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Disclaimer: This Guide gives an overview of the minimum requirements of the Pay Equity Act as interpreted by the Pay Equity Office. The interpretations are drawn from our own experiences and by applying the key rulings of the Pay Equity Hearings Tribunal and the courts and is current to the date of publication.
This section describes the activities that all employers must carry out to meet Part I requirements for implementing and achieving pay equity in their establishment.
When the Review Services Unit investigates a dispute over whether or not pay equity was achieved or maintained, Review Officers follow the standard of review set by the Tribunal. The Tribunal has recognized that certain provisions of Part I require exact application while other sections leave some discretion to the parties implementing pay equity. Where the complaint is related to an exact requirement, the Review Officer will apply the standard of correctness to the decisions made by the employer. Where the complaint is related to an area where discretion may be exercised, the Review Officer will apply the standard of reasonableness when reviewing employers' decisions. Where the Act allows for discretion, a Review Officer will not interfere with decisions made by the employer as long as he/she determines that the decision falls within a reasonable range of outcomes that does not go against the the purpose and intent of the Act.
Table of Contents
Defining the Establishment
How does the Pay Equity Act define "establishment"?
"Establishment" means all of the employees of an employer employed in a geographic division or in such geographic divisions as are agreed upon under section 14 or decided upon under section 15 [1. (1)].
"Geographic division" means a geographic area prescribed under the Territorial Division Act, 2002 [1. (1)].
Why must an employer define the establishment?
The Act states that pay equity must be established and maintained in every establishment of the employer [7.(1)].
Decisions concerning the definition of establishment will determine which female and male job classes will be compared for pay equity purposes.
How does an employer go about defining the establishment?
There may be more than one way to define the establishment. At minimum, employers must define their establishment according to a county, territorial district or regional municipality.
All employees of an employer in a given geographic division must be included in the same establishment.
If an employer has more than one location in different geographic locations, the employer can choose to combine establishments from more than one geographic division. In addition, it is possible to combine establishments in the same geographic division in cases where "centralized bargaining" occurs. That is, two or more employers and the union representing the employees agree that for pay equity purposes, there will be one establishment [2. (1)]. Where this occurs, each employer is still responsible for implementing and maintaining pay equity with respect to its own employees.
By allowing employers to define their establishment according to geographic divisions and requiring pay equity to be implemented in the establishment, the Act does not interfere with an employer's ability to set wages and pay practices in different regions in response to local economic conditions.
Example of the Establishment:
If a company has a warehouse and offices that are all located in Ottawa, there is only one establishment. However, if the company also has a warehouse in Toronto, the employer could decide to have two establishments. This means that the employer would prepare two separate pay equity processes or plans, one for Ottawa employees and the other for Toronto employees. The employer could also decide to have only one establishment, in which case both Ottawa and Toronto employees would be included under the same pay equity process or plan.
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Determining Job Classes
What is the significance of a job class?
"Job class" is a pay equity term that has specific meaning under the Act and will therefore be interpreted using a standard of correctness. An employer is required to identify job classes in the establishment upon which comparisons for pay equity must be done.
What is the definition of a job class?
"Job class" means those positions in an establishment that:
- have similar duties and responsibilities;
- require similar qualifications;
- are filled by similar recruiting procedures; and
- have the same compensation schedule, salary grade or range of salary rates [1. (1)].
How does an employer identify a job class in the establishment?
The positions in one job class must meet all four of the criteria in the definition of a job class. If one position differs from another on any one of the criteria, these two positions would be in two different job classes. Some job classes may include many positions occupied by many employees all performing similar duties and responsibilities with the same compensation. Other job classes may have only one position, occupied by a single incumbent [1. (6)].
How are the criteria applied to determine job classes?
It must be noted that the first three requirements use the word "similar" allowing for some discretion in applying the criteria. The fourth requirement uses the word "same"; this must be applied exactly in order to meet the criteria.
To determine similar qualifications of the job class, employers should consider both the nature of the qualification (for example, special credentials or skills) and the level of the qualification (for example, a community-college diploma could be equivalent to a three-year apprenticeship in a trade). The qualifications of a job class should reflect those required to do the work and not be the qualifications of the employee who happens to be in the job, or a desired qualification that may be not really required.
To determine similar recruitment procedures of the job class, employers should consider the scope of search (i.e. local, provincial, national, international), method of recruitment (i.e. union hiring hall, college campus, internal, external, newspaper advertisement, search firm) and /or recruitment requirements (i.e. application, interview, tests).
All the positions in a job class must have the same compensation schedule, salary grade or range of salary rates; they must be paid the same AND have equal access to the same benefits.
Are people with disabilities in a separate job class?
The Act specifies that a position cannot be assigned to a job class different than that of other similar positions only because the needs of its incumbent have been accommodated to comply with the Human Rights Code.
Q&As Job Class
1. A Company hires full–time and part–time cleaners. Do these similar or identical positions fall under the same job class?
Possibly. If full time and part time employees do similar work, they would belong to the same job class if they have the same compensation schedule, salary grade or range of salary rates, and meet the other three tests for job class outlined in the definition quoted above. However, where both full and part–time employees perform similar duties and responsibilities but the part–time cleaners are paid an hourly rate and the full–time ones are paid on salary, or the part–time cleaners do not have benefits but the full–time ones do, then the full and part–time positions would be in separate job classes.
2. There are ten "Secretary" positions in a company. Do all the secretaries belong to the same job class?
Not necessarily. Even if all the secretaries performed similar duties and responsibilities but one secretary is not paid the same as the rest, that secretary must belong in a separate job class according to the Act. If there are secretary job classes that are similar to each other, these job classes can be grouped together using a "group of jobs" approach.
