How pay transparency impacts pay equity and what Canadian employers need to be aware of
Pay equity is based on the principle of equal pay for work of equal value. Among other conditions, it relies upon pay transparency, which is about openly communicating wage and salary ranges for an organization’s positions.
A pay equity act has been in place for federally regulated organizations in Canada since 2021, and a few provinces within Canada have variations of pay equity and pay transparency acts, either already in place or in the works.
In BC, the Pay Transparency Act was passed on May 11, 2023, aspects of which become effective on November 1, 2023. As is the case federally and within other provinces, the BC Act was passed to help address systemic discrimination and close the gender pay gap.
Why is pay transparency needed?
When pay transparency doesn’t exist, it can lead to biased pay discretion, which often negatively impacts women, people of colour, people with disabilities, and others from historically marginalized/equity seeking groups. Statistics Canada reports that in 2021, women in BC made nearly 17% less than men, which represents one of the highest gender pay gaps in Canada (the national average being 13%). Although the province has not yet passed a similar act, Alberta tops the gender pay gap chart at 19%. When we look at intersecting identities, the gap gets even wider, with Indigenous women making only 65 cents to every dollar a man makes, racialized women 67 cents, and newcomers to Canada 71 cents, respectively.
As Maclean’s outlines, the gap is also significant for those who are transgender, gender diverse, or non-binary. According to the Trans PULSE survey, approximately half of transgender folks earn $15,000 less per year than their non-trans counterparts, despite most having post-secondary education. Of particular note where gender is concerned, it has been found that female to male transgender employees earn more after transition while male to female earn less by almost a third.
Position also plays a significant role in the gender pay gap. Statistics Canada found that female executives, for example, earn 56% less on average than males. Racialized females earn only 32% of what non-visible minority females make.
With the above statistics in mind, workplace pay transparency practices can be helpful by first identifying pay inequality and where it specifically exists within a given organization; from there, moves can be made to decrease the gaps and help minimize biased pay discretion.
What does BC’s Pay Transparency Act mean for employers?
As of November 1, 2023, provincially regulated employers in BC:
- Must include expected pay and/or pay ranges for publicly advertised jobs; general “help wanted” posters/postings that don’t identify a specific position or opportunity aren’t required to outline rates or ranges
- May not ask candidates or their past employers about what they were paid in past positions
- May not discipline, let go, or otherwise retaliate against an employee who asks about their pay or the organization’s pay transparency practices/report, who discusses their pay with a co-worker, or who provides information about the organization in line with the Act
Additionally, in stages over the next four years, employers will need to post annual pay transparency reports. By 2026, all employers with 50 employees or more will need to do so. Detailed information on what will need to be included has not yet been released.
Where an employer has workers across Canada, the pay transparency requirements only apply to BC positions. That said, we recommend having a consistent process across your organization, regardless of legislation not requiring it. It would be difficult to develop/maintain an overall transparent and equitable pay process while only being transparent in part(s) of your organization.
How does BC’s Pay Transparency Act impact federally regulated organizations?
Only provincially regulated employers in BC are required to follow the BC Pay Transparency Act. Since August 13, 2021, federally regulated employers (such as banks, airlines, telecommunications companies, etc.) with more than 10 employees are legislated by the Pay Equity Act. This Act requires employers to develop and implement a pay equity plan and report annually on representation data, employee occupational groups, salary ranges, employee hires/turnover, etc. Employers with more than 100 employees are required to have a pay equity committee that must have at least 3 members who identify as female.
While there isn’t a requirement to post salary ranges on job opportunities, the reports under the Federal Act are expected to be made public.
Currently, Indigenous governing bodies, council operations, and administrations – despite being federally regulated – are not required to follow the Federal Pay Equity Act.
What’s happening across the rest of Canada regarding pay equity and transparency?
Although the Federal Pay Equity Act was an important start to pay equity, most employees within Canada work for provincially legislated organizations. Accordingly, some provinces, in addition to BC, have implemented or are implementing provincial pay equity/transparency acts. These include:
- Alberta – Alberta currently only has the Public Sector Compensation Transparency Act which requires the Government of Alberta to annually disclose salaries of employees who earn above a certain amount.
- Newfoundland and Labrador – While not yet in effect, the Pay Equity and Pay Transparency Act will require private sector employers to publish wage/salary details in postings and provide reports. As is the case for BC, they may not ask employment candidates about past pay, nor may they take action against employees for disclosing their own pay.
- Ontario – While the Pay Transparency Act (enacted in 2018) hasn’t officially come into effect yet, employers will have to post pay ranges, may not ask applicants about past pay or take action against an employee who talks about or inquires about their pay, and those with 100+ employees will need to submit pay transparency reports annually.
- Prince Edward Island – Effective June 1, 2022, PEI’s Employment Standards Act requires provincially regulated private sector employers to include wage/salary details in publicly advertised postings. As is the case for BC, Newfoundland and Labrador, and Ontario, they may not ask employment candidates about past pay, nor may they retaliate against employees for disclosing their own pay.
During the latter part of 2021, 66% of Canadian positions posted on Indeed included salary/wage information. A more recent report by Payscale noted that 45% of employers included pay ranges in job postings in 2022, which was a 22% increase from 2021; however, no specific platform was noted. With the rising trend of pay transparency and equity acts, we expect this will increase significantly in 2023 and beyond.
What should employers be thinking about as they plan for pay transparency?
As we noted in our International Women’s Day post, in addition to working towards pay equity, pay transparency can lead to many positive impacts on diversity, productivity, employee wellbeing, and trust. Candid discussions about how employees can impact their pay, and how employers can support them to get there, facilitate empowerment, engagement, and retention. According to Benefits Canada, most (84%) employees want to see pay transparency, with 43% feeling they’re not currently paid fairly.
That said, there are challenges to be aware of, particularly if your organization isn’t ready for pay transparency. While legislation in some provinces is making this a non-negotiable, it’s important to take the time over the next several months to intentionally plan the steps you take. In other words, it’s not something you should simply start doing. Some of the downsides (as noted by CNBC) include slower overall wage growth, diminishing negotiation power, hiring challenges, and potentially harmful impacts on morale and organizational culture. The key to a successful pay transparency program is to implement it strategically and intentionally – ultimately, ensuring your organization is ready for it and proactively addressing the unintended consequences.
Jouta’s HR Consultants can help you prepare for and put the necessary steps in place before pay transparency becomes a required reality in your workplace.