Living with Pay Equity

Published on 2:48 am by in Employment

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In this article we will address a number of issues that we deal with on a regular basis.

Raise Pay Equity Target Rates Annually for Across the Board Wage Increases
Pay equity target rates must be increased annually for across-the-board wage increases given to staff each year. For example, if a centre gives staff a 2% across-the-board wage increase (not related to the annual pay equity raise) then all target rates must be increased by 2%. An ECE target rate of $25 would therefore have to be increased by 50 cents. These maintenace increases can have a significant impact on you pay equity target rates and are required to have been made since year after your centre’s plan commenced (usually 1995 and beyond).

Differentiate Pay Equity From Operating Grants
As noted above, pay equity and direct operating/wage enhancement grant funding are fundamentally different and should be treated differently from a payroll perspective. Confusion arises because pay equity and operating and wage enhancement grant payments are lumped into the same cheque by municipalities. In addition, we understand that municipalities may not receive sufficient information from the Province to differentiate between the two categories.

Childcare centres must pay direct operating and wage enhancement grants to staff as long as the funding continues. Once funding stops then your organization need not, in most circumstances, continue to pay employees an amount equal to the salary grants. You can, however, continue to make the payments if you want to and can finance them.

Pay equity obligations on the other hand result in an increase in base salary regardless of whether or not you receive funding from the government. If pay equity funding stops, your organization is still obligated to make pay equity payments required under the Pay Equity Act.

To help prevent a possible administrative nightmare we suggest you do the following:

  • Distinguish between pay equity and salary grant receipts in your accounting records. For instructions on how to identify the pay equity portion of quarterly subsidy payments you should see the pay equity section of the preceding article.
  • Organizations that pay direct operating grant and/or wage enhancement grant payments out in lump sum payments should distinguish in their financial records between pay equity amounts and wage grants. The pay equity portion of the quarterly cheques should not be distributed as a lump sum payment on the assumption that it has been incorporated into staff’s regular base pay. Unfortunately some organizations will undoubtedly give their staff an increase in base pay and at the same time distribute the full amount of the quarterly cheques thereby effectively doubling the pay equity payments.
  • Organizations that incorporate operating and wage enhancement grant payments into regular pay should continue to clearly distinguish the cumulative annual amount of these payments in their payroll records. Pay equity should, again, be excluded from operating and wage enhancement grants in your payroll records as these payments are base salary and not salary supplements.
  • It is possible that Toronto Children’s Services will reduce DOG and WEG payments effective July 1, 2000 where centres are receiving more than they are allowed under provincial guidelines. You want to ensure that quarterly grant payments to staff recorded in your records are not inflated by pay equity receipts thereby making it look like your centre is receiving more than its share of salary grants.

When To Stop Pay Equity Increases
Some organizations are confused as to when pay equity has been achieved for a given employee class. Simply put, each employee job classification has a pay equity target rate. Pay equity for the entire job class has been met when the salary for the highest paid employee in that class reaches that pay equity target rate. Note that “salary” includes an employee’s share of any government salary grants but excludes one-time lump sum payments.

As an example, take an organization with a pay equity target rate of $14.21 for its ECE job classification. There are 3 ECE’s earning $14, $13 and $12 per hour respectively as at December 31, 2008. Assume that the January 1, 2009 pay equity increase is $2.14 per hour. This raise would increase the salary of the highest paid ECE to $14.21, an amount equal to the pay equity rate for the class. Consequently, no employees in the class would be entitled to pay equity raises in 2010 and subsequent years. The 1% pay equity entitlement would still be fully distributed among the other female job classes not yet at their pay equity targets.

This requirement underlines the need to formally establish salary grids for all employee job classes. Pay equity legislation does not attempt to ensure that employees with equal job classifications are paid the same salary (i.e. equal pay for work of equal value is not an objective of pay equity legislation). Differences are allowed for seniority and competence. We recommend that you inform your staff when it is likely that their job class pay equity target will be met (i.e. when the highest paid member of the group will reach the target). This will help prevent surprises when some lower-paid members of a group find that they are ineligible for a pay equity raise.

One final note on pay equity: It is important to clearly distinguish between pay equity salary increases and other pay increases. To ensure there is no confusion you should inform employees of amounts that are pay equity raises in writing before or at the time raises are given. If an increase is not specifically identified as a pay equity increase then it is deemed to be a regular salary increase and not a pay equity increase. In this situation your organization would still be required to make an additional pay increase to cover its pay equity obligations.

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