Ontario Pay Equity requirements can be confusing for Employers to navigate and is more than a compliance requirement – it’s a commitment to fair and equitable compensation practices in the workplace.  The Pay Equity Act (Federal), Ontario Pay Equity Act (Provincial) and the Employment Standards Act (Provincial) are the key legislation that addresses pay equity.

It is a complicated and detailed subject, for this blog post we will provide a high-level overview focusing on Ontario Pay Equity legislation (Part I only) and not the Federal Pay Equity Act, which only applies to federally regulated workplaces. 

Definitions

Pay Equity is Equal Pay for work of Equal Value. It compares jobs typically done by women against jobs typically done by men. The value of jobs is based on the levels of skill, effort, responsibility, and working conditions involved.

Equal Pay for Equal Work is focused on situations where men and women do substantially the same kind of work in the same establishment, the work requires substantially the same skill, effort, and responsibility, and is performed under similar working conditions.  

Why Pay Equity Matters 

It is a legal requirement, but more importantly it is about recognizing the value of work fairly regardless of who performs it. Pay Equity is an issue for all organizations. There are many small everyday decisions that lead to pay gaps, and achieving pay equity helps organizations in a number of ways, including: 

• reducing systemic gender discrimination;  

• improving employee trust and retention;  

• strengthening employer branding; and  

• building more inclusive workplaces.  

As pay transparency and workplace equity continue to gain attention across Canada, employers who proactively review compensation structures will be better positioned to attract and retain talent while minimizing legal risk. 

Ontario Employment Standards Act (ESA) 

While our focus here is on Pay Equity, it is important for Employers to understand their obligations under the ESA. 

Equal Pay for Equal Work focuses on employees doing substantially the same job. Employers cannot pay one sex less than another when the work, skills, effort, responsibility, and working conditions are substantially similar. 

However, wage differences may still be permitted in certain circumstances, such as: 

• seniority systems,  

• merit-based compensation,  

• productivity-based earnings,  

• temporary training assignments,  

• skill shortages, or  

• seasonal and part-time work arrangements.  

It is important to ensure you thoroughly document the reasons for any changes in compensation on the employee’s file, to create a paper trail that can be referred to if you ever need to review or justify salary decisions. 

Ontario Pay Equity Act 

Pay Equity, under Ontario’s Pay Equity Act, goes a step further. Instead of comparing individuals doing the same job, it compares entire job classes that are traditionally female or male, to determine whether compensation reflects the true value of the work performed. 

The Act applies to all employers in Ontario except for private sector employers with less than ten employees. There are two parts to the Act; Part I applies to all employers, whereas Part II only applies to certain large private sector and public sector employers that existed on January 1, 1988.  We will be focusing on the requirements in Part I of the Act.  

The Act requires employers to undertake a four-step process: 

1. Identify and define job classes 
2. Determine the gender of each job class 
3. Assess the value of each job class 
4. Compare and adjust wages 

Step 1: Identify and define job classes 

A job class groups positions that: 

• have similar duties and responsibilities,  

• require similar qualifications,  

• follow similar recruitment processes, and  

• share the same salary range or compensation structure.  

Importantly, all types of workers – full-time, part-time, contract, and seasonal employees – count toward Pay Equity requirements. 

Step 2: Determine the gender of each job class 

Under the Act: 

• a job class is generally considered female if at least 60% of incumbents are women,  

• male if at least 70% are men, 

• otherwise, the class may be considered gender neutral.  

Historical patterns and workplace stereotypes may also be considered when determining gender predominance. 

Step 3: Assess the value of each job class 

The Act outlines several methods that can be used to assess whether compensation is equitable: 

• Job-to-Job Method: directly compares female and male job classes of similar value. This type of comparison is used when the female job classes can be matched to male job classes of equal or comparable value. 

• Proportional Value Method: if the job-to-job method is not possible because there are no similar value female to male job classes, employers are required to use the proportional value method.  This compares female job classes to a broader representative group of male job classes when direct matches are unavailable.  

• Proxy Method: Only public sector organizations can use this method and only in specific circumstances.  It allows comparison with another public sector organization when internal comparators do not exist.  

The comparison looks at factors such as: 

• skill,  

• effort,  

• responsibility, and  

• working conditions.  

The evaluation process is detailed and not something we can fully cover in this blog post.  The Pay Equity Office has a guide employers can work through Pay Equity Solution for Small Business Do-It-Yourself Toolkit | Pay Equity Office. 

Step 4: Compare and adjust wages 

When a pay gap is discovered, the wages of the underpaid female job classes must be raised to match the pay of the comparable male job class. You cannot lower the wages of the male job class to fix the pay equity problem. 

Maintaining Pay Equity 

Pay Equity is achieved when every female job class in the company has been compared to a job class or job classes under the job-to-job method of comparison, or the proportional value method of comparison and adjustments to the job rate of each female job class has been made.   

Achieving pay equity is not a one-time exercise. Employers are required to continually monitor compensation practices to ensure equity is maintained over time. If wages increase in male job classes, employers may need to adjust comparable female job classes accordingly.

Pay Equity Reviews 

Pay equity is an on-going process and there are certain events that trigger a pay equity review, these include: 

• Creating new job classes or significantly changing existing ones 

• Organizational restructuring or changes in reporting structure 

• Mergers or acquisitions 

• Changes to compensation structures – new bonus programs, grade changes, market adjustments 

• Significant changes in the gender composition of any job class  

Where wage adjustments are still required, there may be certain qualifying situations where adjustments can be phased in over a period of years, the Act provides further detail on this. Most employers are required to make the adjustments as soon as the process is completed. 

Pay Equity Plan 

Employers with 100 or more employees must prepare and post a written Pay Equity Plan. Employers with under 100 employees must still achieve Pay Equity but are not required to post a formal plan.  

A Pay Equity plan typically includes: 

• A list of all job classes and their gender predominance 

• The job evaluation methodology used and how each factor was weighted 

• Current compensation rates for all job classes 

• Results of comparisons between female-dominated and male-dominated job classes 

• A plan for any wage adjustments that have been identified 

The plan must be posted in a visible location where all employees can access it, and employees have the right to review and raise objections through the Pay Equity Hearings Tribunal.

CulturedHR can help employers assess pay equity obligations and review compensation practices. Learn more about how we support HR compliance for small businesses on our Services page.