCP), are also making pay equity a focus.

A diversity, equity, and inclusion (DEI) lens is integral to building a good workplace culture and a reputation as a forward-thinking employer. Simply put, organizations that demonstrate a commitment to DEI aren’t only doing the right thing – they’re also bolstering recruitment efforts and attracting investors 

One of the Canada Pay Equity Act’s most prominent focuses is to close the gender wage. Through proactive pay equity measures, U.S. employers too can close the gap and promote workplace equality. With new federal regulations on the horizon, U.S. organizations that approach the social good on their own are setting themselves up for greater success. Best practices include undergoing a comprehensive pay equity audit now. To get started, download our white paper Designing a Successful Pay Equity Program.

Organizations looking to disclose pay equity, diversity, and inclusion data information should do so within an ESG reporting framework. Download our white paper, DEI in ESG Reporting to learn about the different standards you can leverage for sharing your progress.

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