3. What is a "Group of Jobs"?
A group of jobs is a series of job classes that involve similar kinds of work performed at different levels of skill, effort, responsibility and working conditions [6. (10)]. The wages for each job class usually increase proportionately through the series. Typically, employees progress from one job class to the next job class within the group.
Example of a "Group of Jobs"
A group of jobs all doing similar "secretarial" work might be:
- Senior Clerk
- Clerk Typist
- Intermediate Clerk Typist
- Senior Clerk Typist
If an employer chooses to use a group of jobs approach, job classes that are related to each other in some way are grouped together to maintain the positions of the job classes relative to each other. Deciding which job classes to group together in a group of jobs should be based on an assessment of the actual tasks and duties performed, not just similar sounding job titles.
The group of jobs approach enables employers to:
- reduce the number of female job classes to evaluate and compare; and
- maintain the relationship between the female job classes in the group of jobs, since the same pay equity result will be applied to the whole group.
The group of jobs approach is applied as follows:
- The female job class with the greatest number of employees is selected as the representative job class for the group.
- The selected pay equity comparison method (See below for Methods of Comparison) is applied to the representative job class.
- The resulting pay equity adjustments, if any, are applied to all the positions in all the job classes in the group as though they were all one female job class.
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Determining the Gender Predominance of Job Classes
To achieve pay equity, the Act requires that female job classes be valued and compared to male job classes. The employer must determine the gender of each job class as male or female before any comparisons can be done. Female job classes are jobs done usually by women, and male job classes are jobs usually done by men. It is possible to have job classes that are neither male nor female; these job classes are considered to be gender neutral.
What is the definition of female job class and male job class?
"Female job class" means,
- a job class in which 60% or more of the members are female,
- a job class that a review officer or the Hearings Tribunal decides is a female job class or a job class that the employer, with the agreement of the bargaining agent, if any, for the employees of the employer, decides is a female job class [1. (1)].
"Male job class" means,
- a job class in which 70% or more of the members are male, or
- a job class that a Review Officer or the Hearings Tribunal decides is a male job class, or a job class that the employer, with the agreement of the bargaining agent if any, decides is a male job class [1. (1)].
In deciding or agreeing whether a job class is a female job class or a male job class, regard shall be had to the historical incumbency of the job class, gender stereotypes of fields of work and such other criteria as may be prescribed by the regulations [1. (5)].
An employer may treat job classes that are arranged in a group of jobs as one female job class if 60% or more of the employees in the group are female [6. (6)].
An employer shall treat job classes that are arranged in a group of jobs as one female job class if a review officer or the Hearings Tribunal decides that the group should be treated as one female job class [6. (7)].
An employer may, with the agreement of the bargaining agent, if any, for the employees of the employer, decide to treat job classes that are arranged in a group of jobs as one female job class [6. (8)].
How is the gender predominance of the job class determined?
The Act requires employers to apply three criteria or tests to determine the gender of the job class [1. (1), 1. (5)]:
- Current incumbency
- Historical incumbency
- Gender stereotype of the field of work
What does "current incumbency" mean?
Current incumbency is the percentage of female and male incumbents in the job class. Usually if a job class is filled by:
- 60% or more female employees, it is a female job class
- 70% or more male employees, it is a male job class
Employers must also consider historical incumbency and gender stereotype of the field of work.
What if a job class is neither male nor female after applying the three criteria?
A gender-neutral job is not involved in the pay equity process. It cannot be used as a comparator nor can the incumbents receive pay equity adjustments.
Examples of gender neutral job classes
- The assembly line workers in a particular establishment where there are more or less equal numbers of women and men doing the job, and there is no gender stereotyping for the job may be a gender neutral job class for pay equity.
- A gym provides a personal training service. To encourage both men and women members to buy this service the employer has always employed an equal number of male and female personal trainers. In this company, personal trainers are likely a gender neutral job class.
- A new internet company has two social media writers, one is male and the other is female; both have been working since the company started. In this company, these writers would likely be in a gender neutral job class.
- The credit and accounts manager of a major department store is a position that has been held by roughly an equal number of men and women over the years. For this employer, this job class may be considered gender neutral.
What does historical incumbency mean and how is it applied?
Historical incumbency refers to pattern of employment for a particular job class within an establishment. For example, if the job class in question is one that has been filled mostly by women, and a man is recently hired, it may still be considered a female job class in that establishment.
Historical incumbency can only apply to situations where the job classes existed when pay equity requirements were imposed. Logically, if the employer is considered a new establishment, then the historical incumbency of job class would not apply because there would be no history of the job class in the establishment, unless the establishment was a successor employer who purchased and continued to operate a business.
To apply the historical incumbency criteria, the Tribunal determined in Pay Equity Office v. GL&V Process Equipment Group Inc., 1999 CanLII 14828 (ON PEHT) that the period used "must be one that fairly represents the incumbency of the job class over a period of time during which the job class characteristics remained substantially the same." This means that changes in the number and percent of men and women from year to year may not necessarily result in a change in the gender predominance of the job class.
What does gender stereotype of the field of work mean and how is it applied?
Gender stereotype of field of work refers to what most people commonly believe to be jobs held by women and jobs held by men. For example, nursing is generally and traditionally seen as a female job; a truck driver is generally and traditionally seen as a job performed by men.
Employers who are met with complaints about their decision regarding the gender of a particular job class may be asked to explain their decision during an investigation. In applying the criterion of gender stereotype of field of work, employers sometimes justify their decisions by relying on statistical data, reports or information such as the gender breakdown of occupational classifications from Statistics Canada, graduation rates by gender in professional programs or fields of study, or occupational data by gender from professional associations.
It is important however for employers to consider the actual job characteristics and duties of the job class in its own establishment and whether those characteristics and duties are associated with, or can be found in a typical female job or male job Association of Professional Student Personnel v. Toronto Catholic District School Board, 2006 CanLII 61262 (ON PEHT).
