The government of Ontario has introduced a new pay transparency law that requires employers to disclose salary bands in public job postings. The new law, which is designed to support candidates in making more informed decisions during their job search, also requires employers to disclose the use of AI hiring tools.
Pay transparency is just one aspect of Ontario’s far-ranging Working for Workers Act, which is modernizing provincial employment standards. (We covered its Right to Disconnect requirements here.) In 2022, only 37% of Ontario job postings contained salary bands, compared to 66% nationally, and 80% globally. The Act aims to help Ontario employers catch up.
While the Act sets out basic pay transparency requirements, employers will have to wait to see what more detailed regulations may come from it.
Ontario is not the other only Canadian province that has introduced a pay transparency law. PEI introduced a pay transparency law in 2022, and BC did the same in 2023. In this blog we will cover how pay transparency works in Canada and the implications for international employers.
What is Pay Transparency?
Pay transparency is a set of practices designed to prevent employee discrimination and retaliation, and increase pay equity. It is increasingly popular with candidates, who use public salary data to better manage their job search and find roles that fit their expectations. Many companies have adopted pay transparency to get an edge in the war for talent and more and more countries are making it the law of the land.
Pay transparency can include one or all the following employer requirements:
- Share salary bands in public job posts
- Refrain from asking candidates about their salary history or expectations
- Refrain from retaliating against employees for seeking or sharing information about salaries
- Produce detailed pay equity reporting for internal, board, or public consumption
- Cooperate with authorities during pay equity investigations
Canada’s pay transparency rules differ by province, with some imposing strict reporting requirements while others focus on candidate experience.
Navigating pay transparency can be difficult for anyone employing workers in Canada, but it is especially tricky for international companies with just one or a small team in Canada. That’s where Employers of Record that can advise international employers on Canadian compliance come in.
How Does Pay Transparency Work in Canada
The pay transparency movement is just getting started. In addition to Ontario, three provinces have pay transparency laws, while others are studying transparency laws and reporting requirements of their own. Employers across Canada should start embracing pay transparency as a cultural value now, before they are forced to.
British Columbia (BC)
In March of 2023 the province of British Columbia introduced a pay transparency law, Bill 13, the Pay Transparency Act, that required employers to include salary bands in all public job postings. The law also banned employers from asking candidates about their salary history, and from retaliating against employees who discuss their wages with each other.
The country’s most expansive pay transparency law, public pay equity reporting will eventually be required for all employers with
| Employer Size | Reporting Deadline |
|---|---|
| 1,000 employees or more | November 1, 2024 |
| 300 employees or more | November 1, 2025 |
| 50 employees or more | November 1, 2026 |
The province plans to publish aggregated pay transparency data using these reports.
Prince Edward Island (PEI)
PEI’s pay transparency law came into effect in June of 2022, as an addition to the province’s Employment Standards Act. Like BC’s law, it requires employers to publish salary bands in public job post and forbids employers from asking applicants about their salary history. Hiring managers can ask candidates about salary expectations. It also forbids employers from discriminating or retaliating against employees who seek info about salaries or share it with a government inspector.
Newfoundland and Labrador
In 2022 Newfoundland and Labrador introduced a pay transparency and equity law, An Act Respecting Pay Equity for the Public Sector and Pay Transparency for the Public and Private Sectors. Like other Canadian pay transparency laws, it bans employers from asking candidates about salary history and from retaliating against employees seeking information about or discussing internal salary bands. The Act does not require employers to share salary bands in job posts. While some aspects of the Act have come have, pay transparency has yet to come into force.
Nova Scotia
Like Newfoundland and Labrador, Nova Scotia has passed but not enacted a pay transparency law. The province’s pay transparency law forbids employers from requiring candidates’ salary history and from retaliating against employees who seek or share salary information. It also explicitly forbids Human Resources and Payroll employees from sharing salary information unless it is required for work purposes, or with written authorization from employees.
Federally Regulated Employees
In Canada, employees in certain industries are not covered by provincial employment standards, but instead by federal standards. These include employees in railway, telecommunications, banking and several other sectors. The federal Employment Equity Act was introduced in 1986 and has been amended many times. In 2021 employers in federally regulated industries with 100 or more employees were required to produce detailed pay equity reporting. Employers are not yet required to include salary bands in job posts.
Impact on International Companies Hiring in Canada
So, the question you’ve been dying to ask: how do Canadian pay transparency rules impact international companies?
There are three paths that international companies can take when they hire in Canada, and that path determines their employer responsibilities. Companies can opt to hire contractors only, they can create a local Canadian subsidiary to hire employees, or they can work with an Employer of Record that will compliantly hire employees and contractors on their behalf.
Options for International Companies Hiring in Canada
| Hiring Approach | Responsibilities | Pay Transparency Compliance |
|---|---|---|
| Hire Contractors Only | Minimal employment standards responsibilities, risk of misclassification and tax evasion | Pay transparency plan needed |
| Open a Subsidiary | Full responsibilities, including payroll, taxes, compliance reporting | Compliance required |
| Work with an Employer of Record | EOR handles payroll, compliance, taxes, and benefits; avoids subsidiary setup | Ensured by the EOR |
Hire Contractors Only
International companies that stick to hiring contractors have minimal employment standards responsibilities in Canada, because their workers are not employees – they are contractors who have a B2B relationship with their employer. Keep in mind that when you hire contractors, you must treat them like contractors. If you don’t, you and your team members may be investigated for misclassification and tax evasion.
Companies that only hire contractors in Canada should have a pay transparency plan in place, as they may choose to hire employees in the future.
We’ve explored the pros and cons of hiring Canadian contractors here.
Open a Subsidiary
Another option to hire in Canada is to open a local subsidiary. This allows international companies to hire Canadians as true employees. However, opening a subsidiary comes with many responsibilities, including payroll, employer and business taxes, compliance reporting, and the pay transparency obligations we covered above.
Because staying on top of local employment law can get complicated, many international companies opening a local subsidiary opt to work with Professional Employer Organization that can provide compliance support, payroll, and help set up benefits for your local team.
We’ve explored the pros and cons of opening a Canadian subsidiary here.
Work with an Employer of Record
The final option for international companies hiring in Canada is to work with an Employer of Record. EORs hire workers on your behalf and then lease them to your company, so that you don’t have to open a local subsidiary or set up local payroll. Instead, EORs compliantly hire employees and contractors for you, provide local payroll. They also take on the burden of understanding employment laws and keep you on side of them.
A good local Employer of Record will ensure that you do not violate pay transparency rules while hiring in Canada.
How an Employer of Record like Canadian Payroll Services Can Help
Employers of Record hire workers on behalf of other companies that don’t have a local subsidiary. As the Employer of Record for your team, they take on payroll, compliance, and managing local taxes, and benefits. By working with an EOR you can expand your team in Canada without having to worry about building out a local Human Resources or Payroll team. And most importantly, you can hire with confidence, knowing you’ve left compliance challenges in safe hands.
Want to learn more about how Canadian Payroll Services can help you manage compliance for Canadian remote workers? Get in touch!
