Impact Your World:
New Thinking on Pay Equity Compliance:
Mary Turan
Susan Tang
Sr. Consultants with Gallagher McDowall Associates
with Irene Stretton, Director Total Rewards at Wajax Corporation
15GBSDCN#
SEPTEMBER 15, 2016
© 2015
2016 GALLAGHER BENEFIT SERVICES,
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INC.
GROUP INC.
ARTHUR J. GALLAGHER | BUSINESS WITHOUT BARRIERS™
About Gallagher McDowall Associates
Gallagher McDowall Associates is a division of Gallagher Benefit Services
(Canada) Group Inc. We are a Canadian consulting firm that focuses on
strategic compensation issues and design with in-depth expertise in job
evaluation and pay equity.
• Job Evaluation and Leveling
• Pay Equity Audits and Plans
• Custom Surveys & Market Reviews
• Executive Compensation Consulting
• Board Advisory Services
• Compensation Outsourcing
• Performance Management
• Sales Compensation
Our approach to compensation consulting is to have views on issues and
offer practical and innovative solutions and processes in helping clients with
compensation matters.
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2
About Wajax Corporation
•
Wajax is a leading Canadian industrial products and services
provider, distinguished through: the excellence of our sales force; the
breadth and efficiency of our repair and maintenance operations; and
our ability to work closely with existing and new vendor partners to
constantly expand our product offering to customers.
•
Wajax operates 123 branches across Canada and represents a wide
range of leading world-wide manufacturers. Wajax’s customer base
is diversified, spanning construction, industrial/commercial,
transportation, the oil sands, forestry, oil and gas, metal processing
and mining.
•
Wajax employs approx. 2,500 employees across Canada in three
critical talent segments: Service Technicians/Mechanics which
represent 34% of the workforce; Sales represents 27% of the
workforce; and Branch Managers represent 4% of the workforce.
Our workforce is concentrated in Western Canada at 37%; Quebec at
30%; Ontario at 26%; and Eastern Canada at 7%
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A. Pay Equity Compliance (30 minutes)
Section I – Canadian Pay Equity Legislation
Section II – Pay Equity Process
Section III – Process to Achieve Compliance
Section IV – Maintenance of Pay Equity
Section V – Other Considerations – What’s New?
B.
Section VI - Panel Discussion – Wajax Corporation (25 minutes)
C.
Section VII - Benefits of Pay Equity (15 minutes)
A. Changing Demographics
B. Governance
C. Benefits of Pay Equity and Wage Gap Closure
D.
Question/Wrap up (5 minutes)
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4
Section I
15GBSDCN#
Canadian Pay Equity Legislation
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2016 GALLAGHER BENEFIT SERVICES,
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Canadian Pay Equity Legislation Overview
• Pay Equity legislation is primarily applicable in Ontario, Quebec
and Federally Regulated industries.
o Applies to all employers with 10 or more employees in
Private Sector and all employers in Public Sector
o Compliance Date Ontario
• (January 1, 1990 for Public sector)
• 1991: for Private Sector with at least 500 employees; 1992: if between
100 - 500 employees; 1993: if between 50 - 100 employees; 1994: if
between 10 – 49 employees
• (Note: Pay Equity adjustments may be retroactive to this date)
o Compliance Date Quebec
• November 21, 2001 - original
•
December 31, 2010 – Amendment to Act
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Canadian Pay Equity Legislation Overview
Federally Regulated Organizations
• Federally Regulated Industries / Commercial Crown Corporations
covered under Canadian Human Rights Act (CHRA), the Equal Wages
Guidelines 1986 and sections 182 / 249 of Canada Labour Code, Part
III.