Can a job class be classified as female in one company and male in another?
Yes. Pay equity is implemented and achieved in the employer's individual establishment; the focus of the pay equity process is not sector, industry, or province-wide. Therefore, it is possible that the gender of the job class may be male in one company but female in another. For example, if the accountant position has always been occupied by women in one establishment and by men in another, the gender of the job class is female in the first case and male in the second.
In its overall structure, the Act requires pay equity to be achieved within the establishment. As such, decisions made about the gender of a job class should reflect the reality of each individual workplace. However, generic jobs that are not restricted to any particular employer may be helpful to determine whether the position has a gender stereotype, Hatts Off Specialized Services v. Employer, 2005 CanLII 60098 (ON PEHT).
How do the criteria apply to a single incumbent job class?
The Tribunal has raised a caution about the single incumbent job class especially where only one person has occupied the job for many years and has specified that some weight must be given to the gender stereotype of the field of work. In addition, the number of persons in the job class does not necessarily mean that the results of current and historical incumbency should be discounted, particularly if both criteria point to the same result.
How is gender of a new job class determined?
The employer must apply the current incumbency and gender stereotype of the type of work for determining the gender predominance. To decide the gender predominance of the job class, employers are expected to consider all relevant factors pertaining to work performed in the job in their workplace.
Employers must be reasonable in determining the gender of the job class
Under the Act, the gender predominance of a job class is an element where a range of options and possible choices is permitted. In the case of Pioneer Youth Services (PYS Associates Ltd) v. Canadian National Federation of Independent Unions, 2002 CanLII 49449 (ON PEHT), the Tribunal has ruled that where there is a complaint that is founded in an employer's exercise of discretion, the decision the employer made will be acceptable if it was considered to be reasonable, given the specific circumstances in which the determination was made.
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Gender Bias and the Need for Gender Neutrality
How does gender bias occur in the valuing of jobs?
Gender bias occurs when aspects of work typically done by women are assigned less value than they should and/or aspects of work typically done by men is given higher value by the employer. For example:
- Manual and repair skills for a mechanic or service personnel are recognized but dexterity skills of a typist or multi-tasking skills of a receptionist are not.
- The physical effort required for lifting heavy objects in a stocker job class is taken into account, but the moving of objects in the cashier job class is overlooked.
- Responsibility for spending authority and budgetary control is recognized, but responsibility for protecting confidentiality or handling customer complaints is not.
- Stress of working with noisy machinery is valued, but the stress of dealing with irate or aggressive customers is overlooked.
Gender bias can also occur if jobs or job evaluation factors are described differently, using different or value-laden terms for men's and women's jobs. For example, if both men and women in a workplace perform similar supervisory roles, the men's job may be described as "managing" while the women's job may be labelled "co–ordinating", assigning different values based on the term used. Similarly, if men's jobs are described in greater detail than women's jobs, it might suggest that men's jobs are more significant. Finally, if aspects of the job are omitted, or inadequately described, they will not be included in the evaluation.
Previously, compensation systems made women's work invisible. Originally, job evaluation was designed and applied in industrial and manufacturing workplaces and to managerial positions. When these systems were applied to all jobs within a workplace or used to assess jobs in the health, service and office sectors, few changes were made to the underlying assumptions on which the value of jobs was assessed. The skills, ability and experience of women in these jobs were not recognized, leading to an inaccurate valuation, resulting in lower wages paid. Ontario Nurses' Association v. Regional Municipality of Haldimand-Norfolk, 1992 CanLII 4705 (ON PEHT).
What makes the job comparison process gender neutral?
Employers must ensure that every component of the job comparison process is gender neutral. In the Haldimand-Norfolk case, the Tribunal stated that bias in one component means the system or tool as a whole is not gender neutral and must be eliminated. The Tribunal identified four components in the job comparison process:
- The accurate collection of job class information.
- The mechanism or tool to determine the value of job classes.
- The application of the mechanism or tool to determine the value of the work.
- The comparison of job classes.
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Collecting Job Information
Employers can gather information through observation, interviews, questionnaires; they can review or develop job descriptions, or they can rely on their own knowledge of the jobs. Regardless of the data collection method used, it is the content of the job itself and not the performance of workers in the job that is relevant.
In the Haldimand-Norfolk case, the Tribunal expanded on how job class information should be collected, by asking:
- What is the range of work performed in the establishment?
- Does the system make work, particularly women's work, visible in the workplace?
- Does the information being collected accurately capture the skill, effort and responsibility normally required in the work and the conditions under which it is normally performed for both the female job classes in the plan and the male job classes to be used for comparison?
- Is the information collected accurately and consistently?
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There are many ways to determine the value of job classes. The Act requires that whatever mechanism or tool is used, it must value skill, effort, responsibility and working conditions and the mechanism or tool must be applied consistently to all of the job classes. For example, employers can use a simple ranking method, or classifications or grade descriptions that include the four required factors.
A more detailed and common approach is the "point factor method". This mechanism involves assigning points to sub-factors and adding them to provide a "score" for the job class. In this type of job evaluation, employers decide the specific number and weighting of sub-factors and levels that is suitable for their business. Whatever system is selected, the Act states that:
- The system must compare all relevant job classes based on the total value of skill, effort (mental and physical), responsibility and working conditions.
- The system must be gender-neutral, not biased toward jobs done by either women or men. It also has to be able to capture aspects of work done by women that may have been overlooked and undervalued in the past.
The Office has developed educational materials and online resources which may assist in determining the value of job classes.
Q&A Selecting a system to value jobs
1. Smaller companies often use informal approaches to set wages. Are these employers expected to do job evaluations and comparisons for pay equity?
