In our January issue we noted that there was confusion over pay equity funding. We have clarified our understanding of the issues with the Ministries of Community and Social Services ("MCSS") and Health and the Pay Equity Commission. This clarification should not have an adverse financial impact on organizations in the broader public sector.

History of pay equity funding

First, some background on pay equity funding is necessary. Funding received in 1994 by organizations adopting the proxy method was calculated at 3% of 1993 salaries. This was initially meant to represent the 1% pay equity adjustment for 1994 with an additional 2% allowance to help organizations catch up to their pay equity base. The intent was that organizations would continue to receive an additional 1% funding increase annually until 1999 to assist with the pay equity adjustments from 1995 to 1999. In 1996 the provincial government scrapped the proxy method. The government then stated that as long as organizations using the proxy method continued to pay out the full amount of the 3% 1994 funded increase they would be considered to have fulfilled all their pay equity obligations.

Enter 1997. The proxy method has been reinstated and organizations in the broader public sector must act as though it had never been repealed. These organizations are required to make retroactive pay equity adjustments for 1995, 1996, 1997 and the current adjustment for 1998. Each adjustment must be equal to 1% of the prior years’ payroll and must be distributed according to the rules outlined in the January 1998 newsletter [Volume III Issue 1]. If your payroll is approximately $500,000 and pay equity has not yet been achieved for all female job classes then your organization could have to come up with in excess of $30,000 in total to meet its retroactive pay equity obligations up to and including 1997. Help, we are told, is on the way.

In late 1997 the Minister of Finance for Ontario announced that $140 million will be available for pay equity funding for organizations in the broader public sector. The Minister apparently arrived at this amount by estimating the salaries of broader public sector organizations and the resultant pay equity funding deficiency from 1995 to 1997. The announced funding is supposed to be sufficient to cover the shortfall to date.

MCSS informs us that correspondence will be sent out shortly to all organizations in the broader public sector to advise them of the situation. A survey will be sent to these organizations sometime in 1998 to determine existing unfunded pay equity requirements. Funding will evidently be forthcoming sometime before April 1, 1999.

Planning considerations

It appears that organizations will receive at least partial funding to assist with unfunded pay equity obligations through 1997. For organizations that currently have insufficient resources to meet past unfunded pay equity obligations (we suspect that this will be the majority of broader public sector organizations) we recommend that you meet with your employees or their bargaining agent(s), explain the situation and develop a plan whereby adjustments can be caught up in the future. The future most likely means as and when funding is received. The alternative for most organizations is an inability to meet payroll obligations. As there is little equity in closing down an organization and terminating all employees we suspect that this draconian option will seldom be taken.

Remember that retroactive payments must be made to all employees working in a given year. This means that employees terminated or having left at any point in 1995 through 1997 will have to be sent a retroactive pay equity payment if they were entitled to receive one. Locating all past employees could be difficult. We wonder what advice the Ministry will give in situations where organizations cannot locate all affected past employees. Stay tuned for more information.