The importance of equal pay to help create a better workforce

Fair and transparent compensation policies lead to a better and more engaged workforce (Getty Images/sanjeri)

Equal pay for work of equal value should be a given in today’s world. But, according to Ontario’s Pay Equity Office, for every $1 earned by a male worker, a female worker still earns just 89 cents.

Most would agree that closing the gap is the right thing to do. It’s also the required thing, with the federal Pay Equity Act coming into effect this past August. But there are also plenty of reasons why it makes good business sense. 

“If compensation is done in a way that is fair and transparent, it will drive positive outcomes,” says Kerris Hougardy, vice-president, People Services – North America and executive champion, North America Diversity and Inclusion Program for Colliers in Vancouver.

Here’s why—and how—to implement equal pay in your organization.

CREATE A WORKPLACE WITH STRONGER ENGAGEMENT AND RETENTION

There’s an innate sense of satisfaction that employees get from working with organizations that have a commitment and methodology around equal pay, according to Hougardy. “When someone is spending 40-plus hours a week on the job, it helps to know that the organization is operating in a fair and transparent way,” she says.

Retention is the number one reason that equal pay is critical, says Jamie Savage, founder of The Leadership Agency in Toronto, which specializes in recruiting for North American startups. “You are going to retain your people longer and be able to develop that talent,” she says.

Organizations that have a commitment to pay equity are also more likely to attract higher quality, diverse talent, says Hougardy. “Recruitment and retention become easier and, as such, organizations become more competitive in the marketplace,” she says.

According to Hougardy, if employees feel there is a commitment to pay equity and doing the right thing, they also tend to be more engaged in their work. And that engagement extends beyond the office environment, she adds. 

“Having a more equitable workplace also has a positive impact on the community at large,” she says. “If women’s salaries are more equitable, those women are able to contribute to the community and to society in a stronger way.” 

MEET ALL LEGAL RESPONSIBILITIES AND REQUIREMENTS

The Government of Canada brought the Pay Equity Act into force on August 31, 2021 in its efforts to close the gender wage gap and ensure workers in federally regulated workplaces receive equal pay for work of equal value. With that, employers with 10 or more employees will have three years to develop and implement their proactive pay equity plans. Provinces also have established their own employment and labour standards legislation.

“Businesses and organizations can be at risk of [owing] large monetary awards if they are not compliant, as awards can be retroactive and even apply to employees who are no longer in your business,” says Lisa Cabel, national leader, employment and labour law, KPMG Law LLP in Toronto. “For public companies, the economic impact of pay equity adjustment could very well be something shareholders will want to see.”

To make sure that you’re compliant with both provincial and federal legislation, it’s important that you maintain good counsel. “If you don’t have the perspective of how the case law has interpreted and applied the legislation, then you could miss areas where discretion is required to ensure compliance,” says Cabel.

Having good collaboration with both HR and accounting also makes it a lot easier to execute your policies, says Hougardy. “Establishing equities can be a costly process. Understand what the strategy is over the months and years and adjustments needed to reach parity. More importantly, can you budget for it? It is critical that accounting and HR experts, including diversity and inclusion experts, take part in that analysis.”

ESTABLISH A FRAMEWORK TO SUCCESFULLY IMPLEMENT YOUR POLICIES 

It is critical to set up a pay evaluation system with established job codes to ensure that you don’t run into risks later on, says Cabel. “It’s not just about base pay, but also all aspects of compensation and benefits.”

Be prepared to invest time into this process. “It’s not an overnight fix,” advises Hougardy. “Also, you can’t just do it once and consider yourself done. It requires continuous and constant monitoring to ensure it is sustainable. One round of bonuses or increases, or a change in leadership, can muck it all up again.”

When you’re establishing your policy, always benchmark first. Make sure the inputs used to benchmark compensation are accurate and have integrity and credibility, says Hougardy. “Benchmarking is extremely important,” she says. “Does everybody have relevant job descriptions? Does a job title make sense? How do roles compare in different markets? Be sure to run some preliminary audits to make sure the data being used is helpful.”

Another key to success is investing in technology. Explains Hougardy: “There is a lot of emerging technology that you can integrate with your data that will run constantly and provide your compensation landscape at any given point of time, including salaries, bonuses, promotions, market assessments, acquisitions, new hires or any other element that could have an impact on pay structures.” 

KEEP LOOKING FORWARD

Find out how EDI policies can help spur action in the workplace and learn how the Big Four accounting firms fare on diversity and inclusion efforts. Also, put in the work to become a better ally and foster a more inclusive workforce.