Pay Equity Canada (Federal)

Basic Summary

Canada's federal Pay Equity Act (2018, in force 2021) establishes a proactive pay equity regime for federally regulated employers. Unlike complaint-based models, this legislation requires employers to proactively identify and correct gender-based wage gaps through systematic pay equity plans.

Key Legislation

Pay Equity Act (2018)

Royal Assent: December 13, 2018 In Force: August 31, 2021

The Act applies to:

Federal public sector: All federal government departments and agencies
Federal private sector: Banks, telecommunications, interprovincial transportation, broadcasting, and other federally regulated industries

Core Principles

Proactive Compliance: Employers must identify and correct wage gaps before complaints arise
Work of Equal Value: Based on skill, effort, responsibility, and working conditions
Job-to-Job Comparison: Female-predominant job classes compared to male-predominant job classes
Transparent and Participatory: Employee representatives (unions or committees) must participate

Employer Obligations

Scope and Thresholds

10+ employees: Must establish a pay equity plan
Fewer than 10 employees: Must provide statement that all positions receive equal pay for work of equal value

Pay Equity Plan Development

Step 1: Identify Job Classes

Group positions into job classes based on:

Similar duties and responsibilities
Similar qualifications
Same compensation structure (salary range, benefits)

Step 2: Determine Predominance

Classify each job class as:

Female-predominant: 60%+ women (or historically associated with women if less than 60%)
Male-predominant: 60%+ men (or historically associated with men if less than 60%)
Neutral: Does not meet predominance criteria

Step 3: Job Evaluation

Use a gender-neutral, objective job evaluation method to assess:

Skill: Education, experience, complexity
Effort: Physical, mental, sensory
Responsibility: Financial, supervisory, decision-making
Working Conditions: Hazards, physical environment, psychological demands

Assign points or rankings to each job class based on these factors.

Step 4: Value Comparison

Compare female-predominant job classes to male-predominant job classes of equal or comparable value:

Group jobs into value bands (e.g., jobs worth 100-150 points)
Compare compensation within each band

Step 5: Calculate Wage Gaps

Identify wage gaps where:

A female-predominant job class has lower compensation than a male-predominant job class of equal value
Gap is not explained by seniority, merit, temporary training, or regional differences (permissible differences)

Compensation includes: Base salary, bonuses, benefits, overtime, premiums, incentives

Step 6: Increase Compensation

Requirement: Increase compensation for female-predominant job classes to eliminate the gap

Timing:

Gaps must be corrected within 3 years for private sector (5 years if phased plan approved)
Gaps must be corrected within 5 years for public sector
Interim increases must be paid annually

No Pay Reduction: Cannot reduce wages of male-predominant classes to achieve equity

Employee Participation

Unionized Workplaces

Employer and union(s) jointly develop the pay equity plan
Must reach agreement or use dispute resolution mechanisms

Non-Unionized Workplaces

Employer must establish a Pay Equity Committee with at least 50% employee representatives
Employees elect their representatives
Committee develops the plan collaboratively

Posting and Communication

Draft plan: Posted for 60-day comment period
Final plan: Posted and provided to Pay Equity Commissioner
Updates: Ongoing obligation to maintain pay equity; updates required every 5 years

Pay Equity Commissioner

The Pay Equity Commissioner (part of the Canadian Human Rights Commission) has broad powers:

Guidance and Support: Issues regulations, guidance, and tools
Compliance Audits: Can audit employer plans
Complaints: Investigates complaints about pay equity plans or failures to maintain equity
Orders: Can order employers to take corrective action
Penalties: Can recommend fines for non-compliance

Penalties and Enforcement

Administrative Monetary Penalties (AMPs)

Failure to establish or post a plan
Failure to adjust compensation
Interference with employee rights or retaliation
Maximum penalties: Up to $50,000 per violation (amounts vary by severity)

Complaints

Employees, unions, or any person can file complaints with the Commissioner regarding:

Failure to establish a pay equity plan
Inadequate pay equity plan
Failure to maintain pay equity
Retaliation

Dispute Resolution

Mediation and conciliation services available
Pay Equity Hearings Tribunal adjudicates unresolved disputes

Permissible Differences

Pay differences are allowed if based on:

Seniority system (objective and consistently applied)
Merit system (based on performance, objective and gender-neutral)
System based on quantity/quality of production (objective measures)
Regional differences in cost of living or labor markets (reasonable and documented)
Temporary training or development assignment (limited duration)

Employers must document and justify permissible differences.

