September 2019

Pay Equity Act amendment – stricter requirements for organizations

As a follow-up to our first bulletin summarizing the new provisions of the Pay Equity Act (PEA) that came into effect on April 10, 2019, this bulletin presents the impact of these changes on organizations governed by the Act.

Major implications for organizations

Of the amendments made to the PEA, two items stand out:

1.      List of events since the previous pay equity exercise or audit

Organizations must now list events that have occurred since the previous pay equity exercise (initial exercise or pay equity audit), because any adjustment will now be retroactive to the date of the event that led to that adjustment.

Given this new requirement, organizations will find the next pay equity audit to be more cumbersome, since in addition to listing events, they must identify any impact these events may have in terms of creating wage gaps ¹. Consequently, an organization that has to conduct a pay equity audit by December 31, 2020, may need to apply an adjustment retroactively to January 1, 2016.

Clearly, adjustment costs will be particularly high for organizations that:

  • do not have a compensation structure guiding decisions made on total rewards practices
  • use a market-based approach to determine salaries
  • manage total rewards on an ad hoc basis (without taking into account the relative value of jobs within the organization)
  • have decentralized human resources management and have no human resources policies (for hiring decisions, for example)

Organizations that have several certified associations covered by the same pay equity plan may also need to apply larger adjustments if working conditions are negotiated independently.

Consequently, it would be advisable for some organizations to rethink their total rewards practices and focus on a consistently equitable approach, such as managing salaries in accordance with a salary structure.

This new provision will also encourage organizations to remain vigilant and identify the creation of possible wage gaps on an ongoing basis. Ideally, wage gaps should be adjusted immediately rather than every five years.

2.      The participation process or committee

During the reference period, all organizations that have more than 100 employees that had to establish a pay equity committee during the initial pay equity exercise or include at least one certified association, must introduce a participation process ² if their pay equity audit is not completed by a pay equity committee. The amended PEA establishes new posting obligations and a requirement that the participation process be completed no later than 60 days before posting begins.

In the course of the pay equity audit, organizations would be well advised to assess whether it would be a better strategy to establish a pay equity audit committee or introduce a participation process.

Transitional provisions

Transitional provisions apply to organizations that had to carry out their pay equity audit before April 10, 2019, that completed their work and posted their results but had not completed their new posting of the pay equity audit results at that date.

In fact, these organizations had 90 days after April 10, 2019, i.e., the period up to and including July 9, 2019, to make their new posting, in application of the new PEA provisions. This posting should list events that led to wage gaps, as well as their start date and their end date, if any. If applicable, any amount due for the period preceding the date of the new posting of the pay equity audit results, or the date it should have been made, must be paid on that date in the form of a lump-sum payment. If no adjustment is required, a notice indicating this fact must be included in the new posting.

Organizations that should have completed their pay equity audit before April 10, 2019 and that have not begun their pay equity work, or organizations that must complete the pay equity audit at a later date, must carry out the audit in accordance with the new PEA provisions.

In Brief

The new PEA provisions are stricter. They require organizations to continuously identify events that could result in wage gaps. They also require a higher level of transparency for pay equity audits.

Consequently, these provisions provide an additional incentive to adopt structured total rewards management that promotes the implementation of equitable practices, both internally and individually, and of sound total rewards communication practices within organizations.

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¹ The amount owing for the period between the event date and the date of the new posting is paid as a lump sum and must be considered for the purposes of employee benefit plans (such as pension plans).

² During the process, the employer should provide documents describing the work done. It should also establish consultation measures so that certified associations and employees can ask questions and share their observations.

Would you like more information? 
Contact your Normandin Beaudry consultant or email us.

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