We've been hearing from many of our clients lately that you are still trying to find the most equitable and competitive levels of pay for your employees. With people feeling the impacts of inflation and the labour market still reporting shortages, organizations are under pressure to raise salaries.

On top of mind for many workplaces in 2023 are compensation strategies, pay equity, and pay transparency - topics we explore in this winter edition of our newsletter.

As always, contact us anytime for support!

The P&A Team

Compensation Top Stories:
• Forecasts for salary increase budgets rise again
• Estimates for pay hikes in Canada continue to rise
• Half of employers say pay increase requests a top challenge

P&A Client: "The best candidates for a job were asking for a salary above the top of our pay range. Should we match it?"

Problem

An organization was having trouble filling a position. Finally, two potential candidates were found but they were both asking for a salary $5,000 above the top of the existing pay range for the job. The company worried about the long-term implications of giving in and offering whatever it took to fill the position.

What happened:

It's easy in the moment to give in and offer whatever it takes to fill the position, especially when feeling the effects of a vacancy and the salary demands by the best candidates.

Our P&A consultants walked the company through possible impacts of hiring someone above the existing pay grid:

Internal equity - The organization would have new employees earning higher wages than long-serving employees, which would have a significant impact on morale.

Pay equity - If the job is offered above the grid rate to a male job class, it would affect the company's Pay Equity Plan: to remain legislatively compliant, the organization would have to increase the wages of all female job classes in comparator roles.

Long-term budget - Giving higher wages to new employees would impact salaries and drive up the organization's overall compensation budget. The salaries of existing employees would have to increase if the company wants to maintain a fair, equitable, and legislatively compliant compensation program.

After considering the implications, the organization decided to offer the position to the candidate but at a salary within the existing pay range. When the candidate considered the salary along with the benefits offered (including hybrid work), they accepted the position.

Following this hire, the P&A consultants helped the organization revise their overall compensation strategy to make them more externally competitive given the tightening labour market.

Creating a Solid Compensation Strategy

Predictions are that the average salary increase budgets will jump around 3-4% in Canada this year, so now is the time to ensure your organization has a solid compensation strategy that will help attract and retain talent.

Some recent surveys show that inflation in Canada has meant that jobseekers and current employees are prioritizing salary when choosing or staying at a job. That said, P&A consultants have also noticed that employees are considering the full package of benefits a company offers, including flexible work options, opportunities for career growth, and the organizational culture.

Regardless, organizations should prepare for tougher salary and benefits negotiations this year, as workers face the pressure of rising inflation.

To prepare, it’s important that employers have a solid compensation strategy in place to predict the costs for hiring talent and for providing salary increases.

The 3 Steps to Create of a Compensation Strategy

Here are three steps that Pesce & Associate consultants take organizations through when creating a solid compensation strategy:

1. Internal Equity Review
First, it’s important to look within your organization and conduct job evaluations and compare salaries and wages of employees in the same jobs. Has your pay equity been maintained? Are any pay practices creating disparate treatment among staff in similar jobs? Update your salary grids to ensure equality among your employees.

2. Check Legislative Compliance
Review the employment laws governing your workplace to ensure that your policies and procedures comply. Ensure that you are aligned with Pay Equity laws.

3. Ensure You Are Externally Competitive
The next step is to conduct an external market review to assess your organization’s competitiveness. Before revising your salary grids to align to the market, a company must decide how to position itself – do you want to be in the middle? Leading? Lagging?

In the past, most of the broader public sector employers we worked with wanted to position their organization in the middle (50th percentile), which felt justifiable to the public and to their funders. However, over the last year or two, we are seeing organizations increase their market position to the 60th or even 75th percentiles due to the labour shortages and competition for talent.

It’s also important to analyze what other organizations may be offering in their benefits packages to attract talent. For example, the option of remote work or at least hybrid work is a top demand these days.

What's Happening Now?

Are salaries increasing across the board? The bottom line is that yes, overall, salaries are increasing and companies need to be prepared with a solid compensation strategy.

Further reading:
• https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/how-employers-are-managing-compensation-challenges-in-2023.aspx

Pay Transparency FAQ: Why do it? Who benefits?

What is pay transparency?

Pay transparency can be interpreted in different ways. Generally, it refers to when employers communicate pay practices to their employees and outline how pay is determined. It can also mean full transparency for employees around the salary and salary ranges for every role in the organization.

What are the benefits of pay transparency?

If you’re considering mandating pay transparency in your organization, here are some benefits to consider:
• Pay transparency laws have been shown to reduce wage gaps and inequality, especially among women and minority workers.
• The transparency helps build trust among staff, improve engagement, and boost productivity.
• It can help refine your recruitment efforts by attracting candidates that are better suited to your positions because they are aware of the pay range beforehand.
• The more organizations that have pay transparency, the better informed companies are about how to be competitive as an employer.
• Pay transparency is associated with lower turnover rates.

What are the cons of pay transparency?

• While pay transparency can reduce wage gaps, it can also create a smaller gap between low and high performers in your organization, making salaries ‘flatter.’
• It may be more difficult to offer performance-based incentives to encourage employees.
• Managers may compensate high-performing employees in other ways, like bonuses and benefits, undermining the point of having pay transparency.

What is the status of pay transparency laws in Canada and Ontario?

In Canada, the federal government’s Pay Equity Act came into effect January 2021. It requires that all employers of federally regulated private-sector employees ensure that workers are receiving equal pay for work of equal value by reported aggregated wage gap information. Employees that fall under this Act include banks, radio and television broadcasters, telecommunications firms, and airlines.

However, the largest percentage of workers in Canada are covered under provincial jurisdictions and the provincial laws mandating pay transparency in the provinces are highly inconsistent.

In Ontario, legislation was introduced in 2018 that would require salary transparency in job postings for all Ontario-based companies with more than 100 employees; however, the measures have been shelved.

In Conclusion…

For organizations committing to pay transparency before it becomes the law, it’s important to begin with internal conversations about the company’s overall approach to compensation and performance.

Further reading:
• https://www.jdsupra.com/legalnews/pay-transparency-and-pay-equity-in-2339723/
• www.linkedin.com/business/talent/blog/employee-experience/what-is-pay-transparency

Compensation Strategy Services

Pesce & Associates believes that fair compensation and pay equity are vital for companies of all types and sizes to help close gender pay gaps, and build a diverse, committed, and loyal workforce

How We Can Help You:

Our consultants can help you develop an externally competitive and internally equitable compensation program that aligns to all related legislation by:

▪	Developing a "Compensation Philosophy" that is aligned with the organization’s strategic direction.

▪	Drafting or modifying job descriptions.

▪	Creating or reviewing job evaluation processes and Job Evaluation Plans to maintain internal equity.

▪	Developing pay structures and salary grids that are internally equitable and competitive with external comparable organizations.

▪	Conducting market surveys with analysis and recommendations.

▪	Developing job evaluation and compensation-related policies and procedures.

▪	Developing pay for performance plans and strategies.

▪	Updating and developing Pay Equity Plans.

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