Week 21 – Chapter 11
Basic Considerations in Determining Pay Rates
Four basic considerations influence the formulation of any pay plans: legal requirements, union issues,
compensation policy, and equity.
Legal Considerations in Compensation
•All of the 14 jurisdictions regulating employment in Canada have laws regulating compensation.
•Employment/Labour Standards Acts (Canada Labour Code)
oEmployment/labour laws set minimum standards regarding pay, including minimum
wage, maximum hours of work, overtime pay, paid vacation, paid statutory holidays,
termination pay, and more.
•Pay Equity Acts
oProviding equal pay for work of equal (or comparable) value performed by men and
oEmployers are required to identify male- and female-dominated jobs, and then use a
gender-neutral job evaluation system based on specific compensable factors (such as skill
and effort) to evaluate the jobs.
•Human Rights Acts
oAll jurisdictions have enacted human rights laws to protect Canadians from
discrimination on a number of grounds in employment and other areas.
•Canada/Quebec Pension Plan
oAll employees and their employers must contribute to the Canada/Quebec Pension Plan
throughout the employee’s working life. Pension benefits based on the employee’s average
earnings are paid during retirement.
•Other Legislation Affecting Compensation
oThe objectives of these laws is to provide a prompt, sure, and reasonable income to
victims of work-related accidents and illnesses.
oEmployers and employees both contribute to the benefits provided by this act.
oThis act also provides up to 45 weeks of compensation for workers unemployed through
no fault of their own.
Union Influences on Compensation Decisions
•Unions and labour relations laws also influence how pay plans are designed.
•Many union leaders fear that any system used to evaluate the worth of a job can become a tool for
management malpractice. They tend to believe that no one can judge the relative value of jobs
better than the workers themselves.
•One way to evaluate the worth of jobs is to get involved into the process and assign fair rates of
pay to these jobs.
•An employer’s compensation policies provide important guidelines regarding the wages and
benefits that it pays.
•A number of factors are taken into account when developing a compensation policy.
oWhether the organization wants to be a leader or a follower regarding pay, business
strategy, and the cost of different types of compensation.
oImportant policies include the basis for:
Salary increases, promotion and demotion policies