Yes. Employers are required to provide pay equity for their female job classes by valuing job classes and comparing female and male job classes on the basis of skill, effort, responsibility and working conditions, using consistently applied gender neutral criteria .
The Tribunal established four tests to determine whether the valuation tool is gender neutral (Ontario Nurses' Association v. Regional Municipality of Haldimand-Norfolk, 1992 CanLII 4705 (ON PEHT)):
- Can the tool determine the value of the work performed using the required factors of skill, effort, responsibility and working conditions?
- Is the choice of sub-factors free of gender bias?
- Are the levels or their equivalent, if used, free of gender bias?
- Is the composite of skill, effort, responsibility and working conditions decided in such a way that it gives value to all four factors, and is the point weighting free of gender bias?
NOTE: A job evaluation system that is applied to male job classes such as construction workers or heavy labourers in a workplace must be capable of also valuing the work done in that workplace by the female job classes such as light cleaners or secretary. The system would have to recognize the working conditions of all of the job classes and then assign the appropriate value to that factor. If a job evaluation tool was developed with only men's jobs in mind, but was then used to value men's and women's jobs, the results would be gender biased because the tool would not be able to recognize and reward skills used to do traditional women's work.
The Office receives a number of complaints each year from employees who are dissatisfied with the results of their employer's evaluation of their jobs. The focus of the Act however is not on the evaluation of individual job classes as such; it is on whether job classes have been valued in a way that allows for comparisons to be made between female job classes and male job classes, using the four required factors.
The Act recognizes that the evaluation and comparison process can result in different outcomes. Employers develop job evaluation processes themselves or with the assistance of compensation specialists. Employers also negotiate job evaluation processes with their unions either within a collective bargaining process or separately as part of an ongoing pay equity process. As long as the valuation process is reasonable, contains the four required factors and is consistently applied for both male and female job classes, the decision of the employer or the agreement between the employer and the union will be upheld.
2. How are factors used and sub-factors chosen to value job classes?
Where the employer and /or union choose to further refine the evaluation process by dividing each of the four required factors into sub-factors, the sub-factors must measure the full range of duties and tasks of both male and female jobs and be applied consistently to both male and female jobs in the establishment.
3. Is there a typical weighting of factors and sub-factors used by companies based on industry?
No. Employers decide the weighting of the four factors and sub-factors however, heavily weighting sub-factors that tend to favour male job classes may result in gender-biased job evaluations, which is not acceptable for pay equity.
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Determining the Value of Job Classes
How do employers assign value to job classes?
Once all job information is collected, and the job evaluation tool or mechanism has been selected and customized for the organization, employers then apply the chosen mechanism or tool to determine the value of job classes according to the factors and sub-factors.
The Tribunal used five tests for determining whether the tool or mechanism used to value the work was applied in a gender neutral way Ontario Nurses' Association v. Regional Municipality of Haldimand-Norfolk, 1992 CanLII 4705 (ON PEHT):
- Is the valuing tool applied consistently without regard to the gender of the job class?
- If a committee is used to evaluate job classes, is the committee balancing the interests of the parties with duties and obligations under the Act?
- If a committee is part of the system, is it sufficiently knowledgeable to allow the parties to meet their obligations?
- Is the decision-making done in a manner free of gender bias?
- Does the mechanism identify systemic wage discrimination?
What if an employee requires job accommodation as a result of a disability?
A lower value cannot be assigned to a job merely because an incumbent requires an accommodation under the Human Rights Code to perform the job tasks and duties [5.(2)].
Job evaluations for pay equity must be reasonable
The Tribunal has recognized that under the Act, the area of job evaluation which includes collecting job information, deciding what is significant, and evaluating that job content against the prescribed factors of skill, effort, responsibility and working conditions, is not precise. The Tribunal stated in Group of Employees v. Ontario (Management Board Secretariat), 1999 CanLII 14827 (ON PEHT).
"If the parties have made a reasonable effort to accurately capture the job content, then the Tribunal will not inquire further. Therefore, if, on the face of the Application, it is clear that the system ignored one of the criteria, or failed to apply these criteria, or unreasonably excluded important job information related to any of the four criteria, then the Tribunal should proceed to hear the merits of the Application."
There may be more than one way to choose sub-factors and /or weightings to value a job class. When investigating complaints about job evaluation for pay equity purposes, a Review Officer will determine whether the job evaluation method took into account the four required factors of skill, effort, responsibility and working conditions and whether the decisions made were reasonable. (See also McNeil v. Kirkland Lake (Town), 2002 CanLII 49446 (ON PEHT)).
Q&As Job Evaluations
1. Can job evaluations be based on job descriptions?
Yes. However, job descriptions are not required to do pay equity. Employers, especially small ones, may know enough about the jobs to be able to conduct a responsible valuation and comparison for pay equity purposes. Employers may also use other ways to collect and assess information about the jobs such as use of interviews, questionnaires or job evaluation committees.
2. Do employers have to evaluate all the male job classes in the establishment?
Employers need to evaluate as many male job classes as necessary to identify a male comparator for each female job class. If the employer was required to post a pay equity plan, all comparator male job classes must be listed in the plan.
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Determining the Job Rate
"Job rate" means the highest rate of compensation for a job class [1. (1)].
"Compensation" means all payments and benefits paid or provided to or for the benefit of a person who performs functions that entitle the person to be paid a fixed or ascertainable amount [1. (1)].
This definition must be applied exactly in order to meet a fundamental requirement of the Act. According to the Tribunal in Ontario Nurses' Association v. Lady Dunn General Hospital, 1991 CanLII 4451 (ON PEHT): "In order to achieve pay equity, the sum of all salaries or wages and benefits, if any, received by a female job class must be equal to the sum of all salaries or wages and benefits, if any, provided to its male comparator job class. The adjustment may be made to wages or salaries, to benefits, or to a combination of the two."