o Currently, pay equity under the Human Rights Commission is primarily
a complaint driven process…however
o In early 2016, the House of Commons created a Special
Committee on Pay Equity (ESPE) to conduct hearings on the
matter of pay equity and to propose a plan to adopt a proactive
federal pay equity regime
- On June 9, Report 1 – It’s Time to Act was presented to the House
- Anticipated response date: October 7, 2016
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Canadian Pay Equity Legislation Overview
Provincially Regulated Organizations
Pay Equity Commissions in both Ontario and Quebec are active:
• Ontario:
o Wage Gap Analysis Reporting or Monitoring
o Current focus on newly registered Corporations
o First point of contact for a “complaint”
• Quebec:
o December 31, 2010 Deadline
o Pay Equity Audit required every 5 years
o Annual Declaration (“DEMES*”) required to be filed on-line
o Commission actively monitoring under Audit pretext
* Déclaration de l'employeur en matière d'équité salariale (DEMES)
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8
Clarifying Terms:
• What is Pay Equity?
o Pay Equity is “equal pay for work of equal value”.
o Pay equity compares the value and pay of different jobs, such as nurse and
electrician.
o Pay Equity Act - (in Ontario, Quebec)
• What it is NOT:
o Equal Pay for Equal Work – this addresses situations in which men and
women do the same job (or substantially same).
o Example two cooks: doing substantially the same job – should receive the
same pay
o Ontario: Employments Standards Act; and, Quebec - Labour Standards
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Section II
15GBSDCN#
Pay Equity Process
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2016 GALLAGHER BENEFIT SERVICES,
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Pay Equity Process:
It All Starts with Job Evaluation
• Since the Pay Equity process involves testing for “equal pay for work of equal
value (or comparable value)”, a systematic job evaluation process is required
to establish the relative value of jobs within an organization.
o Skill: the amount and type of Skill required to perform the job
competently
o Responsibility: how much Responsibility the job has
o Effort: how much Effort (physical and mental/sensory) is required in
performing job tasks, and
o Working Conditions: the conditions under which the job is performed
The job evaluation system must be underpinned by consistent, transparent
point-factor scoring model (i.e., arithmetic or geometric progression).
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“…..But We Conduct Annual Market
Testing”
• A job evaluation system or compensation structure based on salary
market data alone would not be considered to be Pay Equity
compliant.
• Since the perception is that gender bias is systemic in the marketplace, a
job evaluation system and salary administration program based solely on
salary market data would be seen as reinforcing historical gender bias.
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Key Steps in Developing a Fair, Equitable
Pay Program
6. Market Review &
Salary Structure
5. Prepare and Post
Pay Equity Plan
Ongoing
Maintenance
4. Pay Equity Analysis
(see sample analysis)
3. Validation of Job Evaluation Results
(Review with line management by function / across function)
2. Job Evaluation (HR, Committee, use of benchmark jobs)
1. Collection of Current Job Information (Job Descriptions, Questionnaires)
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Phases of Pay Equity
1. Achievement
2. Maintenance
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Section III
15GBSDCN#
Process to Achieve Compliance
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Steps to Achieve Compliance
7 Methods of Comparison: Determine job
1
Identification of key stakeholders including
a JE Committee
2
Identify the Establishment
8
Determine job rates
3
Identify the job classes
9
Compare job rates
4
Gather job information and data
5
Determine gender dominance
11
Post pay equity plan(s)
6
Evaluate job classes
12
Pay out adjustments
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classes of comparable value
10 Identify pay equity adjustments owing
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16
Identify the Establishment
• All employees employed in a geographic division by an Employer
• Can combine Establishments into one plan
• …”Establishment”….”geographic division” (Ontario)
• In Quebec, one Pay Equity Plan per Enterprise
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Identify the Job Classes
• Non-Union
• Each bargaining unit
• Job class definition in Pay Equity Act
o Similar duties and responsibilities
o Similar qualifications
o Filled by similar recruiting procedures
o Same compensation schedule, salary grade or range of rates
• Full-time versus part-time job classes
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Gather Job
Information/Documentation
• Job Fact Questionnaires
• Job Descriptions
• Manager review/sign off but not veto
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Determine Gender Predominance of
the Job Classes
• Incumbency
o 60% or more of incumbents female = female-dominated
o 70% (Quebec = 60%) or more of incumbents male = male-dominated
o Possibly gender neutral if meets neither test
o Must also consider:
– Historical incumbency
– Gender stereotyping, if any
– Date of analysis impacts outcome
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Evaluate Job Classes
• Using a gender neutral job evaluation system (GNCS)
o
Statutory criteria
o
Skill
o
Effort
o
Responsibility
o
Working Conditions
• Choice - Point Factor system common
• Rating by HR or by Committee (depending on legislative
requirements by Province)
• “Reasonableness” standard test
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Methods of Comparison
Ontario:
• Job-to-Job
• Proportional Value (Regression Line)
• Proxy (public sector only)
Quebec:
• Individual Basis
• Global Basis
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Job Rates and Comparison
Maximum rate
• Hourly rates
• Top of grid
• Mid-point of salary range (if defensible)
• Actual salaries if no grid/range
Include all forms of compensation
• Bonus
• Commission
• Benefits, etc.
