Pay Equity - A New DeadlineLinkedIn
There, in black and white
NB Bulletin Vol. 12 N. 15, November 2009
The new Pay Equity Act (the "Act"), which came into force on May 28, 2009, incorporates important changes, including a new deadline. Employers subject to the Act have until the end of 2010 to complete their pay equity program and pay adjustments in compensation to eligible employees, if they haven't already done so. Employers who have already done so must conduct an audit of the pay equity established. An employer's obligations and options depend on which of the following three scenarios best reflects the employer's situation.
|A.||No pay equity program has been completed nor initiated since the employer has been subject to the Act.;|
|B.||A pay equity program has been completed, but maintenance has not been ensured.;|
|C.||A pay equity program has been implemented, and maintenance has been ensured to date.|
The procedures associated with these scenarios are presented in Table 1 on the next page.
1st change - effective date
As was already the case, the Act applies to all enterprises employing 10 or more employees. For an enterprise that grows to that number in the course of a given year, the Act applies on January 1 of the following year. As of that date, the employer has four years to achieve pay equity and to adjust compensation in predominantly female job classes, if necessary.
For all employers with more than 10 employees during the 12 months beginning November 21, 1996, the effective date remains November 21, 1997.
|Table 1 - Compliance procedures|
|Activities and procedures for establishing and maintaining pay equity|| A|
|Achieving pay equity|
|Determine obligations according to the size of the organization during its first year in existence||X||N/A||N/A|
|Configure pay equity plans if more than one is necessary||X||N/A||N/A|
|Establish the committee(s) and train committee members, if necessary||X||N/A||N/A|
|Identify job classes and their gender predominance||X||N/A||N/A|
|Choose the methods to establish pay equity (job evaluation, calculation in differences in compensation, etc.)||X||N/A||N/A|
|Evaluate job classes and determine total compensation for each one||X||N/A||N/A|
|Calculate compensation differential between male and female predominant job classes||X||N/A||N/A|
|Calculate and pay adjustments to eligible employees||X||N/A||N/A|
|Proceed with the required postings (2) during the realization of the plan||X||N/A||N/A|
|Pay equity maintenance|
|Evaluate newly created jobs and those significantly modified subsequent to the achievement of pay equity||N/A||X||N/A|
|Measure the impact of organizational changes (mergers, acquisitions, etc.) and to employment conditions with monetary value||N/A||X||N/A|
|Calculate differences in compensation, if necessary||N/A||X||N/A|
|Calculate and pay adjustments to eligible employees||N/A||X||N/A|
|Periodic pay equity audit (every 5 years)|
|Conduct a pay equity review||X||X||X|
|Post audit results (2 postings required)||X||X||X|
|Keep audit findings and results for 5 years||X||X||X|
2nd change - final deadline
Employers who have not completed their pay equity plan by March 12, 2009 are included in Scenario A. They have until December 31, 2010 to complete their plan and pay salary adjustments to eligible employees. The adjustments will be calculated retroactively to the date from which they should have been calculated and paid. This could be as far back as November 21, 2001.
The work and time required increases depending on the number of job classes identified, the number of bargaining units, the number of separate pay equity plans required by the bargaining unit(s) and whether a pay equity committee is required.
Employers included in Scenario B have established pay equity, but as of March 12, 2009 they have not ensured the maintenance of equity in their organization. These employers have until December 31, 2010 to demonstrate that their salary practices conform to the Act and, and if necessary, to make adjustments in compensation.
Employers included in Scenario C have established pay equity in their organization and ensured its maintenance. Through December 31, 2010 they will only be required to post their pay equity audit results for 60 days. They should have no salary adjustments to pay.
3rd change - the pay equity audit
The Act now stipulates that employers must conduct pay equity audits. Employers who have completed the pay equity process must conduct a pay equity audit every five years. Each employer will decide whether to conduct this audit alone, with a pay equity audit committee or jointly with the bargaining unit representatives. The same terms and conditions that apply to a pay equity committee also apply to a pay equity audit committee. On completion of the pay equity audit, the employer is required to do the following:
- Post the pay equity audit results (two postings required) in locations easily accessible to employees;
- Keep the information used to conduct the pay equity audit and the content of postings for a period of five years from the date of the first posting;
- Produce and submit an annual report on the organization's application of the Act. The parameters of this annual report have not been clearly specified at this point.
The difference between the 2001 and 2010 deadlines
Aside from the changes stemming from the new Act there is a significant difference between the situation of 2001 and that of 2010, i.e., a noticeable increase in worker awareness regarding pay equity and of their rights. This is due to the media hype surrounding the new Act, which will increase as we approach the December 31, 2010 deadline. In addition, new powers and authority have been given to the Commission de l'équité salariale to monitor noncompliant employers more closely.
As the new Act has attracted the attention of media, unions and interest groups, it has become riskier and more costly for employers to neglect their obligations. Fines for violations of the Act run from $1,000 to $45,000 and are double for repeat offenders. In addition, compensation adjustments are always calculated and paid with interest. The business case for sidestepping the law is becoming more and more difficult to make.
Beyond compliance: governance
Beyond the compliance issues, there are advantages for employers who achieve pay equity through a strategic approach and within the required timeframe. Employers who have achieved equity since 2001 have also benefited from a powerful "collateral advantages", i.e., a significant improvement in compensation governance:
- Tighter links between business and compensation strategies;
- Documentation of jobs and a more objective assessment of their relative value;
- Clear guidelines for determining starting salaries and annual increases;
- Greater transparency concerning internal and external equity criteria.
Other benefits include introduction of effective pay practices, taking advantage of authorized extension of adjustment payouts (in certain cases) and less effort to maintain pay equity with time.
With the amendments to the Act, employers have a reasonable timeframe in which to achieve equity without being subject to complaints or fines, provided serious efforts are applied and maintained.
We therefore recommend that you address this issue as quickly as possible, if you have not already done so, and evaluate the scope and financial impact of implementing a pay equity plan.
In this new legislative context, the person in charge of pay equity in your organization would benefit by considering the following key steps:
1- Inform and educate senior management about the issues and impacts of pay equity;
2- Conduct a preliminary pay equity evaluation in order to determine the context, the organization's responsibilities, the timeframe for achieving equity and the necessary resources;
3- Depending on the results of the evaluation:
- Allocate an adequate budget
- Design and implement an employee communication plan for the duration of the pay equity plan that goes beyond the postings required by the Act
- Make the necessary requests to the Commission de l'équité salariale, regarding the following issues:
- Sector-based association or a group of employers in a unique pay equity plan
- Establish separate plans based on regional disparities
- Use of special methods to calculate differences in compensation;
- Obtain an authorized extension in time for making the necessary adjustments in compensation given the limited financial capacity of the organization;
4- Undertake the work required to achieve or maintain pay equity.
The countdown has begun: on your mark, get set, go! For more information, visit the website of the Commission de l'équité salariale at http://www.ces.gouv.qc.ca/english.asp
Please feel free to contact us for additional information.
Montreal, Quebec, H3B 1S6