Are there guidelines for determining the job rate?
The Act defines the job rate as the total of wages or salaries and benefits, but it does not specify a particular way to calculate the job rate or a time measurement (annual, weekly, hourly) for wages, or any particular method for calculating benefits. However, to compare compensation of job classes, it is necessary to express the job rates with one common measurement standard, York Region Board of Education v. York Region Women Teachers' Association, 1995 CanLII 7030 (ON PEHT). The more common measurement standard used is dollars per hour. The Tribunal has also set out three principles for determining the job rate, Ontario Northland Transportation Commission v. Transportation Communications International Union, 1992 CanLII 4696 (ON PEHT):
- The calculations must be as accurate as possible, based on realistic and fair compensation calculations.
- The job rate should be calculated in a manner which is the least disruptive to the collective agreement and compensation practices of the parties.
- All calculations must conform to the purpose and scheme of the Act.
How is the job rate set?
Determining the job rate for a job class depends on the compensation system the employer uses. If an employer does not have a formal system in place for determining pay, the job rate is usually the maximum rate paid to any incumbent in the job class. If there is only one rate of pay for the job class, that rate is the job rate. If the employer maintains a definite salary or wage range with a minimum and a maximum rate for some or all of their job classes, the maximum of the range is the job rate, provided that the rate is actually attainable (however, employees need not be at the maximum rate). Typically, the maximum is achieved based on length of service and/or merit.
How do payments such as commissions, bonuses, incentive pay or tips affect the job rate?
Payments based on work performance or output must be included as part of the job rate, even where the calculation is difficult, Group of Employees v. Windsor Casino Limited, 2007 CanLII 62083 (ON PEHT). Payments can include sales commissions, bonuses, tips and other kinds of incentive pay and may be paid in addition to a base wage or salary, or they may be the only pay received. These types of compensation should be included in the job rate unless it can be clearly established that an amount is attributable to merit. In such cases, the existing merit system must be one that meets the criteria set out in [8. (1) (c)]. Payments that are salary supplements with no confirmed link to performance are considered compensation and should be included in the job rate.
When pay is based on work performance or output, employers should determine the job rate based on how much an employee can realistically earn.
Examples of Calculating Job Rates with Commissions and Tips
- Sales forecasts and past sales performance will provide information on what level of sales can be expected of employees. Applying the commission structure to these numbers can reveal what level of payment contributes to the job rate for these positions.
- An employer may pay a minimum regular salary to servers in a restaurant with the expectation that tips will provide most of the servers' incomes. In this case, since all of the servers can expect a significant part of their pay to come from tips, at least some portion of the tips will have to be counted into the job rate because that portion of the tips is a part of their normal pay. This is especially applicable where tips are pooled for distribution.
How are benefits defined?
The Act does not define "benefits". For purposes of the Act, benefits are part of compensation provided they are quantifiable. The value of a benefit must be included in the job rate if it contributes to the total compensation of a job class, or it provides an advantage to that job class over others that do not have the same benefit. The value of that benefit must be included in the job rate even if employees in the job class individually choose not to use it. It is the availability of benefits – not their use by individuals – that should be considered when including them into the job rate. Regional Municipality of Peel v. Canadian Union of Public Employees, Local 966, 1992 CanLII 4698 ON PEHT).
In situations where an item is something that is required to do the job, that item would not be considered a benefit and thus, not included in the job rate. For example, the value of a uniform or protective clothing would not be considered a benefit if these items are required to do the job.
If identical benefits are available to job classes, it is unlikely that costing will be necessary. To be identical, the benefits must be equally accessible to all employees. If employees have to meet a qualification to access a benefit, for example, having to work for a certain length of time to get more vacation days, those employees are still considered to have access to the benefit.
If one job class has benefits and another does not, or the job classes have the same benefit but at different levels of payment or advantage, it is critical that the value of the benefit be determined and included in the job rate.
Q&As Job Rate and Benefits
Is a paid lunch break considered a benefit?
Maybe. There is no specific definition of benefit in the Act. A paid meal break may or may not be considered a benefit depending on the circumstances. For example, a paid meal break is not likely a benefit if it is considered work time and part of the normal work week during which time employees remain subject to the employer's control and direction.
What about mileage allowance or use of a company vehicle?
Maybe. Mileage allowance or use of a company vehicle may or may not be considered a benefit. For example, if travel or transportation is required for the job, then access to mileage allowance or use of a company vehicle may be a work arrangement and not a benefit. However, if employees can have the car on weekends for personal use, it may be considered a benefit.
An employer provides an extended health benefit plan to a female job class and a different plan for the male comparator job class. Not all employees claim the full value of the benefits. Should the benefits be included in the job rate?
Yes. It is the availability of benefits—not their use by individuals that should be considered when including them into the job rate.
What is the best way to calculate the value of benefits for the job rate?
The Act does not specify how to calculate the value of a benefit. An employer may equate the benefit to the employer's average cost of providing the benefit, or may equalize the benefit by granting it to the job class that does not currently have it. In each case, the approach will depend on the type of benefit, funding, the existing compensation practices of the parties and finally, what course of action fits most with the purpose and intent of the Act.