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Sample Pay Equity Impact Chart –
Ontario
PAY EQUITY ANALYSIS
Similar Value
Group
Job Title
Total Points
(value)
Job
Class
(Gender)
Job Rate
Job to Job
Proportional
Value
Pay Equity Adj
($/Annum)
600
550
500
450
A
640
F
B
635
M*
$55,000
C
620
F
$53,000
D
580
M
$47,000
E
575
F
$47,000
F
565
M*
$44,000
G
555
F
649
599
$56,000
$55,000
$0
$55,000
$2,000
$44,000
$0
$43,000
$44,000
$1,000
$39,000
$0
H
530
F
$39,000
I
510
M
$39,000
J
480
F
$32,000
K
470
F
$31,000
L
460
F
$33,000
M
460
F
$32,500
PV
549
499
PV
$32,500
$500
PV
$32,400
$1,400
PV
$32,200
$0
$32,200
$0
* Note: Ontario Hierarchy of Pay Equity Comparison
1.
Job to Job within Band (lowest paid Male job is comparator)
2.
Job to Job Lower Band (higher paid Male job is comparator)
3.
Proportional Value (Male Pay line is comparator)
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Quebec – Individual Basis - Illustration
• “Dollars per JE points” - Individual Basis
• Select male job with closest JE points; if no 1:1 match - prorate
dollars
$15.00
Rate of Pay
$12.00
$9.00
$6.00
$3.00
$0.00
0
100
200
300
400
500
Total Points
Male Job Class
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Female Job Class
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Proportional Value (Ontario)
Global Method (Quebec)
• Male Pay Line
o regression analysis
o least square formula
Male Pay Line
$60.00
Job Rates
$50.00
$40.00
$30.00
y = 0.0689x + 1.4719
$20.00
R 2 = 0.9725
$10.00
$0.00
0
100
200
300
400
500
600
700
800
Total Points
All Male Jobs
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Linear (All Male Jobs)
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26
Identify Adjustment: Retroactivity &
Interest
• Interest automatically included in retroactive obligations if open file
with Ontario PE Commission
• In Quebec, if the employer is late in completing the pay equity
exercise and/or the 5-year audit and there are adjustments, then
interest is required to be added, per the Quebec Pay Equity Act
NOTE: Overtime, deductions and pension contributions
are also impacted!
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Employees Entitled to Adjustments
• Current incumbents (males and females) in eligible female job
classes
o
Full-time
o
Part-time
o
Contract / Casual
o
Students employed outside of their vacation period
• Former employees
o
o
Entitled to adjustments
Signed full and final release may exclude from retroactive
obligations
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28
Develop/Post Pay Equity Plan(s)
and Pay Out Adjustments Owing
• Pay Equity Act in each Province dictates requirements of a Pay Equity
Plan
• Typically a Plan is posted in the workplace for employees to view or
appeal
• Commission will request for a Plan where it is applicable
• Pay out adjustments owing – past and current employees
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15GBSDCN#
Section IV
Maintenance of Pay Equity
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Maintenance Obligations After Pay
Equity Achieved:
• Employer’s obligation to maintain
• Ongoing comparison of job rates with male comparator or regression line
• Introduction of new job classes
• Significant changes to job classes warranting re-evaluation
• Elimination of male comparator job classes
• Changed Circumstances (for Ontario):
o a new job evaluation system
o changing banding methodology
o merger/acquisition - “Sale of Business”
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Maintenance Obligations after Pay
Equity Achieved, cont’d.
