Is your Company federally regulated? (Click here for a handy infographic: https://www.canada.ca/en/services/jobs/workplace/federally-regulated-industries/federal-labour-standards.html) If so, it’s time to brush up on the proposed Pay Equity obligations that are coming your way. The Act to Establish a Proactive Pay Equity Regime within the Federal Public and Private Sectors (“Pay Equity Act (PEA)” – https://laws-lois.justice.gc.ca/eng/acts/P-4.2/) received royal assent in December 2018 and is expected to come into force in early 2021.
Similar to the Pay Equity Acts in Ontario and Quebec, the Federal Pay Equity Act requires both public and private employers with at least 10 employees to comply with the legislation and take the necessary steps to ensure Pay Equity is achieved and maintained on an ongoing basis. Once an employer is subject to the Act, they will have 3 years to develop and post a Pay Equity Plan.
Below is an outline of the key elements of the Act:
Pay Equity Plan
Employers are required to first determine the number of plans required for their establishment, and the PEA generally favours one Pay Equity Plan for an employer’s operations. Employers who wish to develop more than one Plan must apply for permission from the Commissioner. Careful consideration should be taken for employers with multiple subsidiaries as well as those who have recently undergone or are undergoing an M&A.
Pay Equity Committees
The formation of a Pay Equity Committee is a central component of the Act. All medium and large size non-unionized employers (100 employees +) as well as every unionized employer, regardless of its size, must create a Pay Equity Committee. The Committee must consist of representatives from both the employer and employee as well as both men and women. If the employer is unionized, the union must be represented in the Committee as well. The Committee’s role is to carry out the steps required to establish a plan; including voting on each step and coming to an agreement on their position. If an agreement cannot be made, the Pay Equity Commission can ask the Commissioner to step in. Small (under 100 employees) non-unionized employers are exempt from having to establish a committee.
Steps to Compliance
The steps required to achieve Pay Equity are similar to those found in Ontario and Quebec. Namely, the employer (or Pay Equity Committee) must:
- Classify its jobs,
- Determine the gender predominance of each job class,
- Evaluate all of the job classes using a gender-neutral job evaluation system that includes Skill, Effort, Responsibility and Working Conditions,
- Calculate the job rate (total compensation) of each job class,
- Including base salary, variable pay, benefits not equally accessible to all employees
- Excluding overtime pay, shift premiums, seniority, equally accessible benefits
- Analyze pay equity gaps using one of two methods:
- Equal average method: Comparing the average compensation of all female job classes to that of all male job classes of equal or comparable value (within the same band)
- Equal line method: Comparing all female job classes to all male job classes using regression analysis
- Pay out salary adjustments to employees in female job classes with pay equity gaps,
- Post its results in a notice to employees.
Maintaining Pay Equity
Employers or Pay Equity Committees will need to maintain and update their Pay Equity Plan every 5 years, from the date that their initial plan was posted. The steps taken to carry out a maintenance exercise are similar to those carried out for the initial plan. Maintenance exercises include an analysis of any changes to job classes, gender predominance, skills required to perform the work and compensation.
Annual Declaration
Similar to Quebec, federally regulated employers will be required to submit an annual statement to the Commissioner which will include information about the Company’s compliance date, posting date, number of female job classes requiring an increase, amount of increases provided, and number of employees adjusted. Statements will be due on a specific date.
Record Keeping and Fines
Employers will be required to retain a copy of any revised Pay Equity Plan that is posted as well as all records, reports, electronic data, and other documents. Record keeping is an important and often overlooked aspect of pay equity compliance. Without proper documentation, employers may be required to start the process from scratch which is both time consuming and costly. Fines for non-compliance with the Act range from $30,000 – $50,000 depending on the infraction.
If you are looking for help tackling this significant initiative, please reach out to one of our Pay Equity experts for a free consultation. Solertia has a well-established, long-standing history of assisting our clients with their Canadian Pay Equity compliance needs, including guiding them through difficult audits. We would be happy to help you get ahead of these important federal regulations.
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