A new pay transparency law in Ontario will allow job-seekers a clearer understanding of compensation, but may also create conflict if current employees are being paid the same or less than new, more junior hires, HR experts say.
Bill 149, an amendment to the Employment Standards Act in Ontario, will go into effect Jan. 1. It encompasses issues such as the disclosure for the use of artificial intelligence in the hiring process, the timeframe to inform job-seekers of a hiring decision, the prohibition of asking for prior Canadian work experience, and including whether a job posting is for an existing vacancy.
One amendment sure to interest hiring managers is the requirement for companies with 25 or more employees to disclose the salary or pay compensation for a job. For jobs paying $200,000 per year or less, the width of the pay range disclosed on the job posting must not exceed $50,000; meaning a company could not, for example, give a compensation range of $60,000 to $130,000.
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Ryan Malmberg, venture talent manager at Invest Ottawa, said there are benefits for employers.
“On the business side, there’s an increase in employer brand and transparency; allowing candidates to self-select and ensure that there’s an alignment with the salary expectations. Upon submitting an application, it reduces the opportunity for candidates to go through the process, unaware of the salary, only to get to the end (of the hiring process) and understand that there’s a gap in expectations,” Malmberg told OBJ.
Karen Brownrigg, CEO of Ottawa-based iHR Advisory Services, agreed, saying it’s a win-win situation for employers and job-seekers.
“The opportunity for businesses is that they are likely going to save money by putting this effort on the front end and finding a better fit from the get-go. It’s not a ‘figure it out as we go’ (situation) … For the job-seeker, it’s really about (having) confidence because expectations are pretty clear,” she said.
But while the benefits are clear, Brownrigg said that adoption will take “a significant change in behaviour” on the part of recruitment teams, which, particularly in Ottawa’s competitive tech market, have had to “hire fast and fire slow,” the opposite of what Brownrigg recommends.
“They put such a significant investment in those individuals to stay ahead of the competition that they might actually not fire fast and that ends up costing them more money in the long run,” she said. “(This change) is requiring more formalized decision-making (and) education on both sides of what is needed.”
Malmberg said companies will still be able to decide what the compensation range is.
“There’s a strategy around what to post. Are you posting the penny-to-penny range that you have allocated for this hire? Are you posting slightly below and leaving range to increase pay for exceptional candidates? Or are you posting above your range hoping to attract candidates? Compensation goes beyond salary. Employers can choose to include much more than just salary,” he said.
As salary ranges for new hires are discussed, Malmberg said companies will have to re-assess the salaries of current employees to make sure they are up to market standards and avoid any internal conflicts.
“Employers have the responsibility to look at fairness pay across internal employees (so) that they’re not bringing on new, perhaps more junior, team members at the same rate as an existing team member,” he said.
“The flip side is that existing team members have visibility on new job postings with their employers and other employers of interest. If they see that it no longer appears they’re being compensated at market value, they may seek positions elsewhere,” Malmberg added.
Brownrigg said managers should anticipate issues that may arise as a result of this change and get ahead of the conflict by speaking with employees and preparing for any questions that they may have. Startups and small businesses without dedicated HR teams may not be aware of the change and how it will impact them, she added.
Ultimately, every organization is different and there is no “one-size-fits-all” approach, she said.
“The more information you can share with (employees), the better it will be because people will come along with you and understand. Through that, you’re creating greater transparency inside your organization,” she said.
Employers can prepare for the change before it becomes law on Jan. 1 by starting a compensation review process, while also looking at staffing requirements and financial impacts.
“Do a complete audit of your compensation practices. Have you properly assessed how you’re paying your employees? Where do you sit in relation to the market? … (Ask) ‘Do I have to fix some of the anomalies from a pay equity standpoint?’
“If you’ve got to make adjustments, that’s going to be a financial hit. You’ve got a runway to adjust to the financial impacts of those salary changes internally so you take care of your people that you’ve invested in … The cost of losing someone because of an upset could be far greater than delaying a hire.”
“For employers, I would say (to) make sure that they’re not just looking at external applicants, but they’re looking at their internal teams to make sure that they’re able to retain their team members and bring on new talent at the same time,” Malmberg said.
