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As Canadian provinces move to enact salary transparency laws, experts and stakeholders say enforcement of the well-intended policies could be tricky.
British Columbia’s Pay Transparency Act, a law aimed at reducing the gender pay gap that came into force on Nov. 1, mandates that employers include salary ranges in all public job postings. Ontario is set to table legislation next week that includes the same rule, while Prince Edward Island passed a similar law in 2022.
While the Ontario government intends to penalize employers that don’t follow the pending transparency rules, B.C. has not laid out specific penalties for employers who are found to be noncompliant.
The province’s parliamentary secretary for gender equity told BNNBloomberg.ca that for the time being, the government is taking an “educational approach” with non-compliant employers.
“Where we find situations where the legislation is not being followed, the team will be sending out a letter and we'll be working directly with employers to see what the barrier is,” said Kelli Paddon.
University of Toronto employment relations professor Rafael Gomez told BNNBloomberg.ca that if there are firms that are resistant to the new regulations, effectively enforcing them may be a challenge, noting that B.C. appears to be proposing a “quasi-voluntary system” for employers.
“Obviously, they’re being obliged to do it, but there isn't a strong enforcement mechanism – well, then you need to enforce,” Gomez said in an interview.
“Then you need inspectors, and then you need to make judgment calls. It's a bit of a minefield.”
HOW DOES PAY TRANSPARENCY WORK IN PRACTICE?
Pay transparency policies have been used in the past to equalize pay or keep public salaries in check, Gomez said. The policies have evolved over the years, he explained, noting that they have produced some unintended results.
Pay transparency was intended to move employee salaries to the mean average, he said, but in reality, salaries almost always moved closer to the maximum.
Because of that, he said pay transparency can sometimes come at the cost of the happiness and wellbeing of an employer’s workforce as people discover they are earning less than their peers.
“When people look and find out about salaries, they never look down. They always look up,” Gomez said.
“You can tell someone: ‘Hey, there's people earning less than you,’ but that doesn't make them feel better. What makes you feel worse is knowing someone is making more than you when you think you should be making the same as that person.”
He added that pay transparency also increases the threat of exit by employees who feel undervalued, which may encourage firms to be more diligent about their compensation choices.
“The thing that gets people upset more than anything is overpaying for the wrong talent and underpaying for good talent, and that's done because management is not effective in recognizing talent,” he argued.
“Therefore, if you could create transparency and allow these forces to work out, then it might encourage better systematic pay policies that reflect people's true productivity.”
GENDER PAY GAP
Pay transparency legislation has been proposed as a solution to lessen the gender pay gap in Canada. Data from the Organisation for Economic Co-operation and Development (OECD) has documented a 17.1 per cent difference between the annual median earnings of women and men in Canada as of 2022.
In the OECD’s ranking of more than three dozen countries world-wide, Canada currently has the sixth-worst gender pay gap.
Closing that gap and ensuring everyone receives equal pay for equal work is one of the main objectives of B.C.’s legislation, according to Paddon. She said the provincial government is “determined” to see that objective through, and promised more enforcement measures down the line if necessary.
“We have to close this gap,” Paddon said. “If more is needed, more will be done.”
In Ontario’s case, pay transparency legislation aimed at closing the gender pay gap was first introduced by former premier Kathleen Wynne’s Liberal government. Premier Doug Ford’s Progressive Conservative government paused implementation of that law after taking office in 2018.
Ford’s government has now announced plans this month to reintroduce pay transparency legislation in provincial legislature.
If the law is passed, noncompliant businesses will be penalized based on the existing Employment Standards Act, with the possibility of fines up to $50,000.
P.E.I.’s pay transparency laws were added to the province’s Employment Standards Act in 2022 and came into force in June of that year.
IMPACT ON EMPLOYERS
The Canadian Federation of Independent Business’ (CFIB) vice president of legislative affairs for Ontario says that while increased pay transparency is good, there are concerns that the new regulations could create a hiring environment where salary is the only thing that’s taken into consideration.
“I think the intention behind the law is fine, but we also want to make sure that the narratives around the legislation aren't being pushed towards the dollar figure being the only thing that matters,” Ryan Mallough told BNNBloomberg.ca.
“We certainly understand that as an employee, money is always going to matter to people. It is important, but it's not the only part of the job.”
Mallough said that some jobs may pay less than others but offer more flexibility or additional perks like travel or time off.
He added that business owners don’t want to find themselves in a situation where potential applicants are simply scrolling to the salary range section of a job posting and making their decision based entirely on that number.
With files from the Canadian Press