Legal Compliance

When compensating employees an organization must adhere to the existing legislation in the areas of Labour
Standards, pay equity, Human Rights, Employment Insurance, pension or retirement benefits, labour relations and
Occupational Health and Safety. Regularly reviewing the HR Toolkit, key government websites, and connecting with
an HR and/or legal professional can help you ensure that your organization’s compensation practices are in
compliance with current legislation in your jurisdiction.

Issues may include, but are not limited to, wages, leave options, bonuses, advancement opportunities, termination
pay and more. Auditing your compliance with legislation annually is time consuming yet critical to the sustainability
of your organization.

When compensating employees the following are areas that you need to ensure comply with relevant legislation:

 Statutory Obligations
 Minimum Wage
 Statutory Benefits
 Employment Insurance
 Canada/Quebec Pension Plans
Statutory Obligations
A statutory obligation is a requirement that employers are required to provide their employees as determined by the
law of the province or territory where the employer operates.

Employment Standards Legislation sets out the minimum terms and conditions of employment for those who operate
federally and for each province or territory. Both employers and employees must follow these minimum obligations
unless they offer terms or conditions more generous that the ones mandated by legislation.

Therefore, employment standards legislation sets out minimum standards relating to employment terms and
conditions. The legislation also includes exceptions for certain types of employees, such as managers and
professionals. Some key areas covered by legislation are:

 Minimum Wage
 Hours of Work
 Public Holiday Entitlement
 Overtime
 Vacations Leave
 Maternity and Paternity Leaves
 Adoption and PArental Leaves
 Emergency/Sick Leave/Compassionate Leave
 Bereavement Leave
 Leave Entitlement
 Grievance procedures
 Termintation of Employment
Statutory Benefits
Statutory is defined as something “fixed, authorized, or established by statute”, therefore the benefit packages that
Canadian employers offer, are designed to enhance the well-being of their employees, and will contain both statutory
and discretionary benefits. Statutory benefits are some of the benefits also referred to as “employer paid” benefits.

Compensation & Benefits

Developing a compensation rewards program

A Compensation and Rewards Program is a tool used by employers to effectively attract, retain and motivate
employees. The program results in equitable payment for performance of a service, in exchange for the work of an
employee. The following are elements an organization considers when developing a compensation and rewards
program.

 Compensation Philosophy
 Equity
 Compensation Components

Develop a compensation philosophy

Developing a compensation philosophy can support an organization in developing a program that is in line with the
work culture an organization has or wants to create.

A compensation philosophy is developed to guide the design and complexity of your compensation programs; this is
done by identifying your goals and objectives, considering your competitiveness in attracting and retaining
employees, your emphasis on internal and/or external equity, and whether performance is tied to pay increases.
Understanding what balance you want to achieve between direct and indirect financial compensation is critical in
developing your overall total compensation approach.

A consistent philosophy provides a strong foundation for both the organization and the employee. Without a
philosophy, leaders often find themselves unsure of what to offer as a starting salary for a new employee. This can
lead to offering too high a total compensation package for a new employee in relation to existing employees, or being
unable to successfully hire because the total compensation offer is too low to be competitive.

Questions to consider when developing your Compensation Philosophy:

 What do you want your compensation program to do to help your organization succeed?
 Where do you want your organization to sit regarding compensation as compared with your industry or market?
Your relevant labour market is defined as those organizations, usually in your geographic area, with whom you
compete for labour. You have three choices: Lead, lag or match the market
 Deciding what to pay
They are many situations in which you will be faced with deciding what to pay an employee.

 A new hire
 An existing employee due for an increase
 An existing employee moving into a new role
 A valuable employee who is considering leaving because of compensation
 Market conditions
 Scarce skill
It is important to ensure that the approach taken is guided by the compensation philosophy and is applied
consistently. Ensuring that established guidelines are followed will prevent offering a compensation package so
tailored to a person that the organization is jeopardized by having too heavy a financial burden or that flexible
arrangements actually hinder the critical work from being completed. It takes a carefully crafted balance between the
organizational needs and the individual considerations to arrive at the optimal compensation structure.

Answering these questions will help to formulate the appropriate balance:

From the organization’s perspective:

 Will you hire an employee or a contractor?Do you understand the difference? For more information visit:
 Canadian Revenue Agency: Employee or Self Employed
 HR Toolkit: Non-standard Employment Relationships
 What will the role be doing?
 How much responsibility will they have?
 How specialized are the skills required to do the job?
 How much experience do they need to have?
 Are there others doing the same work? Are their responsibilities established? Is there alignment?
 How many people could potentially apply?
 Can you find a comparable job in a salary survey or on a job-posting website?
 How would not having this role filled impact your business?
 What is your range for this role? How does it compare to other roles already in place?
 How critical is the role to the achievement of organizational goals?
 What is the cost of living in your region? What is minimum wage?
 Have they been considered in your compensation strategy?
Review pay structures
Pay structures are helpful when standardizing your organization’s compensation practices as they reflect the grouping
of jobs based on relative worth. Typical pay structures can have several grades or levels, career bands, or job families
with each having a minimum or maximum salary associated. These could be identified by hourly wages or annual
salaries.

A number of levels may exist for a role or types of roles linked together, and for each, a dollar value would be
associated. Creation of pay structures are based on internal and/or external data.
 The most basic salary structure is one in which each job class is a level with a single salary for all incumbents within
the level.
 This is seen as somewhat limited as employees (or potential employees) come with a variety of experience and
skills and therefore should not all be compensated at the same rate.
 An alternative to the basic salary structure is to incorporate salary ranges for each of the different job levels.
 Placement in the range is based on established criteria outlining experience, skill, potential and fit
 The scale is usually created by evaluating the market comparative data however, the placement of the person in
the salary range is usually based on their skill and ability against other employees in the same role
 Criteria for moving through a salary grade must align with the compensation philosophy and should be described
in the Compensation Policy.
Building a matrix that identifies the hierarchy of the job family through levels as well as skills and competencies can
assist in determining the appropriate placement of a position.