Pay transparency is often viewed as a “taboo” topic of conversation. Employees can veer away from the subject, simply due to a fear of being judged for what they earn. It can also be challenging for employers to address the reasoning behind pay discrepancies in the workplace, thus it is easier to close off these types of conversations rather than to discuss them openly with employees.
We at Sultan Lawyers discuss current legislation, address the stigma surrounding the topic of pay transparency and discuss the benefits and challenges that accompany it. Further, we dive into the advantages of companies being open about salaries at the hiring stage and during the employment relationship.
WHAT IS PAY TRANSPARENCY?
Pay transparency is the process of having open and forthright conversations relating to salaries, or other forms of compensation within the workplace. Typically, this includes colleagues discussing their wages or pay ranges for their positions, and even providing insight as to how the employer determined their salaries.
PAY TRANSPARENCY IN THE LAW:
Pay transparency reporting amendments were made to the Employment Equity Act on January 1, 2021.
As a result, federally regulated private-sector employers with 100 or more employees covered by the Act are required to report their salary data in a way that shows aggregated wage gap information. Aggregated wage gap information will be released through an online application (which is currently in development by the government), and will provide comparable data on inconsistent wage rates and wage gaps within designated groups.
The first release of wage gap information is expected in the Winter of 2023.
Ontario and the Pay Transparency Act
The Pay Transparency Act is provincial legislation that applies to employers in Ontario while incorporating employee protections.
This Act established obligations for employers to disclose information relating to the compensation of their employees and prospective employees. This disclosure, similar to federal amendments includes requiring employers with 100 or more employees to submit a pay transparency report that contains information relating to the employer, the employer’s workforce composition and differences in compensation in the employer’s workforce with respect to gender, race and other characteristics.
By collecting this data from employers, the provincial government’s goal is to:
- promote gender equality and equal opportunity in employment and in the workplace;
- remove inequities within businesses and to promote the full and equal participation of marginalized groups in the workplace;
- eliminate gender, and racial biases in processes of hiring, promotion, employment status and pay practices;
- support open dialogue and workplace consultation between employers and employees on issues concerning employment, compensation and equal opportunity; and
- support economic growth through the advancement of equity in employment and in the workplace for marginalized groups.
Further, the Act protects employees from being penalized, threatened or intimidated for disclosing or inquiring about another employees’ compensation rate. These protection measures are to raise awareness of pay discrepancies experienced by women, Indigenous people, persons with disabilities and members of visible minorities.
PAY TRANSPARENCY IN EMPLOYMENT
Within the hiring process
It is important to be transparent in the hiring process for a few reasons.
First being the fact that applicants appreciate pay transparency. Employers being upfront and honest about how much they are willing to compensate their employees within the initial job advertisement, preserves time and effort for both parties in the hiring process. If candidates are able to determine whether a job can sustain their lifestyle from the initial point of discovery, candidates can self-select out of the hiring process, and streamline their candidate pool. Further, transparency can provide employers with a significant competitive edge when candidates can see a hard figure associated with the role, rather than a level of uncertainty whether the job will work for them.
Allison Venditti, HR professional and founder of the online network “Moms at Work”, is an advocate for pay transparency to be standard practice and priority for all Canadian employers. She observes that without pay transparency, employers have an informational upper hand, allowing them to pay employees less. The types of employees most underpaid are marginalized groups in society. Venditti illustrates pay transparency in a job advertisement as comparable to including price tags on goods in a store. When you are in the store, you gain an understanding of what the item is worth. Venditti’s conclusion is that when wages are not transparent it is portraying the message, “We are not valuing your time”.
Within the company
There continues to be concern about gender and racial wage gaps in the workplace. Pay secrecy is a driving force of these pay gaps and can have an influence on promoting an unbalanced work environment through the presence of inequality, discrimination, and leaving many employees questioning their worth. These issues can lead to decreased levels of job satisfaction, motivation amongst employees, and output within the company.
By being transparent about compensation in the workplace, companies can identify these pay gaps, minimize negative effects and ensure that their employees are paid appropriately, thus transitioning towards pay equality.
Below, we at Sultan Lawyers have identified notable benefits and challenges of pay transparency for employers to keep in mind.
Benefits to Pay Transparency
- Promotes an open-workplace culture, creating a high-trust organization;
- Ensures a more transparent recruitment process;
- Increases employee retention and levels of job satisfaction and motivation, as employees will feel valued and more understanding;
- Identifies and minimizes pay gaps;
- Increases employee collaboration;
- Provides a competitive edge in the hiring process; and
- Facilitates a workplace environment with happier and healthier employees.
Challenges of Pay Transparency
While pay transparency in the workplace offers many benefits, employers may face some challenges in the wake of pay transparency discussions.
When pay is treated as a topic of secrecy, it is common for employees to assume that they are being subject to impartial pay rates. This can create conflicts between co-workers, and or generate concerns surrounding unequal pay, colleagues feeling undervalued or resentful, potential human-rights claims, and further potential for increasing an employer’s employee turnover rate.
For example, if an employee becomes aware that they are being underpaid through a conversation with another employee, this is concerning as it may result in the employee ending their employment relationship for a more competitive salary. Considering this, employers should be open to negotiating salaries, as it may cause more hardship losing an employee rather than simply increasing their compensation.
While employers should commit to paying everyone fairly and appropriately, there are many factors that must be considered when calculating compensation. Factors such as: the length of employment, levels of training of the employee and overall experience each employee possesses. These factors are all unique and should be accounted for by the employer.
The process to reach equality requires acknowledging the unique traits of each employee, and using this knowledge to determine the appropriate compensation for that employee. Transparent conversations help facilitate this process. Providing equal opportunity, and acknowledging everyone’s skills, experiences, and level of expertise are the cornerstones to achieving pay transparency opportunities, and subsequently pay equality, for all.
CONTACT THE EMPLOYMENT LAWYERS AT SULTAN LAWYERS FOR ASSISTANCE NAVIGATING PAY TRANSPARENCY
If you are an employee or an employer needing assistance navigating conversations and or policies relating to pay transparency, contact your Toronto employment lawyers at Sultan Lawyers for a flat-rate consultation. We can be reached at 416-214-5111, or here.
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