What is Pay Equity? Canadian Pay Equity Act Explained.

Pay equity in Canada.

The Canadian Human Rights Act of 1977 first prohibited discrimination in employment, including pay, based on sex. This foundation was further reinforced in the Canadian Charter of Rights and Freedoms in 1982, guaranteeing equality rights under the law. Over time, several provinces introduced their own pay equity statutes to establish a proactive model for closing wage gaps. Still, challenges remained in achieving truly equitable pay, particularly across genders. While the gap has closed steadily over the past nearly three decades, it still persists in double-digit percentages.

In 2018, Canada passed the federal Pay Equity Act to strengthen and modernize how pay equity is achieved in federally regulated workplaces, introducing a comprehensive and proactive framework for achieving and maintaining pay equity.

What is the Canada Pay Equity Act?

The Canadian Pay Equity Act was passed in 2018 and established requirements for pay equity in public and private-sector organizations under federal jurisdiction. 

This includes:

• Banks

• Telecommunications and broadcasting companies

• Interprovincial transportation providers

• Crown corporations

• The federal public service

• Parliamentary institutions (such as the House of Commons and Senate)

• Royal Canadian Mounted Police and Canadian Armed Forces

The Act came into force in 2021 and marked a shift away from previous efforts relying on complaint-based models. Under the new Act, employers are required to develop their own formal pay equity plans and report periodically on their effectiveness.

Pay Equity Act requirements.

Pay equity plans developed under the Pay Equity Act must outline how jobs are classified, how compensation is assessed, and what actions will be taken to close any identified gaps. The following steps outline the Act’s core requirements and guidance for organizations to build practical plans aligned with their workforce and resources.

Identify job classes and gender predominance.

A key first step for employers is to group positions within their organizations into job classes that share similar functions and pay levels. Titles and descriptions should be evaluated to confirm that each one reflects the work actually being performed and whether the job is held predominantly by women, men, or an equal combination.

This step in the process relies heavily on internal workforce data to set a clear baseline for later comparisons of the value of work and pay.

Evaluate the value of work.

Once job classes are defined, their relative value must be assessed according to four factors prescribed by the Act: skill, effort, responsibility, and working conditions.

This part of the analysis focuses on the substance of each role—the education and experience it requires, the level of effort and accountability involved, and the conditions under which the work takes place. By standardizing these factors, the Act ensures that different kinds of work can be compared objectively and on equal terms.

Compare compensation.

Once all job values are established, employers compare total compensation between predominantly male and predominantly female job classes of equal or comparable value. This includes wages, bonuses, benefits, and other financial or non-financial rewards. The purpose is to identify pay differences between comparable roles and determine how to eliminate inequitable gaps.

Correct pay gaps.

Under the Pay Equity Act, pay adjustments aimed at achieving equity may be phased in but must be fully implemented within five years. Reductions to higher-paid predominantly male roles are not permitted; instead, compensation for predominantly female roles must be increased until pay levels align. Calculations and timelines must be documented in the plan for transparency.

Develop a pay equity plan.

A completed pay equity plan must be finalized within three years of becoming subject to the Pay Equity Act. The plan must outline all of the information gathered in the above steps: job classes and gender predominance, assessment of value, compensation comparisons, pay adjustments, and timelines for implementation.

Engage employees in the process.

Employee participation is a key part of the Pay Equity Act. In unionized workplaces, bargaining agents are directly involved in developing and maintaining the pay equity plan. In non-unionized organizations, a pay equity committee or another form of employee representation must be established to ensure workers have a voice in the process.

Workplace notices are issued at key stages—when work on the plan begins, when a draft is posted for review, and when the plan is complete—to keep employees informed and provide them with opportunities for input throughout the process.

Review and update every five years.

Pay equity plans must be reviewed at least once every five years to ensure equity is maintained as jobs evolve and new positions are added. Any new gaps identified during the review must be corrected, and all updates must be documented to demonstrate continued compliance with the Act.

Pay equity committee requirements.

A formal pay equity committee is required for employers with 100 or more employees, or when an employer with 10-99 employees has unionized staff. Smaller, non-unionized organizations are not required to create a committee but may choose to do so voluntarily.

Equity committee makeup.

Committees must reflect a balance of perspectives and meet these membership requirements:

• A minimum of three members and at least two-thirds of members representing employees covered by the plan.

• At least half of the members must be women.

• At least one member must be selected by the employer.

• Each bargaining agent representing unionized employees must have at least one representative.

• If there are non-unionized employees, at least one representative must be chosen by those employees.

