The Pay Equity Act for federally regulated organizations: What’s happening now and what’s next

As of September 3, 2024, many federally regulated organizations subject to the Pay Equity Act (the Act) were required to have posted the final version of their pay equity plan. In addition to this obligation, organizations are also required to prepare and submit an annual statement and post an updated pay equity plan.

Conducting pay equity work may also bring to light limitations in your compensation practices. Even if these limitations are not referred to in the Act, going beyond the legal requirements helps promote more equitable and harmonized compensation practices.

This bulletin provides a reminder of the next steps and some key essentials for remaining in compliance with pay equity legislation, while exploring ways to optimize compensation practices.

Private-sector employers are required to retain a copy of the final version of their pay equity plan, as well as other documents relating to its establishment, until the day on which they post the final version of their updated plan. Retaining documents for an extended period may facilitate future plan updates.

In addition to complying with legal requirements governing record keeping, adopting a rigorous document management approach can make it easier to respond to potential questions, objections, complaints or investigations, and also contributes to:

• Preventing misinterpretation and supporting decisions
• Ensuring consistent decision-making and facilitating the next update to the pay equity plan

Employers who have established a pay equity plan are also required to submit their first annual statement to the Pay Equity Commissioner on or before June 30th following the third anniversary of the employer becoming subject to the Act. For example, an organization that became subject to the Act in August 2021 when the Act took effect was required to post its plan on or before September 3, 2024, and must submit its first annual declaration by June 30, 2025.

However, if an extension has been obtained for posting the final version of the plan, the first annual statement must be submitted by June 30 of the following year. For example, if an employer obtains a one-year extension until September 3, 2025, that employer has until June 30, 2026 to submit its first annual statement.

If you have more than one pay equity plan, information about each separate plan must be included in a single annual statement. An authorized individual can submit them online through the Annual Statement Portal.

Subsequent statements must then be submitted by June 30th each year. The information generally remains the same from one year to the next, unless the plan is updated before the five-year maximum.

See our checklist before filling out your annual statement.

Employers that are subject to the Act must update their pay equity plan at least every five years. For employers who have been subject to the Act since it came into force, this means that the first updated plan is required no later than September 4, 2029.

This update is intended to correct any differences in compensation (pay gaps) resulting from changes likely to have had an impact on pay equity since the most recent posting of the pay equity plan. In order to maintain pay equity, analyses will continue to be needed over the long term. The updates must be carried out with a committee if your organization has:

• 100 or more employees
• unionized employees

An update is required every five years but can be done more frequently (e.g. every year) in order to:

• Keep the plan up to date by reflecting recent changes in the organization
• Simplify the plan update process, which can be lengthy and complex when completed every five years due to the need to analyze all changes that have taken place since the last posting
• Prevent differences in compensation from being identified retroactively

It is therefore advisable to take a proactive approach to maintaining pay equity. Depending on the organization’s culture and working relationships, committee meetings may be held more regularly to conduct specific analyses in the event of major changes, including:

• The creation of a new job class
• The renewal of a collective agreement
• The implementation of a new salary structure
• Changes in compensation practices

Regardless of whether they are documented in an official update to the pay equity plan, these actions help foster equitable compensation and compliance with the legislative framework.

It is important for organizations to check the dates and obligations that apply to their situation to ensure they are in compliance with pay equity legislation. Some organizations may be in special situations that require careful consideration:

• Federally regulated private-sector employers that became subject to the Act after it came into force: These employers became subject to the Act on January 1 following the year in which the average number of employees reached ten. They must post the final version of their pay equity plan in the three years following that date.
• Organizations undergoing a merger, acquisition or restructuring: An acquisition by transfer, lease, sale or merger of a federally regulated company or organization may change the pay equity obligations of the parties involved. As a result, it is essential to assess the impacts of these changes carefully, so as to prevent any surprises and get the necessary work done on time.
• Organizations that have changed jurisdiction: When a provincial organization becomes federally regulated, specific rules apply.
• Organizations that have experienced a change in situation since the last pay equity obligations, regardless of whether they are establishing or updating their pay equity plan: Changes within an organization may affect its obligations when it comes time to update its pay equity plan. For example, the formation or disbanding of a union can have an impact on the obligation to set up a committee.

Depending on the situation of each organization, it may be appropriate to confirm which obligations apply with the assistance of specialists.

Ensuring pay equity can be a springboard for establishing an internal equity process within an organization. Setting up mechanisms to regularly review and monitor compensation practices among different employee groups makes it possible to pursue long-term internal equity, which fosters an inclusive and equitable organizational culture for all job classes, including gender neutral and predominantly male jobs.

Analyzing pay equity can also reveal broader issues. For example, as the process does not take gender neutral job classes into account, compensation for these classes may not be aligned with internal equity principles. Some predominantly male job classes may also be undervalued in relation to other comparable jobs. Lastly, even if there are no official differences in compensation under the Act, it is important to identify and correct any internal imbalances to ensure that compensation is equitable.

To discuss the best strategy for your organization’s reality, contact our specialists or write to us.