Are companies and workers prepared for the pay transparency that is hitting Ontario soon
Employers in Ontario will be required to publish salary ranges on job postings — eventually — but a new survey shows that they’re not quite ready.
Less than 20 per cent of Canadian employers have “fully implemented” pay transparency plans, according to the 2024 Global Pay Transparency Survey Report by Mercer, a human resources consulting firm.
Under Ontario’s new Working for Workers Four Act, employers will be required to publish pay ranges or expected compensation on public job postings.
Provisions of the Act, like changes dealing with the payment and pooling of tips, are already in place, but others like pay transparency will come into effect at an undetermined later date.
The ministry of labour did not respond before deadline to an email question regarding the timing of the changes.
Employers have a lot of prep work, experts say, with companies needing to get their “houses in order,” said Christie Rall, a partner at Mercer specializing in workforce transformation.
This could include fixing pay equity gaps, reassessing how they share information for current and future employees, and ensuring the company’s compensation ‘practices’ align with compensation ‘philosophies.’
Canadian workers are largely in favour of pay transparency, said Renee Caron, an independent pay equity consultant.
“It’s attractive to employees,” said Caron who helped negotiate Canada’s Pay Equity Act launched a year ago. “More and more employees are looking for it. They’re interested.”
Mercer’s survey, which polled 1,160 companies headquartered in 45 countries between April 15 and May 15 this year, found that 70 per cent of employees worldwide expect pay transparency.
Discussing pay is no longer taboo. Salary is increasingly a “dining table conversation,” said Rall with Gen Z, in particular, more open to talking about salaries than previous generations.
But pay transparency is a new concept for most companies, said Lisa Cabel, partner and national leader of KPMG’s labour law practice. It’s only in the last few years that the practice has started to be signed into law, she said.
Four Canadian provinces have legislated or plan to introduce salary disclosure requirements, including British Columbia, Nova Scotia, Newfoundland & Labrador, and Ontario.
A lack of transparency creates a situation that “typically benefits employers,” said Andrew Goldberg, managing partner at the Levitt LLP employment law firm, with white males historically benefiting.
Pay transparency could empower marginalized populations, like women, and people of colour, Caron said, allowing them “self-select.” As they review a job posting, “They may think, ‘That’s a really low salary; I don’t even want to go for that.’”
Employees will be able to better understand career and salary pathways within the organization so they can plan for themselves and their families. And when employees feel they’re being paid fairly, there is more trust between them and the organization, said Mercer’s Rall.
But there are wrinkles to transparency.
If salary ranges no longer reflect market demands, then employees might find themselves locked into a certain salary, said Cabel, of KPMG. “If you’re looking for something outside of that range, it could be hard to negotiate.”
Even when posted, salary ranges might not tell the full story, said Wendy Glaser, national director of the pay equity practice at KPMG. Base salary ranges might not reflect the full compensation package, which could include bonuses, commissions, group insurance benefits, allowances, and more, which could be “quite lucrative” for an employee, said Glaser.
And pay transparency may also stoke jealously between colleagues.
Some people might be getting paid more because they perform better, but others might look at them and wonder why they are getting paid less.
“The workplace is certainly a delicate balance of relationships,” said Goldberg. “There are different personalities. There’s always natural friction. Any time there’s a change in the variables, particularly one that’s as critical as compensation, you should expect that there’s going to be some change.”
Employees perform at all different levels, echoed Kun Huo, assistant professor of managerial accounting and control at the Ivey Business School at Western University, and pay transparency isn’t enough to achieve equity.
You need performance transparency as well, said Huo, with managers needing to credibly justify to low performers why they’re paying high performers more.
Employers may also need to carry out job evaluations to assess the value of work, experts said.
And national or international companies will need to decide whether they will publish salary ranges for all provinces, or just the ones with pay transparency legislation.
They’ll also need to figure out how to justify pay differences between employees working the same job, but in different provinces with different costs of living.
Pay transparency “takes a lot of careful consideration … there has to be really effective communication from the top all the way through the organization,” said Glaser, of KPMG. Companies might need to train managers on how to communicate about pay effectively.
“It’s going to be a challenge for employers to rectify,” said Goldberg, “and it will take time.”
This article was first reported by The Star
