National Post: Minimum-wage changes should spur full, concurrent HR policy reviews

Original published in the National Post

Like it or not, the Fair Workplaces, Better Jobs Act is here to stay in Ontario. The good news is, the act represents a shift towards a more equitable workforce where all can earn a living wage. On the down side, business owners will need to plan for higher wages, more sick days and higher staffing costs.

In light of the new Act, businesses that operate in Ontario will need to do a full review of all current human resources policies to determine where changes need to be made and updated to reflect the new legislation. A number of work products and processes may also need to be revised, ranging from pay grids to scheduling.

Before making any changes however, it is important to look beyond the surface level, and be strategic in how you adapt your human resource policies. Rather than taking a “knee jerk” approach, it is essential to take the time to look at your policies holistically in order to avoid any unintended consequences. One major question that you need to consider from the outset is what the potential impact - positive and negative - on employees will be.

Here are some practical tips for addressing these latest legislative changes.

Consider the trickle-up effect

Employers in Ontario have until January 2018 to increase minimum wage to $14 an hour; and up to January 2019 to raise it to $15 per hour. This change will mean more than just an increase for employees currently making minimum wage. Employees earning three to five dollars more than minimum wage will also expect an increase in order to maintain some sort of reasonable gap between their level and a minimum wage role to confirm their status. Not factoring in the needs of those workers could be demoralizing for them, as they will feel unappreciated.

Another important point to consider is that raising the minimum wage  may consume a large portion of salary increase budgets over the near term, leaving little to offer other employees not affected by the mandated increase. This discrepancy may not be well received by employees who . Who will get a smaller increase (if any) as a consequence.

Therefore, pay attention to any resentment among employees.  You will want to maintain employee job satisfaction and engagement. Employees at the lower end of the pay grid will be pleased with the increase, but others we have mentioned will not. Acceptance will very much depend on how well the increases are implemented and communicated.

Don’t let extended leave blindside you

While minimum wage has been the main topic of discussion, there is another aspect of the Fair Workplaces Act that employers need to consider. First is the extension of the Personal Emergency Leave provision to all employers, including those with fewer than 50 employees (who were previously exempt). 

All employees will be eligible for 10 days (two paid + eight unpaid) in the event of a personal emergency per year. Small businesses will be hit the hardest by the provision as they have less staffing flexibility.

Similarly, the Family Caregiver Leave has been extended from eight to 27 weeks. This is an obvious benefit to anyone caring for a family member who is ill, and is especially important as our population ages and more people in the workforce will be caring for elderly parents. Employers for their part need to make sure they have a plan in place when an employee needs to take leave.

In both cases, employers will be faced with having to make arrangements for someone to cover the work (either by distributing the tasks to other employees or bringing in a temporary employee). At the same time, employers will need to take steps to ensure those employees asked to step in don’t end up resenting the added burden and/or the individual on leave. 

Other important considerations:

In addition to making provisions for the increase to minimum wage and vacation days, there are some other notable considerations for employers in Ontario, such as:

• The Act states that any employee on call must be paid a minimum of three hours, even if they are not actually called in. For example, It is common to have a member of the IT team on call after work hours.

• If an employee is scheduled to work a shift, and that shift is cancelled within 48 hours of the starting time, the employer must pay them three hours of wages.

• Part-time or casual employees must be paid at the same rate as full time employees for doing the same job. In other words, employment status is no longer a valid reason for pay differentials.

While the Fair Workplaces Act presents a number of financial and administrative burdens for employers, there is a silver lining. If executed properly, it affords companies the opportunity to perform a review and update their current policies and work practices holistically to ensure they align with the modern workplace. 

Globe and Mail: How businesses can handle provincial changes to minimum wage

This article was originally published in the Globe and Mail

 Following Alberta’s lead, the Ontario government has committed to raising the minimum wage to $15 per hour within the next few years and, in addition, is upgrading the mandatory minimum vacation allowance for employees. Business owners now need to make a plan for how they will absorb these costs and determine what the impact will be on their business.

While the change to minimum wage is only targeted at those workers earning less than $15 per hour, the overall impact is scalable as the implications for compensation are far wider than simply bumping up the pay. In addition to forking over more for items calculated as a percentage of pay, such as payroll taxes, CPP, EI, benefits and company pension contributions, many business owners will also have to address pay increases for workers who are already earning more than $15 per hour to remain competitive while ensuring that pay is based on value to the organization.

A solid compensation plan ensures that employees are paid fairly, based on that role’s market value and worth to the organization. If those employees who are currently earning less than $15 per hour are bumped up, this will likely create a ripple effect on the entire pay grid necessitating salary increases for those who were already near the new minimum wage as well. 

A holistic review of the company’s compensation policy may be necessary – particularly if the bulk of your employees are paid hourly, or earning a salary of around $30K - $40K per year.

If this is your company’s situation, here are the steps you should take now to make sure you’re ready when the minimum wage policies come into effect:

Start with an audit. It may come as a surprise, but many owners may are not actually aware of the specifics of individual jobs or contract entitlements, and it’s important to make sure you have all the facts before making the necessary changes. Now is the time to review all positions and contracts to determine pay scale, current vacation allowances and job responsibilities. If you haven’t already done so, an audit will help reveal whether the pay structure is aligned with your business structure and plan or if the pay is not being distributed effectively, among other things.

Determine the scope. Depending on your business, if you only have a few employees earning less than $15 per hour, it may not be a huge burden to simply increase those salaries. But if you have many employees and your salaries are spread from minimum wage upwards, you need to consider the compression issue identified above.

Determine job worth. Consider how you evaluate the roles within your organization. How do you establish the worth of each role to the business, especially as it relates to other roles? Does it have a direct impact on sales or new business? Is it integral to customer service or satisfaction? Does it require a higher level of critical thinking?  By asking these types of questions you can determine whether your current system of evaluation is still appropriate. Review each job role to help identify whether any changes to responsibility are required.   

Create a new pay grid. Based on your findings, you’ll now need to establish a new pay grid. In addition to accommodating government regulations, you may wish to increase the salary ranges to give you greater flexibility to absorb the minimum wage increases over the next couple of years.

Communicate changes clearly. Compensation sends a value message to employees as well as external customers who deal with your business. It goes without saying that any changes to compensation can affect employee morale and need to be communicated clearly and early. Yet it’s a step that’s often overlooked – or even mishandled. While an increase in wages is usually good news, it’s an important change that always requires a communication plan. This should happen before rumours can skew expectations, and include consistent messaging, personal interaction and the opportunity for employees to ask questions.

The good news is that both the Ontario and Alberta governments have given substantial notice before the wage increases need to take effect. Use that time to review your full compensation program to make sure that any actions taken are best for your business, rather than a knee jerk reaction to government policies. By acting now, you can hopefully mitigate the impact the reforms will have to your bottom line.