• Be Prepared:
o Prepare Annual Pay Equity Analysis
o Must be able to demonstrate compliance
o Employer’s obligation to maintain - language in Collective Agreement around
pay equity compliance is not enough if Employer cannot demonstrate
compliance
o If an organization does not maintain on regular basis, retroactivity will apply back
to the period an organization last completed a maintenance assessment
(Ontario)
o CRA – 7 year limit does not apply re: Pay Equity obligations (Ontario)
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Maintenance - Key Considerations Union Pay Equity
• Terms of Reference document with unions
• Pay Equity v. Internal Equity
• Job Evaluation Committee v. Steering Committee
• Frequency of joint job evaluation
• Dispute Resolution Methods
– Pay Equity Commission
– Arbitration
– Referee – Advisors
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34
Maintenance Obligations after Pay
Equity is Achieved:
• We recommend that Pay Equity be reviewed at the same time as the
organization’s annual salary adjustment (i.e. changes to pay
ranges/grids) and regular market compensation review.
• Female jobs must be monitored to prevent systemic discrimination in
compensation, and gaps that were previously addressed should not
be allowed to re-emerge or widen.
• Jobs in the workplace must be monitored for changes that could
affect the validity of the pay equity analysis/plan.
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Steps to Maintain Pay Equity
1.
Identify stakeholders in the on-going evaluation process:
• HR? Job Evaluation Committee? Union(s)?
2.
Identify jobs that have been added or changed over the past year
including jobs that have been eliminated
3.
Determine gender dominance of new/changed jobs:
• Female job - 60% or more of the incumbents are female
• Male job - 70% (60% Quebec) or more of the incumbents are male
• For existing jobs, refer back to the “deemed approved” Pay Equity Plan
and only change the gender if there has been significant shift in the
gender data
• Gather job data
• Revise existing job descriptions / Create new job descriptions
• Complete job information questionnaires for new jobs
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Steps to Maintain Pay Equity
4. Evaluate jobs
• Using a gender neutral job evaluation system
• Incorporate new/changed jobs into analysis
5.
Determine Male Comparator and compare Job Rates
6.
Identify any pay equity adjustments and make adjustments to pay all
incumbents in the job class and/or pay out retroactive amounts owing
7.
Examine posting and communication obligations
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15GBSDCN#
Section V
Other Considerations/What’s New?
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Pay Equity Complaints
• Current or former employees
o
Unionized or not
• Unions
o
o
Even where signatory to a Pay Equity Plan or not
Even where collective agreement rates purport to be pay equity
compliant
• Unions acting as agents for former non-union employees
• No time limits (Ontario)
• Estoppel/waiver does not apply if non-compliance with PEA
• Random audits by Pay Equity Commission
• Review Officers “adding to” legislative requirements
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What’s New?/Did you know?
In Ontario…
• Interest applied at the Commission to all open files
• Request for 3 additional years’ analysis/data if adjustment(s)
identified in earliest analysis year
• Review Officers visiting on-site:
o Examine payroll records
• New employers currently being Monitored
o 16,000 monitoring letters sent
• Changes in Staff at Review Services:
o New Review Officer – Initial Review Officer
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What’s New?/Did you know?
In Quebec….
• Commission actively monitoring organizations to comply
• DEMES – requirement to do annual filing
• Non-compliance or on-going non-co-operation with Commission
may lead to exposing an organization’s name on Commission’s
Website
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What’s New – Federal Pay Equity?
