Compensation has long been a sensitive topic across Canadian workplaces.
In fact, few employees will ever venture to discuss their pay with co-workers. In some cases that policy is either implicitly or explicitly dictated by management. At others it’s a matter of manners, with co-workers resisting direct salary comparisons to avoid ruffling feathers.
But with the passage of Bill 3, the Pay Transparency Act, 2018 (the “Act”), perceptions around fair pay practices are now top of mind for employees. Assuming Ontario’s new Conservative government doesn’t rescind or amend the legislation, employers will be prohibited from asking a job candidate about their past compensation or retaliating against employees who decide to disclose their compensation. In addition, publicly advertised job postings must include a salary rate or range and larger employers will be required to track and report gender- and ethnicity-based compensation gaps.
The purpose of the Act is to promote gender equality and equal opportunity in the workplace by eliminating potential biases in hiring, promotion, employment status and pay practices. The end goal is for organizations to be held more accountable for their actions to support equality.
If your organization’s compensation philosophy and practices are misaligned with current or prospective employees’ values, talent can be far more difficult to attract, engage and retain. It’s the reason why employers must now be strategic in the communication of compensation practices, and employers need to adjust their recruitment and candidate screening policies and procedures to ensure compliance under the Act in several key areas:
Until now, many recruiters and hiring managers have relied on candidates’ salary history to determine everything from their compensation expectations to suitability for the role during the hiring process. Studies have shown that in many cases, these questions can negatively disadvantage women who often earn less than men after revealing their salaries. To prevent pay inequities—and comply with the Act—the best approach for organizations is to update any screening questionnaires, interview guides or reference-checking forms inquiring about salary history. With a published salary rate or range, there is significantly diminished risk of unconscious bias tainting the recruitment process. Doing so also allows candidates with limited negotiating experience to have open salary discussions knowing the upper and lower parameters of the salary range assigned to the role.
Market Competitive Pay
The current unemployment rate in Ontario is hovering at historically low 5.8 per cent—its lowest level since 2001—according to Statistics Canada. Needless to say, this is very much a seller’s job market, meaning top talent can be selective in their choice of employer. Employers need to have their finger on the pulse of the market and need to carefully research salary ranges across their industry to ensure they develop competitive compensation structures. This can be a difficult undertaking because compensation varies from organization to organization, making an objective and fair evaluation difficult. Organizations should ensure job descriptions are updated and consider how they will evaluate those jobs against the market—perhaps as frequently as doing a quarterly assessment, depending on your organization’s rate of growth.
Organizations should be intentional about how compensation decisions are made, as well as the way they evaluate salary ranges across the market. A comprehensive compensation philosophy is the crucial pillar of your compensation plan, because it guides decisions around how competitive your pay will be to attract and retain talent, and what roles will be grouped together based on market data, level of responsibility, and value to the organization. Take the time to reflect on your organization’s compensation philosophy and conduct a comprehensive market analysis to determine how your organization compares to others in the industry. This will help your HR team meet the Act’s job-posting requirements, while supporting your employee retention and engagement strategies.
Retaining top talent is becoming far more challenging in today’ hyper-competitive labour market. As such, deliberate employee engagement measures are becoming more important than ever before. It’s crucial to show your existing employees that you care about them and their quality of life. Today’s savvy employees want to be adequately compensated for their efforts and numerous studies show that employee satisfaction is driven by feeling that their organizations’ approach to pay is fair and transparent, among other factors such as providing work-life balance and providing the opportunity for career advancement while performing meaningful work. Millennials, in particular, are far more cognizant of the value of their services in the current market than previous generations. They’re also more frequently approached by recruiters, and are connected to social media groups and websites that keep them informed of the market value of their services. Adjusting your compensation strategy to reflect those realities is critical, as is a focus on creating an exceptional employee experience across your organization.
An employee’s positive experience in discussing compensation hinges on a manager’s ability to effectively share sensitive information about compensation and performance, and to recognize employees for their workplace contributions. If your organization is perceived to be unfair in its pay practices, feelings can be hurt and conflicts may arise. Employers would be wise to invest in training for their managers to prepare them for questions surrounding pay, to have difficult conversations and resolve conflicts as they emerge. Also, be sure to provide employees with training on how to best approach their manager if they feel their salary is not fair. This will prepare both managers and employees to have productive discussions and foster greater trust and engagement.
Paying everyone fairly doesn’t mean paying everyone the same. But it does mean having a defined process to reward the things that matter most to your workforce, such as performance, experience and/or critical skills. It’s important to have a coherent pay scale, then communicate to your employees how pay decisions are made.
Remember that engagement is indelibly linked to having an open and honest conversation about compensation. It’s important to make employees understand that you’re concerned and committed to pay equity across your organization. As such, your HR team may opt to provide employees with total compensation statements or use technology to disseminate compensation information.
Whatever your approach, it’s important to note that the while the Act requires pay transparency—and compliance may seem onerous at first—the real benefit for employers is in helping to build a more productive and engaged workplace culture where employees understand that they’re being paid fairly.