Pay Equity – A few reminders:
What is Pay Equity?
Pay Equity can be defined as equal pay for different but equivalent work.
Who is affected by the Pay Equity Act?
Any company with 10 employees or more during their reference period*.
What is the deadline to comply?
Under the modified Pay Equity Act, most companies must comply, or update their original plan by December 31, 2010. For many companies the original deadline to comply was as early as November 21, 2001, in which case any pay adjustments must be made retroactively to this date.
*reference periods can vary from one company to another, depending on the date that the company began its activities. For more information please consult the Pay Equity Commission’s website or contact one of Fuller Landau’s HR Representatives.
Pay Equity Series – Will you be ready?
PART 3 – Comparing Male and Female Job Classes and Determining Pay Adjustments
As discussed in Part I and Part II of the series, the purpose of the Pay Equity Act is to rectify pay differences between predominantly male and female job classes. Therefore, once the predominantly male and female job classes have been identified, the next step is to determine their “value” so that a point of comparison is created which will help to ensure that equivalent job classes earn equivalent remuneration.
How do we determine the “value” of a job class?
The Pay Equity Commission requires that companies use four factors to determine the value of their job classes:
- Required qualifications: requirements of the position, including education, experience and other special skills or abilities, such as coordination and dexterity;
- Assumed responsibilities: supervision, autonomy, client relations, decision-making, communication, financial responsibility, etc.;
- Required effort: physical effort (ex: lifting, repetitive movements, crouching or bending) and mental effort (ex: complexity of tasks, concentration.);
- Working conditions: physical environment (conditions where work is performed, risk of injuries) and psychological environment (level of stress, dealing with difficult people).
Once each job class has been rated using these factors, the numerical value (score) of each job class will be used to compare the male and female job classes.
How do we compare job classes in order to determine pay adjustments?
Once a score has been determined for each job class it becomes easier to compare the female and male job classes. Here is a very simple example using two job classes:
In this example, since the Warehouse Worker and the Receptionist have been determined to have the same value (score), the Receptionist would therefore be entitled to an adjustment of $1.00 / hour.
Comparing job classes is usually more complex than the above example, given that normally there are more than two job classes to evaluate and compare. There are two recognized methods that can be used to determine pay adjustments – the Individual Method and the Global Method.
The most commonly used method is the Global Method. Using this method, we can first plot on a graph the male job classes using the scores and hourly rates. Then, by dividing the hourly rate by the score for each male job class we obtain a ratio. By taking the average of the ratios of all of the male job classes, we obtain a trend line. Lastly, by plotting the female job classes on the same graph, we are able to visually see if any of these job classes should receive a pay adjustment as they will fall below the trend line.
The amount of the adjustment is calculated as the difference between the current hourly rate and the rate according to the trend line. In order to calculate pay adjustments, the maximum hourly rate (or max. of the salary scale) should be used for each job class and should include any benefits which are not equally accessible to all, for example commissions or bonuses.
It should be noted that under the Pay Equity Act, only predominantly female job classes receive pay adjustments.
Here is an example of the Global Method, with the graphic illustration in Box 1.
Example: Global Method
Predominantly Male Job Classes
Predominantly Female Job Classes
PART 4 – Posting the results
Companies are obligated to inform their employees of their pay equity process by posting the results. For companies who employed 10 to 49 employees during their reference period, this posting is done only at the end of the process. For companies with 50 employees or more, two postings are required, one posting once the predominantly male and female job classes, as well as the method to evaluate the job classes have been determined, and a second posting at the end of the process. See Box 2 for a list of what your pay equity posting should include.
This posting must be posted for a period of 60 days in a location that is easily accessible and visible to all employees. In addition, the Pay Equity Commission asks that employees be informed that a posting exists through a memo or another means that it likely to reach them. Once the posting has expired a second posting must be done within 30 days in order to respond to any questions or comments received from employees and this posting must also be done for a period of 60 days.
Once your posting is finished, you have completed your pay equity plan! However, under the modified Act, companies are required to maintain their plan every five years.
Box 2: Information your Pay Equity Posting must contain
- Date and length of posting
- Method of transmission and location of posting
- List of predominantly male and female job classes
- Summary of steps followed (companies with 10 to 49 employees)
- Method and tools used to evaluate the job classes (companies with 50 employees or more)
- Results of the evaluation and comparison of job classes (companies with 50 employees or more)
- Method for calculating adjustments (companies with 50 employees or more)
- The % pay adjustment for each predominantly female job class and payment method, if applicable
- To whom employees should address any questions or comments and how they will be responded to
- Date of next posting (for first 60-day posting)
- How to contact the Pay Equity Commission for more information
Need help completing your company’s Pay Equity Plan? Not sure what your obligations are? Call our experts!