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Permissible Wage Differences
While the Act requires that female job classes be paid at least the same as male job classes of equal or comparable value, it does not necessarily mean that each incumbent in a female job class must be paid exactly the same as the incumbents in a male job class. The Act sets out circumstances whereby differences in pay between females and their male comparators are allowed:
[8. (1)] This Act does not apply so as to prevent differences in compensation between a female job class and a male job class if the employer is able to show that the difference is the result of:
- a formal seniority system that does not discriminate on the basis of gender;
- a temporary employee training or development assignment that is equally available to male and female employees and that leads to career advancement for those involved in the program;
- a merit compensation plan that is based on formal performance ratings and that has been brought to the attention of the employees and that does not discriminate on the basis of gender;
- the personnel practice known as red-circling, where, based on a gender-neutral re-evaluation process, the value of a position has been down-graded and the compensation of the incumbent employee has been frozen or his or her increases in compensation have been curtailed until the compensation for the down-graded position is equivalent to or greater than the compensation payable to the incumbent; or
- a skills shortage that is causing a temporary inflation in compensation because the employer is encountering difficulties in recruiting employees with the requisite skills for positions in the job class.
The Act is not intended to disrupt common compensation practices. When an employer claims an exception to pay equity, it is the employer's responsibility to show that the wage difference is a result of a circumstance or pay practice as it is described in the Act. Furthermore, these exceptions will be narrowly defined.
Permissible difference can also arise as a result of differences in bargaining strength [8. (2)] (See Pay Equity in Unionized Workplaces).
How are permissible wage differences treated in pay equity job comparisons?
The effect of these exceptions is not to alter the job rate of the male job class, but to justify not adjusting the entire pay equity gap between the female job rate and the job rate of an equal or comparably valued male job class. A male job class that is affected by these circumstances can still be used in pay equity job comparisons. In all situations, the normal job rate is determined for the job class. The portion of the wage that can be attributed to the exception is excluded from the pay equity comparison process.
Wages cannot be reduced to achieve pay equity. It is against the law for an employer to reduce employees' wages in order to achieve pay equity [9. (1)]. If employees in a female job class have been underpaid, their wages must be increased. The wages of workers in male job classes cannot be reduced to make the job rates of comparable male and female jobs equal.
Details of Permissible Wage Differences
Formal Seniority System
Seniority systems provide increases in pay to employees based on length of service. Generally, employees who have worked for the company longer earn more than newer employees in the same job class.
Where an employer has a seniority system in place, differences in pay resulting from the system's application between incumbents in job classes of equal or comparable value is allowed provided that:
- the system is formalized and made known to employees when implemented; and
- the system operates and is applied the same way, based on the same principles, for both female and male employees.
For pay equity job comparisons, the maximum rate for the job class is used as the job rate. There may be differences between pay of individual employees within the job class due to seniority. However, all incumbents must be able to achieve the maximum rate, which is the job rate for the job class, after the required length of service.
Q&A Formal Seniority System
What makes a seniority system "formal"?
A formal seniority system is normally documented. For example, it may be described in an employee's manual or guide, or where there is a union, in a collective agreement. There must be evidence that the system has been in existence and consistently applied in the organization. The employer must be able to demonstrate that the system defines and recognizes length of service to the organization and is known to the affected employees.
Temporary Employee Training or Development Assignment
Employers may pay employees in a temporary training assignment a "training" wage that may be either higher or lower than the regular job rate paid to an incumbent of a job class. For example, management trainees, who are rotated through a number of non-managerial jobs as part of their training, may be paid at the rate of their management job class which is a higher than the rate paid to their co-workers who fill the non-managerial jobs on a permanent basis. On the other hand, sometimes trainees continue to receive the wage of their "home" position throughout the training period, even though they may be performing work of higher value.
If a temporary training assignment meets the following conditions, the portion of the incumbent's wage in training that is greater or lower than the regular job rate would not be used for comparison purposes. To qualify as a permissible difference, a temporary training or development assignment:
- is equally available to female and male employees;
- leads to career advancement for employees in the program;
- is temporary for each employee involved, either of a fixed duration, or until a specific goal is achieved; and,
- identifies the normal job rate for the job class.
A merit system may be the basis for a permissible difference in the rates paid to incumbents in equal or comparable job classes if an employer is able to show that the difference is based on a performance rating system that:
- has systematic ratings of how well employees are performing (these ratings must be applied consistently to employees, at regular and defined intervals and must be related to pay levels or increases);
- was brought to the attention of employees in some formal and consistent way;
- does not discriminate on the basis of gender; and,
- identifies the normal job rate for the job class.
An employer may have a merit system where a "reference rate" is identified for a job class. This reference rate is paid to an employee who performs his/her work in a fully competent manner, and it may be used as the job rate. Pay equity is achieved when the reference rate for the female job class is at least equal to that of the male job class of equal or comparable value. Employees who exhibit exceptional performance would be paid above the reference rate.
An employer's merit system must be gender neutral. Similar to the selection of sub-factors for a gender neutral job comparison tool or mechanism, the performance criteria used in the merit system and its application should not result in gender bias. The Tribunal stated in Law Society of Upper Canada, 1999 CanLII 14823 (ON PEHT): "The Tribunal will carefully scrutinize merit compensation systems to ensure that they are consistently applied and that gender bias, which may not be apparent on the face of the system, does not creep into its application."
"Red circling" pay practices are referred to in [8. (1) (d)] and enable an employer to to pay an employee higher than the maximum rate or salary range for their assigned job as a special provision and is allowable under the Act. The Act does not prevent the red circling of any job classes; its only application under the Act is to allow employers to use this red circling as a "permissible difference for pay equity purposes. For an employer to claim that the difference in wages between a female and male job class of comparable value is due to red circling, a number of criteria must be met:
- The value of the red circled position was downgraded;
- This downgrading of the position was based on a gender neutral re evaluation;
- The compensation of the incumbent is frozen; and,
- The incumbent's compensation is frozen until the new, lower compensation rate catches up to the red circled rate.
For example, if duties and responsibilities of a job class are reduced significantly, the position may be re evaluated and, as a result, be assigned less overall value. In this case, an incumbent may keep the current compensation tied to the former value of the position but have future increases frozen or curtailed until the lower pay rate attached to the new lower valued position catches up. An employee's compensation cannot be reduced to achieve pay equity [9. (1)]. Cupe, Local 1623 v. Greater Sudbury Regional Hospital, 2005 CanLII 60099 (ON PEHT).