•
In early 2016, the House of Commons created a Special Committee on Pay
Equity (ESPE) to conduct hearings on the matter of pay equity and to propose
a plan to adopt a proactive federal pay equity regime
•
On June 9, 2016 Report 1 – “It’s Time to Act” was presented to the House:
o 31 recommendations including;
– draft proactive pay equity legislation within 18 months of the tabling of this
report
– Compliance within 3 years of the legislation coming into force
– Acceptance of the overall direction and majority of the recommendations of the
2004 Federal Pay Equity Task Force report
– Establishment of a Commission and Tribunal with significant responsibility and
authority – similar to Ontario and Quebec
– Organizations with 100+ employees to establish a pay equity committee
– Requirement to potentially file regular declaration (similar to Quebec)
– Requirement to make maintenance reviews accessible to employees and
provide a copy to the Pay Equity Commission every three years
Stayed tuned for much-anticipated response from the Government !
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What HR should be doing?
• Continue to prepare annual analysis for all employee groups
• Check the process; test the process = Annual Maintenance
– Be Prepared!
• Document—Document—Document!
• Never Purge! Do not delete male comparators in CA!
• Ensure the “tools” are compliant and progressive
• Be “Informed” about your compliance status
o Union employee groups
o Non Union employee group
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What HR should be doing?
• Keep job information up to date (e.g. job descriptions)
• Maintain / keep job evaluation records up to date
• Monitor changes in benefits or comp structure
• Monitor changes in job class gender – can change over time
• Re-evaluate jobs as part of acquisition/merger/reorganization
NOTE: The purchaser organization becomes liable for retroactive
adjustments for time period prior to acquisition date!
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Section VI
15GBSDCN#
Panel Discussion
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PANEL DISCUSSION with Irene Stretton,
Director, Total Rewards, Wajax Corporation
Open Discussion:
1. What has been the most challenging aspect of implementing a
job evaluation system?
2. What are your experiences in dealing with the Pay Equity
Commission and Monitoring?
3. What are some words of advice for Human Resources
Professionals around best practices regarding pay equity ?
4. How has Wajax benefited from the introduction of a formal job
evaluation system?
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Section VII
15GBSDCN#
Benefits of Pay Equity: Exploring Governance
and Wage Gap Closure Activities
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Governance and Gender Wage Gap
Closure
1. Changing Demographics
2. Governance
3. Benefits of Pay Equity and Wage Gap Closure
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Changing Demographics
(Source: Statistics Canada)
Percent Males and Females (aged 15+)
Employed 1976 to 2014
75%
70%
65%
60%
55%
50%
45%
40%
Males
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Females
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Gender Wage Gap Challenge
• Definition: “Wage gap” – difference between the income earned by
women and by men.
• Wage gap persists – Statistics Canada: range between 12% – 31.5%
• With the aging of the Canadian population during the next 20 years as
the baby boom generation retires, organizations will need to fully
engage all Canadians of working age in the workforce.
• In the face of potential labour shortages, employers will miss out on
opportunities for growth unless they recognize the potential of all
groups in Canadian society.
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Business Realities
• Legislation – rules, regulations
• Increased costs
• Striving to gain competitive advantage – maximize market share
• Shareholder expectations – return on investment
• Funding Issues
• Labour expectations
• Labour shortages
• Growth and expansion – job creation
• Market share loss – job loss
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Governance
Corporate Governance shapes companies and this impacts the society
we live in:
Consider:
• Women’s share of Board seats at Canadian Stock Index Companies =
20% (Source: Catalyst 2014)
• Royal Bank of Canada Study: – “Canadian incomes would rise $168B each
year if the wage gap was closed”. (Source Ont. Ministry of Labour: Closing the Gender Wage Gap: A
Background Paper)
• Boards that have both men and women are better equipped to oversee
governance which results in stronger, more sustainable companies.
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Governance Drivers in Decision
Making
Performance
Social
Compliance
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Women in the C-Suite
• We are hearing a “Call to Action”: U.S. U.K, Norway and Australia –
mandated disclose of diversity policies to self imposed objectives to
quotas for gender balanced board representation.
