Workers in Ontario might soon have a better sense of how much they’ll be paid for a role, but experts warn proposed legislation announced this week can have a series of knock-on effects that can both help and hinder employees and employers alike.
The Ontario government announced plans Tuesday to introduce new laws regulating employers in the province, including setting standards for the use of artificial intelligence in the hiring process.
But the highlight of the proposed law would see companies required to disclose salary bands in job postings. Ontario government figures show some 37 per cent of job postings last year included pay ranges.
Similar pay legislation was passed in Ontario by the Liberal government of the day in May 2018, but those laws were “shelved” when the Conservatives took power a few months later, says Laura Williams, managing partner at Williams HR Law LLP.
Williams is glad to see provinces pursuing pay transparency again, which she says can help job seekers be “more focused” on career opportunities that align with their goals.
“I think it does give job seekers and candidates a better understanding of how the role is valued and whether or not the compensation is set at a level that they desire for the work that they expect to perform,” she tells Global News.
Ontario is not the only province to move towards pay transparency in recent months. British Columbia first introducing legislation in March requiring salary ranges on job postings. As of Nov, 1, 2023, all B.C. employers are required to include transparent wage or salary information on publicly advertised jobs. PEI enacted similar legislation last year.
Williams notes that while these laws only apply to jobs within the respective provinces, national employers might feel the pressure to institute blanket policies across their organization to maintain equity.
Survey data from employment consultancy Robert Half Canada shows not knowing compensation going into a job application is a common gripe among workers.
Polling from this past May shows that 48 per cent of workers named a lack of transparency about salary and benefits as their biggest frustration. Almost two-thirds (63 per cent) said they’d abandon a job application if the employer didn’t provide that information when asked.
Giving clear information about pay expectations isn’t necessarily a concession from employers, notes Julia Pollak, the chief economist at online job portal ZipRecruiter.
Companies that give salary expectations upfront are more likely to attract more applicants and find more skilled candidates that are a better fit for the role, she says.
Pay transparency comes with a ‘tradeoff’
But pay transparency also creates new hurdles for companies to navigate, Pollak notes, which can ultimately hurt some new and existing employees.
Before pay legislation is introduced in a jurisdiction, Pollak says companies typically won’t have a “clear set of parameters” around compensation internally — meaning two people performing the same role could be paid vastly different sums.
Embracing transparency usually results in a reshuffling internally of pay scales when the same positions are put up for new hires, she says, which can have a series of knock-on effects.
For existing workers, that could mean rapidly increasing compensation for roles that are at or below the low range of a posted salary scale. For higher-paid employees, that could mean telling them not to expect the same raises they’ve gotten in previous years going forward.
Veteran employees at a company might also become disgruntled if they see new hires onboarded at or near the same pay rate as them, something Pollak says has been common as of late as companies increase offers to remain competitive and attract talent.
This can encourage employers to set their salary bands on new postings lower than they’re actually willing to pay, she says. For one, this gives the company more space to negotiate upwards with new hires, but she says it also helps skirt the pressure to revise salaries up internally to match the posting.
“Companies face a tradeoff between external competitiveness and internal equity,” Pollak says.
Williams notes that tight labour markets like what Canada has seen in the past year can “skew (companies’) compensation practices” and “create unfairness.” Pay transparency legislation could be the opportunity employers need to reset their salary structures, she says.
“There could be a good output to this, ultimately, if employers really seize this opportunity to get their compensation practices in order.”
Pay transparency can also disadvantage smaller companies if they’re not able to post the same salary bands of their larger counterparts, Pollak notes. These companies may have unseen advantages in terms of their workplace culture or other benefits, but she says they now have to work harder to promote those aspects of their companies.
Can more transparency fix pay gaps?
Another common assertion from provinces introducing pay legislation is that it can help to fill in equity gaps.
While both Pollak and Williams say just posting salary bands can be helpful, they’re not a cure-all for pay gaps.
Pollak says the biggest impact on pay gaps, including salary bands, are in industries with the widest variation in pay.
She cites an example in the United States of an online freelancing platform for engineers, a traditionally male-dominated industry. When the platform made a slight tweak to pre-populate an online form with market rates for a role “the pay gap completely vanished,” she says.
Pollak says this fix might come down to boosting negotiation experience, where women might not have the industry background to ask for what men are traditionally making for the same role.
Williams argues, however, that leaving salary expectations as a range can inherently propagate differences in compensation for the same role.
If the issue comes down to negotiation experience, men can still find themselves at the top of a salary band while women are onboarded at the bottom of the scale, Williams explains.
Negotiation for some positions also isn’t always limited to a salary scale, she adds, which could give the most experienced negotiators another leg up over those who feel confined to the posted range.
While the details on Ontario’s proposed law haven’t been settled yet, B.C.’s pay legislation includes requirements for large employers to post progress reports on the gender pay gap within their organization.
Williams says that enshrining pay transparency in law can give employees and applicants a formal avenue to make complaints and remedy deviations from the legislation at their workplace — something she argues will more often help employees at the bottom of the pay scale.
“There will be recourse for those groups that are disadvantaged and would stand to benefit from these rules,” she says.
With files from Global News’ Nivrita Ganguly