MaRS Library The Pay Equity Act: Pay equity legislation and Ontario startups
In 1987, the Ontario government passed the Pay Equity Act. The purpose of the law is to assure workers equal pay for work of equal value—in particular, to address gender discrimination in the compensation of work by women.
The Ontario Pay Equity Commission actively works with organizations in Ontario of all sizes to help them achieve their pay equity commitments.
Ontario startups and pay equity requirements
Consider the following:
- Did you know that Ontario organizations with over 10 employees are responsible to comply with pay equity regulations?
- Have you already filed a pay equity plan? Did you know that your startup needs to review its status every year?
- Do you know if your job evaluation program will meet pay equity requirements?
If you were not aware of these requirements or are unsure of any of its elements, you may need to review your startup’s position with respect to pay equity.
Pay equity in Ontario: The focus is shifting to small organizations
While the pay equity process began with a focus on organizations with over 500 employees, in 2011 an announcement from the government of Ontario declared that the focus would now be on organizations with over 100 employees. The focus will soon shift to even smaller organizations. For additional information, refer to the Ontario Pay Equity Commission’s Wage Gap Pilot Program.
Steps to help your startup ensure it aligns with pay equity legislation in Ontario
To start the pay equity process, follow these basic steps:
- Determine your employer definition. This involves a four-part test provided by the Ontario Pay Equity Commission. For small companies, this is relatively straightforward (the interpretation of this test grows more complex if the company has many divisions or subsidiaries)
- Determine your employee definition. (The Pay Equity Commission’s goal is to ensure that all regular employees are part of the pay equity analysis—this could include seasonal and contract employees)
- Determine the date that your startup achieved pay equity status (the date it became effective—i.e., the “achievement date”)
- Determine how many establishments (geographic regions as defined by the Pay Equity Commission) that your business will use for the pay equity analysis
- Determine your job classes. Job classes have four areas in common:
- Determine the gender of the job classes (female, male or gender-neutral job classes). To do so, keep the following in mind:
- If 60% of the incumbents are female, it’s a female job class
- If 70% are male, it’s a male job class
- If there are about the same number of females and males, it may be gender neutral
- Determine the job rate (the highest rate of compensation for a job class). Compensation includes all payments and benefits provided to a person who performs work for the organization
- Once pay equity job comparisons have been made, the Ontario Pay Equity Act requires employers to increase the job rates of female job classes to be at least as much as the job rate of the comparable male job classes. These increases are referred to as pay equity adjustments
- The employer must determine the adjustment amounts based on the pay equity gaps that existed at the time their plans should have been posted. Retroactive payments should be calculated as if the adjustments were paid on time
It is also important to consider the gender that is usually associated with each job class (i.e., the gender stereotype). If you are conducting the pay equity analysis retroactively to your achievement date, take into account the gender of the employees who have done the work in the past (i.e., the historical incumbency).
Determining pay equity: Tips
- Keep in mind that only female and male job classes are part of the pay equity process (gender-neutral job classes are not part of the process)
- Reflect on past numbers, present percentages and stereotypes to determine the gender of a job class. If none of these apply, you may then have a gender-neutral job class
- Consider what would best serve the intent and purpose of pay equity (which is to redress discrimination in compensation for women’s jobs)
- Historical incumbency does not apply if you are a new business implementing pay equity at start up
For further information on achieving pay equity for your Ontario startup, refer to the Pay Equity Act, and the Ontario Pay Equity Commission’s Step by Step to Pay Equity Mini-Kit, which is designed for use by smaller organizations, such as startups.