Legal News

Pay Equity Act comes into effect for Federal Employers

On August 31, 2021, federally regulated employers with ten or more employees will become subject to the Pay Equity Act (the “Act“), which requires them to take proactive steps to address gender discrimination in compensation practices. Implementing this Act will require employers to work with employee representatives and unions to put systems in place to evaluate the compensation of their workforce.

One notable exception, however, is that the Act will not automatically apply to Indigenous governing bodies falling within federal jurisdiction. Further consultations will take place between the federal government and Indigenous partners to ensure the Act is appropriately adapted for these workplaces before taking effect.

Establish a pay equity committee

Federally regulated employers with 100 or more employees, or with 10 to 99 employees where a union represents some or all of the employees, will be required to establish a pay equity committee to oversee the pay equity process in their organization. Other employers can voluntarily decide to establish such a committee on their own initiative. The committee must be composed of a minimum of three members and meet the following minimum criteria:

  • 2/3 of the members are representatives of employees;
  • 50% of the members must be women;
  • One representative of the employer;
  • One representative of each bargaining unit; and
  • One representative of the non-unionized employees selected by those employees.

Within 60 days of becoming subject to the Act, impacted employers must post a notice in the workplace setting out the employer’s obligation to establish a pay equity plan and a pay equity committee, and informing employees of their right to be represented on the committee.

Establish a pay equity plan

Employers are required to set up a pay equity plan that creates a framework to evaluate the workforce and assess where discrepancies might exist between predominantly female and male job classes. To that end, the committee, or the employer in the absence of a committee, will be responsible for the following tasks:

  • Identifying all job classes of positions occupied by employees to whom the pay equity plan relates;
  • Determine for each job class if they are predominantly a female or male job class. A job class will be predominantly female or male if, amongst other criteria, at least 60% of the positions are occupied by employees of one gender;
  • Determine the value of work performed and the compensation for each job class. The method used to achieve this determination must not discriminate on the basis of gender and shall take into consideration the skills and effort required to perform the work, the level of responsibility of the position as well as the work environment; and
  • Compare the compensation of predominantly female and predominantly male job classes. That exercise will occur using one of the described methods in the Act or as otherwise authorized by the Pay Equity Commissioner.

As part of the foregoing calculations, employers may exclude certain non-discriminatory differences in compensation, for example where based on a seniority system, “red-circling” compensation after a reclassification or demotion, temporary shortages of skilled workers, or the existence of a merit-based compensation plan based upon formal performance ratings. Employers will have three years from August 31, 2021 to establish their pay equity plan and post it in the workplace. These plans must then be reviewed and updated a minimum of every five years.

Equity payout

If the compensation of predominantly female job classes is lower than the predominantly male classes, employers will have to eliminate the gap in compensation. This will be achieved by increasing the compensation payable to predominately female job classes; if the total wage adjustment due is in excess of 1% of an employer’s total payroll for the year immediately preceding, an employer may choose to phase-in the compensation increase according to a schedule established under the Act.

Generally, employers will have three years from the date they became subject to the Act to implement compensation increases to impacted employees. However, the Act also provides a mechanism for employers to seek an extension of time to establish and post their pay equity plan, and in that case, a lump sum may be owing to employees related to that extension period should a gap in compensation be found.


The Pay Equity Act will have substantial impacts on federally regulated workplaces, and will require substantial investments of time and money by employers. Federally regulated employers should start preparing for these processes now, including contemplating appropriate training for pay equity committee members and employer representatives relating to unconscious bias and job and compensation comparison methods. Employers should also commence a review of their job descriptions to ensure they are gender-inclusive and gather self-identified gender information on their workforce.

For further information on the impact of the Pay Equity Act on your organization or how to prepare for the coming into force of the provisions, please contact Ilan Burkes or Virginie Vigeant.

Also, look forward to our Pay Equity Act for Federal Employers webinar coming up this fall. Make sure to register on our mailing list to receive invitations to Harris webinars.