Q&As Red Circling
Can the red-circling of a job exclude it from a pay equity process?
No. The newly established pay rate for the red circled job will be used in pay equity comparisons.
Can an employer red circle a female job class?
Yes, the Act does not prohibit the practice of red circling. If a female job class receives a lower rating as a result of a gender neutral job re-evaluation, nothing prevents an employer from red circling that female job class.
Can red-circling be used to compensate for pay increases for female job classes?
No. Red circling should be used where it is appropriate; it cannot be used to avoid the spirit and intent of the Act.
The Act permits wage differences between employees in equal or comparable female and male job classes as a result of a skills shortage only if the employer can demonstrate:
- a skills shortage is causing a temporary inflation in compensation;
- difficulties in recruiting employees with the requisite skills for positions in the job class; and
- the job rate for the job class is identifiable.
An employer should consider how broadly the positions were advertised, the length of time the search has gone on and whether internal candidates have been trained and are now available. Employers can refer to outside data, such as labour market indicators, to help demonstrate a skills shortage, but would also need to show difficulty in recruiting. Anonymous Group of Employees v. Melitta Canada Inc., 1995 CanLII 7204 (ON PEHT).
To claim that wage differences are due to a skills shortage, employers are required to demonstrate that the shortage is temporary in nature. For example, there may be insufficient graduates in an occupation or specialty at a given time, but there is evidence that more qualified people will be graduating or moving into the relevant market at an identifiable future date. This permissible difference, however, should not be used to justify all market stresses. Job rates reflecting long standing inflation due to past skills shortages may qualify for exemption. (Welland County General Hospital (No. 2) (1994), 5 P.E.R. 12).
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Methods of Comparison
There are three methods of comparison in the Act for achieving pay equity:
- Job–to–job comparison matches female job classes directly to a male job of equal or comparable value in the establishment.
- Proportional value comparison indirectly compares the relationship between the male and female jobs in an establishment.
- Proxy method of comparison is available only to broader public sector organizations that are unable to achieve pay equity using the above methods. Unlike the other two methods, the proxy method allows comparisons to be made to job classes outside the organization in other broader sector organizations.
Employers who are not subject to Part II requirements may use either the job–to–job or the proportional value comparison method to achieve pay equity. Part II employers are required to first apply job–to–job and then, if there are some female job classes that have not achieved pay equity, this employer must apply the proportional value comparison method. Only public sector employers with employees on July 1, 1993 that are listed in the Appendix in the Schedule to the Act and are granted an Order by the Commission are eligible to use the proxy method (See Proxy Comparison Method).
The requirements for the job–to–job comparisons are set out in  of the Act. The proportional value method is described in Part III.1 [21. 1–21.10]. The proxy method is outlined in Part III.2 [21. 11–21. 23]. Both the proportional value and proxy methods were introduced in amendments to the Act in 1993
(Bill 102, Pay Equity Amendment Act).
The Office offers many resources explaining in detail the mechanics of each of the comparison methods.
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Job–to–Job Comparison Method
According to the Act, pay equity is achieved using the job–to–job comparison method when "the job rate for the female job class that is the subject of the comparison is at least equal to the job rate for a male job class in the same establishment where the work performed in the two job classes is of equal or comparable value [6. (1])."
"Equal or comparable value" means the job classes must have similar value; they are not necessarily identical in value. With job–to–job comparisons, employers must look for male comparators for every female job class. One male job class can serve as the comparator for more than one female job class. The direct comparisons of job rates (pay and benefits) are made between each female job class and its male comparator job class.
Sequence of Search: Which Job Classes to Compare?
Employers are required under the Act to identify an appropriate male comparator job class for every female job class within their establishment according to the following search sequence [6. (3)-(5)]:
- A male job class of equal or comparable value should be identified. For unionized female job classes, comparisons are made to male job classes in the bargaining unit. For non-unionized female job classes, comparisons are made to non-union male job classes. If more than one male comparator is found, the one with the lowest job rate is the appropriate comparator.
- If there is no male job class of equal or comparable value found, an employer must then look at other male job classes throughout the establishment. If more than one male comparator is found, again the one with the lowest job rate is the appropriate comparator.
- If there are no male job classes of equal or comparable value, an employer should look throughout the establishment for a male comparator that has lower value but is higher paid than the female job class. If more than one male comparator is found, the one with the highest job rate is the appropriate comparator.
If, after applying the above sequence of search, there are female job classes that do not have a male comparator, the employer is required to use the proportional value method to achieve pay equity for these unmatched female jobs.
Several methods can be used to determine comparable value.
If an employer's jobs have been evaluated using a point-factor system, that employer may choose to apply job clusters or a process called "banding" that sets out ranges or bands of points in which the value of different job classes are considered comparable.
Job Cluster Method: job classes are listed according to the points given to them, from highest to lowest points. Look for job classes that "cluster" together according to the number of points they have. See if there are female and male job classes within the clusters. These will be the job classes that are of equal or comparable value.
Floating Point Band Method: comparable jobs are determined by focusing on the point value of each female job class and then looking for any male job classes that fall within a range or band of points. Male job classes that fall within a range of points above or below the female job are of the same or comparable value as the female job class. The number of points used may be a set amount, such as 25 points above or below the female job class. Some organizations use percentages ranging from 5% to 10%, instead of a fixed number of points.
Fixed Point Band Method: comparable jobs are determined by listing the job classes by value and dividing the set of job class values into sections or "bands", with each band having a certain number of points. Job classes that fall within the same band are of equal or comparable value.