• Why?*
o
o
o
Improved financial performance – positive correlation – more
women – better firm performance
More positive employee perceptions about the diversity climate of
the organization = employee satisfaction and morale
Better corporate governance and board oversight
* Catalyst (2013 report)
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Business Opportunity: Impact Your
Way of Thinking

We know that women represent an important and growing
segment from both a market and talent perspective

As business, we want to turn challenges to creative energy and
positive change and business results
IDENTIFY
OPPORTUNITIES
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DETERMINE
WHAT MATTERS
TO YOUR
ORGANIZATION
NEW
DIRECTION
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Impact Your Way of Thinking
 What mechanics do you need in your organization
to support change?
 Existing policies, practices and methods aren’t
designed to correct wage inequities.
 Only intentional actions will help close wage gap.
•
•
•
•
Increased awareness
Identify opportunities
Increased transparency
Objectivity
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Benefits for Organizations?
At a Minimum: Compliance: (Pay Equity legislation)
• Introduces a positive human resource process in the workplace
o Concept of job measurement
• Concept of salary structure based on internal relativity
• Hiring – establishment of salary based on job worth rather than
market or perception
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Moving the Yardstick: “Social” Governance:
What Can You Do?
• Establish Positive Role Models
• Build Awareness
• Hiring Methods (e.g. ensure gender neutral job posting and
job descriptions)
• Wage Transparency – Voluntary reporting? Legislation?
• Performance Evaluation (e.g. group feedback method)
• Caregiver Flexibility
• Policies and Practices
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Summary
Performance
Social
Compliance
At a Minimum: Compliance:
 Introduction of a positive human resource process in the
workplace; concept of job analysis and measurement
Social:
 Reduction of systemic discrimination in pay
 Lessening employee discontent about pay
 Improved processes and transparency in compensation
 Awareness-building
Performance:
 Increased productivity, reduced turnover, absenteeism all of which
helps to create a positive image with the customer and which
ultimately drive performance
© 2016 GALLAGHER BENEFIT SERVICES (CANADA) GROUP INC.
ARTHUR J. GALLAGHER | BUSINESS WITHOUT BARRIERS™
58
Ontario Government – Wage Gap Strategy
Final Word: The Ontario Government released it Wage Gap Strategy
Steering Committee Report at the end of August 2016:
Report: Government should address barriers to compliance and support
employers in ongoing obligations by amending the Pay Equity Act; in
part by;
 setting a defined time period to bring forward current complaints for
non-compliance and retroactive payments
 setting regular intervals for employers to report on changes to their
compensation practices and the impact on pay equity
 and limiting retroactive payments to claims that arise within the
reporting period
The report also suggests that enforcement measures should be increased
and supported by government.
© 2016 GALLAGHER BENEFIT SERVICES (CANADA) GROUP INC.
ARTHUR J. GALLAGHER | BUSINESS WITHOUT BARRIERS™
59
Conclusion
• Wage gap – recognize it, address it, make it part of your strategy at
the table.
• Find what is out there (evidence based) to support your business
case:
o Compliance – are you compliant?
o Social – what is your public image ? What is the competition is doing ?
o Performance – how will you be able to use wage gap closure efforts to
impact your bottom line and/or organizational effectiveness?
© 2016 GALLAGHER BENEFIT SERVICES (CANADA) GROUP INC.
ARTHUR J. GALLAGHER | BUSINESS WITHOUT BARRIERS™
60
Questions?
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ARTHUR J. GALLAGHER | BUSINESS WITHOUT BARRIERS™
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Thank You
Mary Turan | Sr. Consultant
416.644.6584
647.388.1722 (mobile)
[email protected]
© 2015
2016 GALLAGHER BENEFIT SERVICES,
SERVICES (CANADA)
INC.
GROUP INC.
Susan Tang | Sr. Consultant
416.644.6584
647.388.2215 (mobile)
[email protected]
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