External experts may participate in a committee when their expertise can assist in fulfilling the committee’s responsibilities, but their involvement should be agreed upon by all members.

Employer support.

Employers are responsible for providing the time and resources necessary for the committee to carry out its work effectively. This includes access to all relevant pay data, meeting spaces, and training to help committee members understand their roles and responsibilities under the Act.

Committee members must be able to participate without penalty or loss of pay. Employers are also expected to create a respectful and cooperative environment that supports open discussion and equitable decision-making.

Alternative committee structures.

If an employer has made every reasonable effort but cannot meet the composition requirements for their committee—for instance, because of the size or structure of the workforce—they may apply to the Pay Equity Commissioner for authorization to use an alternate committee structure.

The Commissioner then assesses requests based on the employer’s demonstrated efforts and the proposed alternative’s ability to maintain fairness and meaningful employee participation.

Multiple committees.

If an employer has approval to establish more than one pay equity plan, each plan must have its own committee. Members must  represent the specific group of employees covered by that plan to maintain accurate and equitable representation throughout the process.

Pay Equity Act oversight and compliance.

Oversight of the Pay Equity Act is led by the Pay Equity Commissioner, who serves as the primary authority responsible for ensuring employers fulfill their pay equity obligations. The Commissioner may request documentation, conduct audits, or investigate complaints as needed to verify compliance.

When organizations fail to implement their pay equity plans or fall short of their commitments, the Commissioner can issue a formal compliance order. Depending on the circumstances, this may involve revising the plan, issuing back pay, or taking other corrective measures.

Beyond enforcement, the Commissioner’s office is a resource for employers, offering practical tools, guidance, and education to support compliance before formal action becomes necessary.

Pay equity plan templates and other resources are publicly available on the Commissioner’s page on the Canadian Human Rights Commission website.

Best practices for staying compliant.

Pay equity is a continuous commitment woven into how organizations manage compensation and culture. Employers should treat compliance as part of their broader strategy for transparency and fairness, using data, collaboration, and communication to keep equity strong over time. These best practices can drive success.

Use reliable data.

Rely on direct government sources such as Statistics Canada and the Pay Equity Act web page to ensure compensation comparisons align with Canadian labour standards and market conditions. Using current, Canada-specific data supports accurate analysis and helps prevent pay structures from falling out of alignment over time.

Implement localized HR systems.

HR platform capabilities enhance pay equity compliance by keeping all relevant data in one place. Integrated systems can automate record-keeping workflows, standardize how roles are evaluated, and simplify reporting, making it easier to track trends and identify inequities before they widen.

Common tools include:

• Human Resources Information Systems (HRIS) centralize employee data, job details, and pay history for consistent analysis.

• Compensation management tools standardize role evaluation and salary benchmarking to keep pay decisions equitable.

• Payroll and analytics platforms generate reports that highlight pay trends, spot inconsistencies, and flag potential gaps early.

Use a system built for the Canadian market that can incorporate local labour standards and pay equity requirements so your data and workflows align with federal and provincial regulations.

Foster cross-functional collaboration.

Sustaining pay equity depends on consistent coordination among HR, finance, and legal. Each group plays a distinct role—HR manages job data and plan updates, finance validates compensation decisions, and legal ensures alignment with regulatory requirements. Hold regular check-ins and maintain shared data access to keep the process fully transparent.

Promote transparency and education.

When employees understand your equity efforts and have access to information, confidence in the process grows. Publish plain-language summaries of your plan and communicate how progress is tracked over time. Equip managers to discuss compensation confidently and give employees access to resources that show how pay decisions are evaluated and upheld. Open communication reduces misinformation, builds accountability, and reinforces equity as a shared organizational value.

Continuously review job changes and compensation decisions.

Pay equity shifts as roles evolve and new positions are added. Regular reviews catch emerging gaps early and keep compensation aligned with current responsibilities. Tie equity checks to annual pay reviews and organizational updates, and document changes clearly so the process stays transparent and defensible.

Looking ahead.

The Pay Equity Act marked an important shift from reactivity to structured accountability when it comes to maintaining equal pay. But the real impact lies in day-to-day application—keeping plans relevant and executing them consistently. Looking forward, the organizations that succeed will be those that see pay equity as part of a broader workforce strategy.

Sustaining progress calls for embedding equity into all compensation decisions, supported by systems that centrally track outcomes and surface gaps early. As workforce expectations evolve and transparency standards rise, employers that make pay equity an ongoing commitment will be best positioned to stay compliant under the Pay Equity Act and maintain true fairness in their pay practices.