Canada has one of the world’s highest participation rate of women in the workforce, but there remains a significant wage gap—Canadian women earn about 88 cents for every dollar earned by men.

To help address this, the federal government’s Budget Implementation Act C-86 introduced a new pay equity regime for women in the workforce. It applies to:

• workplaces with 10 or more employees in the federal public service;
• federal Crown agencies and private companies that operate a federal work, undertaking or business; and
• any employer who has contracts worth over $1 million with the federal government under the Federal Contractor Program.

At this time, it will not apply to Indigenous governments nor the governments of Yukon, Northwest Territories and Nunavut. It also does not apply to some private businesses in Nunavut, Northwest Territories or the Yukon.

The new federal approach to pay equity in Act C-86 is significantly different than ones in Canadian provinces, and is both comprehensive and prescriptive. Under the new proactive approach, companies will be obligated to put in place both a process for the determination of pay equity and make pay outs.

A Complex Process for Employers

Pay equity brings the compensation of all employees who are in female-dominated jobs up to the level of compensation of all employees in male-dominated jobs where the two jobs have similar “job value,” measured in terms of effort, responsibility, skill and working conditions. Subject to some exceptions, where the composition of a job class is 60 percent or higher of one sex, it will be considered a male or female-dominated job class. The payments are not made exclusively to women but to all employees in the female-dominated job class.

The process requirements to implement pay equity are complex. There must be a committee that creates a plan to implement pay equity, notice to all employees of this plan and then implementation. The company must also maintain pay equity after the initial plan and pay outs are made, and there are rules how to do this in the legislation. The members of the pay equity committee are specified in the legislation as are the contents of the plan. There are rights of appeal to a new federal Pay Equity Commission that will be nested in the Canadian Human Rights Commission. 

The Bill sets out a formula for how to compare male and female jobs which is difficult to understand (knowledge of econometric regression analysis seems to be necessary). As well, because the evaluation of jobs can be a time consuming, controversial and expensive process, there is a less cumbersome process for companies under 100 employees. Companies have up to three years to finalize their pay equity plans from the date the legislation receives royal assent.

Pay outs must be at least one percent of payroll with final payout dates being a function of the size of the firm. In general, for firms over 100 employees, final pay out must be no later than three years after the plan is posted. The size of the ultimate pay equity payout will depend on the extent to which a  business has female-dominated job classes and a gender neutral compensation system already in place.

What Should Companies Do?

Companies in the federal sector should start reviewing their compensation systems. Although there is an extended time to implement pay equity, the process will take time, expertise and financial and human resources. As well, in unionized workforces, the union will be part of the pay equity committee and any pay outs will impact the bargaining process.