How companies can get their pay equity act together

By LARA ZINK AND KATIE SQUIRES-THOMPSON | The Globe and Mail| August 25, 2021
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On Aug. 31, Canada’s new Pay Equity Act will come into effect in an attempt to address systemic and persistent pay discrimination that has disadvantaged women for decades. The act will require federally regulated companies with 10 or more employees to develop and implement a pay equity plan within three years, by following a detailed, step-by-step and standardized process.

Pay equity is equal pay for equal work. To think that, in 2021, employers are still not paying women the same as men for equal value work is outrageous. Technically, this has been illegal for 40 years (since 1977) under the Canadian Human Rights Act, but a complaint-based structure, combined with a culture of pay secrecy that dominates our workplaces, made it difficult to have a widespread impact.

It’s well known that Canada has a persistent wage gap. A 2018 Statistics Canada report estimated women earned 87 cents for every dollar earned by men, and for Black and Indigenous women and women of colour, the shortfall was even more severe. The Globe and Mail’s recent Power Gap report found in highly paid jobs such as the senior ones at law firms, male equity partners were making $200,000 more a year than female equity partners.

But what surprises some people is how far behind Canada is compared with other OECD countries in narrowing the pay gap between men and women. Of the 36 OECD countries, Canada ranks 29th. What do the countries ahead of Canada have in common? Most have taken pro-active measures to force companies to report and correct gender pay gaps.

The act makes it feel like finally something is being done. This law is different because it is pro-active. It appropriately places the burden on employers to ensure pay equity is achieved and maintained, and provides companies with a standardized template of how to do this properly.

Other countries and academics have proved even just disclosing gender pay shrinks the gender wage gap. The act will work, but it will only affect 6 per cent of Canadians – those employed by federally regulated industries such as banks, airlines and telecom.

Eliminating the gender pay gap in the entire country will require a combination of further efforts, and more people need to benefit. Gender pay equity is unavoidably trending into the world of compliance – it will become regulated and legislated.

So why wait? COVID-19 has exacerbated gender inequities and set many companies back in their diversity efforts. And while it’s clear businesses face many challenges, it’s also clear that closing the gender wage cap can spur massive economic growth, leading to a stronger economic recovery.

Companies should follow the government’s lead and voluntarily address and correct gender pay inequities. If you need a stronger case than basic morality and ethics, it’s also better for business. Correcting gender wage gaps and guaranteeing fair pay in your company increases your ability to attract and retain diverse talent, allowing companies to make gains toward their gender diversity goals, which as we all know, increases business performance and strengthens bottom lines.

Finally, consider the positive branding and reputation-strengthening opportunity. Employers, now is the time to act. Pro-active companies will gain incredible competitive advantages.

WHAT COMPANIES CAN DO

Take a pro-active, voluntary and holistic approach to ensuring equal pay

Conduct a pay equity audit following the Pay Equity Act’s framework, correct any inequities and create a plan to monitor and maintain equal pay in future. Salaries are a starting point, but all forms of remuneration should be examined and equalized, including bonuses, awards of company shares and stock options, travel allowances and any other form of compensation.

Look beyond gender to correct pay gaps

Use the act as a template to correct pay gaps beyond gender. Ensure employees who identify as non-binary, Black, First Nations, Inuit, Métis, racialized employees and staff with disabilities are not subject to pay discrimination and are paid fairly.

Educate all people managers responsible for hiring, promotion and compensation decisions on the pay equity process

All people managers should be very literate on the issue, aware of their own biases and held accountable for ensuring equal pay.

Be transparent and release your statistics

Voluntarily disclose your statistics and methodology to all employees, and share your detailed plan to correct pay gaps and maintain equity. Make your compensation framework transparent and available to employees, as well as standardizing hiring criteria and promotions evaluations to reduce gender and racial bias.

Use your findings to diagnose and correct systemic inequalities.

Pay inequity is often indicative of broader inequities and discrimination. Once you correct your pay gap, prevent it from recurring by addressing root causes. What led to the pay gap in the first place? Is it due to inequities in the way you recruit and hire, your promotions process, how you conduct negotiations, your leadership and management, and your organization’s culture?

Implement other practices and policies that support equal pay.

The gender gap often becomes more extreme when women shoulder a disproportionate amount of domestic and caregiving responsibilities. Things such as robust and generous parental leave policies (for all parents, not just mothers), flexible and family-friendly workplaces, national child care and other initiatives that incentivize and allow fathers to participate equally at home, will go a long way toward creating more equal workplaces.

This process is continuing and without end, as are many other elements of doing good business. A company’s compensation practices are a good indicator of how committed it is to gender equality and fairness. Let’s hope for a not-so-distant future when the most fair companies win.

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