Does Canada need wider pay transparency laws?

California recently passed a law requiring all employers based or hiring in the state to post salary ranges on all job listings, following similar moves by Colorado, New York City and Washington state.

The law will also require California-based employers with more than 100 workers to show their median gender and racial pay gaps — a first in the U.S.

Pros and cons to pay transparency

Legislation like this may bring a lot of positives to the table, says Jeramy Kaiman, partner head of LHH Knightsbridge, a subsidiary of LHH in Toronto.

One of them is pay transparency for potential job applicants and existing employees, “especially in places like New York, where they're required to post all jobs, not just the position or all salary ranges for jobs, not just those that are posted externally,” says Kaiman.

These rules also provide for better job insights for both applicants and employers, he says.

“It helps applicants to save time and avoid applying to a job that wouldn't fit within the pay ban that they need. That also is helpful to the employer, because they're not having to vet candidates that can't fit within that pay band as well.”

Also, “a lot of studies suggest that [this legislation] will lead to improvements in pay equity for new and existing employees, and not just improvements in pay transparency but – over the long term – improved pay equity”.

Overall, Canadian women between the ages of 25 and 64 earned $0.89 for every dollar earned by men in 2021, according to Statistics Canada.

But as of now, it’s “hard to say” if these benefits will come to fruition, says Kaiman, “because in some of the places that they've been passed, the period of time that they've been active is relatively short.”

Also, these laws can have negative effects, he says, pointing to research that has shown that salary transparency tends to or could potentially lower men’s salaries, even as it raises those of women or other underrepresented communities.

“And there are some studies that suggest that it might lower salaries overall,” he says.

Also, some critics feel that transparency laws like this might persuade companies to hire fewer employees overall, says Kaiman. “Do I think that that's as likely as the other two outcomes? No. But I think that it is a risk.”

The Canadian situation

In Canada, the Pay Equity Act finally came into force in 2021 almost three years after it was first introduced.

There have also been some movements in this direction in different provinces. Since June 1 of this year, employers operating in Prince Edward Island have been required to make public pay ranges or expected pay in job ads. Manitoba has also introduced Bill 222 or The Pay Transparency Act in the legislature, but it is yet to pass. 

“British Columbia has had discussions around a law like this, and I would imagine that something like this will be considered in the future in British Columbia based on the discussions that have been having,” says Kaiman.

Nova Scotia has legislation that requires employers not to ask about applicants' wage history, but it does not require transparency regarding starting pay ranges and public job postings, he says. Quebec has pay equity legislation that requires compensation to be shared with pay equity committees, but nothing specifically about job postings. 

But there have been struggles in execution. For example, Bill 3, the Pay Transparency Act, 2018, passed Third Reading in the Ontario Legislature on April 26, 2018. The legislation requires an employer to disclose certain compensation information about, and to, employees and prospective employees, and restrict the information an employer may solicit during the hiring process.

It came into effect Jan. 1, 2019 but there was a change to an incoming party, says Kaiman, so the laws were never enacted.

“Currently, there is no law like this in place in Ontario.”

But federalization of laws around pay transparency will help, he says.

“There's no question that if there was a federalization of laws like this in either the U.S. or Canada, that removes some of the challenges that will exist between states or provinces that are imposing these laws and those that are not.”

In Canada, there is some federalization. 

“Anybody who's a federally regulated employer needs to file an employment equity report, which basically covers about six per cent of the Canadian workforce. So there is some federalization of laws like this in Canada, but only those that apply to the employers that are federally regulated. So again, only six per cent.”