Ongoing Maintenance

Obligation to Maintain Pay Equity

Pay equity is not a one-time exercise. Employers must:

Monitor compensation for new job classes
Review changes in job duties, compensation, or predominance
Update the pay equity plan at least every 5 years
Post updates and notify the Commissioner

Triggers for Updates

New collective bargaining agreement
Significant organizational change (merger, restructuring)
Changes in job classes or predominance
Scheduled 5-year review

Comparison with Provincial Legislation

Several Canadian provinces have their own pay equity laws:

Jurisdiction	Legislation	Key Features
Ontario	Pay Equity Act (1987)	Proactive, similar to federal model
Quebec	Pay Equity Act (1996)	Proactive, applies to 10+ employees
Prince Edward Island, New Brunswick, Nova Scotia, Manitoba	Human Rights legislation	Complaint-based models

Organizations operating across Canada must comply with both federal and applicable provincial laws.

Topics Covered

Equal Pay Audits ✅ (Mandatory pay equity plan with job evaluation)
Pay Gap Reporting ✅ (Plans posted and submitted to Commissioner)
Salary Range Standardization ✅ (Job evaluation and value bands)
Employer Thresholds ✅ (10+ employees)
Remediation Requirements ✅ (Must correct gaps within 3-5 years)
Collective Bargaining ✅ (Union participation in plan development)
Reporting Deadlines ✅ (Initial plan + 5-year updates)
Penalties & Enforcement ✅ (AMPs up to $50,000, Commissioner oversight)
Protected Characteristics ✅ (Gender-based, with focus on female-predominant job classes)

Compliance Timeline

Date	Action
August 31, 2021	Pay Equity Act comes into force
September 1, 2021 - August 31, 2024	Employers establish and post pay equity plans (3-year period)
By August 31, 2024	Private sector employers must complete initial pay equity plans
By August 31, 2026	Public sector employers must complete initial pay equity plans
Ongoing	Maintain pay equity; update plans every 5 years

Note: Deadlines vary by sector and size; consult Pay Equity Commissioner for specific timelines.

Resources

Pay Equity Commissioner: https://www.chrc-ccdp.gc.ca/en/about-us/pay-equity-commissioner
Pay Equity Act (full text): https://laws-lois.justice.gc.ca/eng/acts/P-4.2/
Guidance and Toolkits: https://www.payequitychrc.ca
Canadian Human Rights Commission: https://www.chrc-ccdp.gc.ca
Employment and Social Development Canada: https://www.canada.ca/en/employment-social-development.html

Best Practices

Engage Early

Start planning well before deadlines
Involve HR, compensation, legal, and employee representatives early

Rigorous Job Evaluation

Use recognized, objective methods (e.g., Hay, Mercer, CWA, or custom systems)
Ensure evaluators are trained and calibrated
Document all decisions and rationale

Data Quality

Maintain accurate HRIS with job class, compensation, gender, and FTE data
Validate predominance classifications
Track changes over time

Transparent Communication

Communicate the process and outcomes to all employees
Post drafts and invite feedback
Address employee concerns and questions

Legal and Consulting Support

Given complexity, many employers engage:

Employment lawyers specializing in pay equity
Compensation consultants with pay equity expertise
Specialized software tools for job evaluation and gap analysis

Disclaimer: This guide is for informational purposes only and does not constitute legal advice. Organizations should consult Canadian employment law specialists and the Pay Equity Commissioner for specific compliance guidance.