New equal pay requirements under the Canada Labour Code are coming into effect on October 20, 2026, impacting certain federally regulated employers.

This new legislation mandates that federally regulated private sector and Crown corporation employees performing substantially similar work be paid on the same basis, regardless of employment status. “The goal of these new legislative requirements is to help ensure that employees doing substantially the same work are compensated equitably regardless of employment status” says Lauri Reesor, a lawyer and partner at Hicks Morley Hamilton Stewart Storie LLP, a management-side labour and employment law firm in Toronto. “While not pay equity legislation, the impact goes beyond the Code requirements. It will be prudent for employers to also review their pay equity plans in light of these changes to determine whether there is any resulting pay equity plan impact.”

How will this impact HR leaders?

This legislation applies to employers where they have substantially similar work in the same industrial establishment being performed by full-time, part-time, and temporary employees under similar working conditions. It also applies to federally regulated temporary help agencies. For HR leaders in federally regulated organizations, these new rules make compensation governance a more immediate operational and compliance responsibility. To prepare for these changes:

1. HR will need to identify comparable work

HR teams must determine which full-time, part-time, temporary, and agency employees perform “substantially the same kind of work”, requiring substantially the same skill, effort and responsibility, under similar working conditions. The Government published an Interpretation, Policy and Guideline which affirms that “substantially the same” does not mean identical, and that where the main duties of the job are similar but minor differences are found, it is likely that the work will be considered substantially the same.

Job titles alone may not be enough; HR will need to compare actual duties, roles and responsibilities, effort, qualifications, working conditions, workloads, and worker categories. “Job postings and descriptions, organizational pay equity data, internal job information questionnaire responses and evaluation ratings are additional information sources that can support this work,” Reesor explains. “HR professionals also need to map out their industrial establishments, especially for remote and mobile industries. The regulatory changes effectively expand the scope of comparator groups beyond a single location; now you need to look at all divisions of your business within the same EI region.”

2. Compensation practices may benefit from a formal audit

HR leaders should review pay rates across comparable roles and identify differences that are based on employment status. Any unexplained gaps may need to be corrected to ensure compliance when the rules take effect. HR leaders will also want to ensure their record keeping systems comply with the new obligations to record and retain employee requests and responses, and to record any exceptions relied upon for wage differentials.

3. Pay decisions should be more structured and defensible

Differences based on seniority, merit, pay-progression, or other legitimate, non-discriminatory factors may still be permitted, but those systems ought to be formalized, consistently applied, and documented. Employers should review any applicable exceptions and individually negotiated salaries in individual contracts, collective agreements and compensation structures. Unique individual contracts at time of hire, manager discretion and inconsistent starting salaries could become greater risks where there is differentiation based on employment status.

4. HR must be ready to explain pay differences

Employers will not need to proactively publish explanations for pay differences. However, employees can request information about their pay. Therefore, consistent HR processes for investigating and responding to these requests will stand organizations in good stead.

5. Agency-worker arrangements may need closer oversight

Under the new rules, federally regulated agency workers must receive pay comparable to directly employed workers doing similar work. In other words, agency fees cannot be offset by lowering the worker’s hourly rate. In effect, this calls for a comprehensive audit of employee compensation and agency-worker rates. HR and procurement teams may see changes to their contracts with temporary help agencies and may be asked to confirm their rates when retaining temporary help agencies, so that the agency can ensure their own compliance.

6. Recruitment and internal pay practices must align

Although the provisions do not apply to job postings, HR should ensure advertised salary ranges, candidate offers, and incumbent pay are consistent wherever exceptions do not apply. Misalignment between these practices could expose broader inequities or create difficult employee relations issues.

7. Managers will need training

Managers responsible for setting compensation should understand which factors can legitimately explain pay differences and avoid making unsupported commitments or explanations. “Where there is a compensation difference based on employment status, if an exception does not apply, that difference has to be reconciled” Reesor cautions. “Where exceptions do apply, it is important that employees can readily access the rationale for such differences.” As a result, HR leaders may need to consider reducing decentralized manager discretion over starting pay, increases, and agency worker rates. Here, training and standardized processes could enable HR, payroll, recruitment, and procurement functions to respond consistently to employee questions regarding pay. Additionally, a centralized repository of standardized responses may also support HR in ensuring that the nuances and complexities in this domain are adequately addressed.

8. Employee relations risks may need to be addressed

As employees gain greater visibility into how pay differences are justified, HR may see more questions, complaints, and pressure to address legacy disparities. Even legally permissible differences may create trust or fairness concerns if they are poorly communicated.

The broader implication is that HR leaders are being called upon to demonstrate that compensation decisions are consistent, legally compliant, evidence-based, and explainable.

What can HR professionals do to prepare?

We have several upcoming programs that focus on managing compensation and payroll, implementing pay equity, and navigating employment legislation. Below are a few professional development opportunities that can help bring you up to speed:

HRPA’s Quarterly Legal Updates 2026 – Q4, on Oct 15
Pay Equity Certificate, running from Oct 20 to 22
Compensation Reviews – Data & Decision Making, on Nov 12
Labour Relations Certificate Program, running from Nov 17 to 25

“Before the legislation goes into effect, HR professionals should audit workplace classifications against the new definitions of employment status, review formalized compensation structures, assess wage comparability assessment methodologies, and enhance record-keeping,” Reesor suggests. “On this front, the Interpretation, Policy and Guideline from the federal government is a helpful resource to consult.”

With October 20 not too far off, employers...

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