We’ve all heard about pay equity but what does that actually mean in a workplace? And as an Ontario employer, what are your obligations around reaching and maintaining pay equity? One this is for sure, outside of a huge financial risk, you also do not want to be known as an employer who is not paying their employees equally. Here’s everything you need to know about your obligations under the Pay Equity Act.

What is Pay Equity? 

Pay equity means equal pay for work of equal value. This means employees who perform substantially the same kind of work in the same establishment,  which requires substantially the same skill, effort, and responsibility and under similar working conditions should be compensated equally, regardless of gender. All of these conditions must be met for equal pay for equal work to be required.

But of course, there are some exceptions. Even if all of the above conditions are met, a difference in pay can apply due to seniority (length of service), merit (how well they perform at their jobs), or systems that measure earnings by production or quality (promotions based on exceeding sales, etc.). The difference in rate of pay includes hourly or salary pay rates, overtime pay rates, and commission rates.

Who Does the Pay Equity Act Apply To?

The Pay Equity Act applies to all employers in the private sector in Ontario who employ ten or more employees and all employers in the public sector, including all full-time, part-time employees and seasonal employees. The only employees exempt from the overall count are students employed during their vacation periods.

Ok, So the Pay Equity Act Applies to My Workplace, Now What? 

If the Pay Equity Act applies to your workplace, your obligations are to

• Determine job classes for all employees and include the employees’ gender and pay rate so you can easily determine discrepancies within each job class;
• Determine the value of job classes based on legislative requirements of skill, effort, responsibility and working conditions using a gender-neutral comparison tool;
• Conduct job and pay rate comparisons for all genders in each job class using job-to-job and/or proportional value method of comparison;
• Identify and adjust the compensation of underpaid genders in each job class so that they are paid at least as much as an equal or comparable rate as others in that job class. All retroactive payments must include interest; and
• Provide payroll summary and proof of payment to the Pay Equity Office, if ordered by a Review Officer to do so.

As an employer, you do not need to report or submit any documentation to prove that you have reached and are maintaining pay equity.

What are the Consequences of Not Maintaining Pay Equity? 

Firstly, the most important consequence is a moral one. The Pay Equity Act aims to redress systemic gender discrimination in compensation for work performed by employees in the same job classes and as an employer, you should be aiming for the same thing. Secondly, and just as important, is the financial consequence. Essentially, not maintaining pay equity in your workplace would become a live issue if an employee were to make a complaint to the Ministry of Labour stating that your organization is not providing equal pay for equal work. If a complaint is made, that is when the Pay Equity Office would do an investigation and a Review Officer would ask you to provide a payroll summary and proof of payment to your employees. There is a fairly large risk here because if you are found to not be maintaining pay equity, you will be on the hook for retroactive payments to ensure equity where necessary and these payments also incur interest.

Do you have questions about your obligations around pay equity in your workplace? Get in touch for a consultation.