Are employers required to construct pay bands for pay equity job comparisons?
The Act does not specifically require the use of banding, or any particular strategy for achieving pay equity using the job–to–job method; the law only requires that job rates of female job classes are at least equal to the job rate of a male job class where the work performed is of equal or comparable value [5. (1)]. Regardless of whether or not an employer decides to use banding, there should be no gender bias in the job comparison process.
If an employer decides to use banding, there are no hard rules for setting bands for pay equity purposes. Most often, the starting value for bands is the lowest possible point score in the system, the lowest actual point value of a job class, or the typical breakpoint closest to these scores. There is also no set formula for how narrow or wide a band should be, or how many points to include within each band, or the kind of band to use (fixed or floating), or whether to use bands with even or uneven widths. The underlying test is whether the decisions are reasonable and in keeping with the Act.
Avoid gender bias in banding
One sign of gender bias in the banding of job classes may occur when women in the female job classes consistently are at the top of bands and male job classes at the bottom. In this case, band boundaries may need to be adjusted so that job classes of equal or comparable value are more accurately reflected.
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Proportional Value Comparison Method
Proportional value indirectly compares female and male job classes by looking at the relationship between the value of the work performed and the compensation received by male job classes and applying the same principles and practices to compensating female job classes. The Act specifies that pay equity is achieved by proportional value when the relationship between the value of the work performed and the compensation received is the same for both female and male job classes [21.3(1)].
The proportional value method is applied in establishments where male job classes are not available in large enough numbers, or else their job values are such that they cannot be used for direct comparisons. For example, in two-tiered pay systems, the male management job classes may be valued much higher than the female job classes, and thus, they may not be appropriate comparators.
To achieve pay equity using the proportional value method, employers must:
- select a representative group of male job classes;
- establish the relationship between job values and job rates;
- calculate pay equity adjustments; and,
- increase wages for underpaid female job classes.
How are representative male job classes selected?
Female job classes must be compared with a representative male job class or representative group of male job classes for proportional value [21.3 (1)(a)]. Regarding the proportional value method and what is "representative", the Tribunal stated in Hudson v. Hamilton Police Association, 2010 CanLII 61163 (ON PEHT)):
"The Act is clear that the value/compensation ratio of male job classes is to be determined having regard to one or more "representative male job classes". The term "representative" is not defined in the Act, however its plain English meaning suggests a part standing in for a whole: clearly "representative" implies that it is not necessary to include "every" male job class in the Proportional Value analysis."
"Representative male job classes are those that will best reflect the value/compensation ratio at which male job classes in the "group" are compensated. They should therefore be job classes within the same employee "group" where that is possible, and should not include a job class that is paid an anomalous rate (like the inflated rate of the male job class with skills that are in short supply)."
This case suggests that male job classes are not "representative" if their rate of compensation is either much higher or much lower for their job value relative to other jobs in the organization, or their compensation is set in an anomalous way and not reflective of the overall compensation pattern or practices. These 'outlier' jobs should be excluded or they will distort the value/compensation ratio that is the basis for pay equity comparisons.
Which comparisons are required?
For unionized female job classes, comparisons are made to representative male job classes in the bargaining unit. For non-unionized female job classes, comparisons are made to non-union male job classes [section 21.3 (2)]. If no representative male job classes can be found, the female job classes must be compared to representative male job class throughout the establishment [21.3 (3)].
Establishing the relationship between job values and job rates
There are different ways to establish the relationship between job value and job rate for pay equity by using proportional value.
The wage line approach to proportional value is widely used. While wage lines are not specifically required by the Act, this approach is considered the most effective way to summarize the overall relationship between the job rate and job value where there is more than one representative male job class.
For the wage line approach, the employer develops a job rate line by plotting the representative male job classes on a graph with the job rate along the y-axis and the job value along the x-axis. Then a line is drawn and projected over the range of job values that cover the female job classes. The employer can also use a computer program to draw a "best-fit" job rate line using a statistical technique called regression analysis. The female job classes are plotted. Employers are required to increase the wages of all female job classes that fall below the job rate line. The amount of the pay equity adjustment is the difference between the female job rate and the rate predicted by the job rate line for the job value of that female job class.
Using a "proportional to female job classes" approach, pay equity adjustments are given to unmatched female job classes in proportion to adjustments of female job classes that had comparators under job-to-job (modified group of jobs approach).
The formula or pay-per-points approach requires the job value to pay relationship for male job classes to be expressed as a ratio that is applied to the female job classes. However, where there is more than one male job class, the formula or pay-per-points method is less effective than the wage line method at describing the job value to pay relationship in cases.
The Act requires employers to undertake job comparisons with representative male job classes for proportional value; however, it does not prescribe exactly how to do the comparisons. Employers, or employers and unions in unionized settings, may select the method that best suits their circumstances but in the case of a dispute their choices will be acceptable if they are considered reasonable and if they demonstrate the relationship between value and job rate.
Q&As Proportional Value
Is an employer required to develop a job rate line to use the proportional value method?
TheAct does not specifically require employers to use wage or job rate lines. However, employers must establish the relationship between job value and job rate as the basis for proportional value comparisons. In practical terms, a job rate line is a common and reliable way to express the job value to pay relationship.
Can the proportional value method of pay equity be done with only one representative male job class?
In certain cases it may be acceptable to apply the proportional value method where there is only one male job class or only one class that is representative. For example, where there are multiple female job classes that are close in value to the sole higher paid male job class, a female job rate line could be constructed. A male job rate line could then be drawn parallel to it. The female job rates would be increased to the point where they reach the amount on the male job rate line corresponding to the job value of each female job class.
Another approach is to calculate the ratio of job value to pay for the male job class. This ratio is then applied to the female job classes (sometimes referred to as "formula" or "pay per points approach").
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