As the ink is still fresh on recent legislative changes, understanding pay transparency is more crucial than ever for businesses aiming to foster trust and equity within their organisations. Pay transparency is a fundamental trend driven by employee expectations and the evolving values of our society. Even if you don't operate in Ontario or other provinces where laws are in place to regulate transparency, it's crucial to address it proactively by asking the right questions and taking actions that go beyond mere legislative requirements.
The shift towards transparency
Historically, discussions about pay have been considered private, akin to personal health matters. This secrecy, while intended to protect individual privacy, can inadvertently lead to workplace tension, conflict and even resentment. Employees often find themselves in the dark about how their compensation compares to their peers, which can breed dissatisfaction and mistrust. In Canada and globally, there's a growing discourse around pay transparency, driven by new legislation across various jurisdictions. This shift is particularly impactful for organisations lacking a clear compensation framework, as it can reveal internal equity issues and undermine trust, making them less competitive in the labour market.
Defining pay transparency
Pay transparency involves open communication about compensation, ensuring that both potential and current employees have access to relevant information. It's distinct from pay equity, which focuses on gender pay gaps. Transparency acts aim to address wage gaps and create a level playing field, allowing employees to negotiate openly and understand their compensation relative to others. This transparency isn't just about numbers; it's about fostering trust in an environment where employees feel valued and informed.
The importance of pay transparency
Pay transparency is increasingly vital for organisations, impacting brand perception, recruitment, retention and employee engagement. Pay transparency practices can enhance a company's brand, making it more attractive to top talent. According to the Society for HR Management, 65% of organisations that include pay ranges in job postings find it boosts their competitiveness.1 Moreover, employees in opaque organisations are significantly more likely to leave than those in transparent ones.
A transparent approach to compensation can set the stage for a positive employee experience based on trust and open dialogue on which employers can successfully expand.
Navigating legislative changes related to pay transparency
Starting July 1, 2025
As of July 1, 2025, an employer must provide certain prescribed employment information to an employee in writing, before the first day of work or, if not possible, as soon as thereafter as is reasonably possible. This information includes;
- Legal name, operating name (if different) and contact information for the employer
- Work location where it's anticipated the employee will initially perform work
- Starting wage or salary or commission
- Pay period and pay day established by the employer
- Initial hours of work as anticipated
Starting January 1, 2026
At the start of 2026, several new regulations will be implemented that impact job postings and hiring processes. The following key points outline the new requirements:
- Compensation information: The posting will need to include the expected compensation for a position or a range of expected compensation — and that posted range of compensation cannot exceed $50,000 annually. However, there is one exception — there is NO requirement to include the compensation range for positions where the expected compensation is more than $200,000 annually.
- Prohibition on Canadian work experience requirement: An employer cannot include any requirement related to Canadian experience in a publicly available job posting or associated job application form.
- Use of artificial intelligence (AI) in the job selection process: An employer must disclose if it uses AI to screen, assess or select applicants.
- Information on job availability: All publicly advertised job posting must also include a statement on whether the posting is for an existing vacancy.
- Informing interviewees: The employer must advise interviewees within 45 days of an applicant's interview whether a hiring decision has been made.
- Job posting and record retention: Employers must retain copies of every publicly advertised job posting and associated application form for 3 years after the posting is removed. In addition, interview information — such as applicants who were interviewed — must be retained for 3 years.
Ensuring compliance
To ensure compliance with these new regulations, employers can take several proactive steps:
- Review and update policies: Employers should review their current hiring and compensation policies to ensure they align with the new legislative requirements. This review includes updating job posting templates to include salary ranges and removing any Canadian work experience requirements.
- Conduct training: Training managers and HR teams on the new requirements is crucial. They should be equipped to handle questions about pay transparency and understand how to implement these changes effectively.
- Implement robust record-keeping practices: Establish systems to maintain records of job postings and related documentation for the required three-year period. Revise and update existing record-keeping practices as needed to help ensure compliance and provide a clear audit trail if needed.
- Audit compensation structures: Audit current compensation structures to identify any discrepancies or inequities to help ensure that salary ranges are competitive and equitable across the organization.
- Communicate clearly: Develop a comprehensive communication strategy to inform employees about the changes and how they will be implemented. This strategy includes empowering managers to discuss pay transparency confidently with their teams.
Challenges and opportunities
Employers face challenges in managing internal expectations and ensuring compliance with new regulations. Employees may compare their salaries to posted ranges and question discrepancies, leading to distrust and potential retention issues. However, these changes also present opportunities to enhance internal communication, align compensation practices with market standards and improve employee trust and engagement.
Organisations can take this opportunity to review and strengthen their compensation structures while ensuring they remain competitive and fair. Transparency — whether voluntary or imposed — requires thorough preparation. Before building a house, one ensures the foundation is solid. The same applies to compensation: it's essential to ensure that the salary structure is built on a solid foundation before communicating it. By conducting audits and addressing internal equity issues, employers can proactively manage potential challenges and foster a workplace culture that prioritizes transparency and trust.
The role of communication in pay transparency
Effective communication is at the heart of successful pay transparency initiatives. Organisations must craft a communication strategy that aligns with their compensation philosophy and clearly conveys the rationale behind pay decisions. This strategy includes empowering managers with the tools and training they need to discuss pay with their teams confidently. Managers are often the first point of contact for employees, making their role crucial in fostering understanding and trust.
Organisations should also consider the broader communication efforts that encompass an employee's journey, from recruitment to their ongoing experience within the company. Using storytelling and consumer-grade communications can help convey the organization's pay philosophy and strategy, ensuring that employees understand how these elements align with the company's overarching business goals.
Preparing for the future
Beyond the formal implementation scheduled for January 1, 2026, organisations must focus on continuously updating salary structures or hiring scales to ensure they continue to support the internal compensation strategy and, where applicable, comply with legislative requirements.
"Their clarity and consistency will make them easier to 'justify' and disclose", says Mary Budgell, principal consultant, Employee Communication. "Since the goal is to explain rather than simply reveal, it's also essential to train managers to effectively handle compensation-related discussions." Managers must understand the organization's compensation strategy and be equipped to answer employee questions about pay.
"As we often tell our clients, when it comes to compensation and salary, the real question isn't how much, but how, and especially why," says Caroline Long, vice president, Compensation.
Transparency requires thorough preparation, as Long illustrates with an analogy: "Before opening the door to guests, you tidy up. The same applies to compensation. You need to ensure the salary structure is solid before making it public."
Developing a comprehensive communication strategy is essential for successfully implementing pay transparency. This strategy includes crafting a narrative aligned with the organization's compensation philosophy and ensuring all employees clearly understand how compensation decisions are made. By empowering managers and leveraging effective communication channels, organisations can ensure employees perceive their pay as fair and equitable.
