Canada: Giving Foreign Workers Their Due

Last Updated: June 29 2017
Article by Julie Lessard

Focusing on fairness and compliance when compensating temporary foreign workers

In today's fierce competition for global talent, employers are designing innovative   compensation and benefits systems that strike the right balance between internal equity and external competitiveness. While being creative in finding ways to reach these objectives, employers should believe equity is critically important because perceived unfairness can adversely affect any organization's ability to attract and retain talent.

While the principle of equity re-mains central, employers recruiting and hiring temporary foreign workers (TFWs) are operating on a whole new level of complexity when dealing with the issues of fairness and compliance.

Temporary foreign workers

Employers using the Temporary Foreign Worker Program (TFWP) or the International Mobility Program (IMP) must comply with government-imposed wage requirements that may substantially differ from their normal practices and corporate philosophy in terms of wages and compensation.

To receive a positive Labour Market Impact Assessment (LMIA) under the TFWP, employers must declare they "will comply with the prevailing wage requirements and agree to review and adjust, when applicable, the TFWs wages, at least annually, to ensure he/she continues to receive the prevailing wage for the occupation and region where he/ she is employed."

The prevailing wage is defined as the highest of either the median wage listed on Canada's Job Bank or the wage that is within the wage range the employer is paying cur-rent employees hired for the same job and work location, and with the same skills and years of experience.

The median wage on Job Bank is calculated based on Canada's official system classifying jobs into occupational groups, the National Occupation Classification (NOC) system.

After identifying the NOC that best suits the duties and the requirements for the position offered, the wage that must be used is, at a minimum, the median wage, even if the job offered is entry-level (except in Quebec where the wage requirement is calculated differently). If the job offered requires additional experience, the salary must meet the higher scale.

The median wage includes only the guaranteed wage, excluding specifically overtime hours, tips, benefits, profit sharing, bonuses, commissions or other forms of un-guaranteed wages.

The details of all categories of work permits that can be issued un-der the stream of the IMP are out-side the scope of this article.

Nonetheless, it is important to note that since program changes were introduced in 2014, the pre-vailing wage requirement equally applies to TFWs entering Canada under the Intra-Company Trans-ferees or Specialized Knowledge Category.

Impact on employers

While the median wage is based on statistics for specific occupations in specific geographic locations, employers may need to increase the offer to a TFW so it meets the pre-vailing wage requirement.

This is especially true for entry-level positions where the employer participating in the TFWP must still pay the median wage. In such cases, internal inequity between Canadian and foreign workers can result from the employer's effort to comply with the TFWP requirements.

In the context of the TFWP, the median salary payment requirement rule is applied to the letter. This means employers are unable to obtain positive LMIA opinions if the prevailing wage is not met, effectively forcing them to create internal inequity between TFWP and Canadians, particularly at entry-level positions.

The absurdity of the situation could be disputed, as it was successfully done in the 2016 Paturel International Co v. Canada (Minister of Employment and Social Development) where the Federal Court ruled the prevailing wage was too high in the unique circumstances of this case and it was not representative of the wages paid by employers in the region.

However, this decision has not changed the adjudications practice at the administrative level of the TFWP.

Meanwhile, few employers have the resources and perseverance required to have such situations heard in Federal Court.

Employers' strategies to offer attractive packages, merit-based compensation and creative incentives can also fire back in the context of the current regulation.

Under the current rule, any pro-gram putting greater emphasis on bonuses or compensation tied to performance rather than fixed salary, programs favouring flex time, lieu time, overtime or any other policy based on unguaranteed, merit-based wages may be found non-compliant with the prevailing wage requirements under the TFWP.

The result is the creation of two categories of workers: local workers and TFWs.

Ensuring compliance On Nov. 1, 2016, the NOC 2016 was introduced to update the NOC  2011 with new market analysis, and prevailing wages were updated for many occupations on the Job Bank website.

Such changes can have an impact not only on future applications for TFWs but also on existing immigration-based work permits already issued.

In LMIA applications, employers not only declare that they actually comply with the requirement, they undertake the obligation of future compliance, declaring they will ensure the TFW will continue to receive the prevailing wage for the occupation and region where he is employed.

Accordingly, to be compliant un-der the TFWP, employers have a positive duty to identify the potential impact of the prevailing wages update on existing LMIA-based TFWs.

If the new median wage is higher than the wage previously included on the LMIA or the employee's actual wage, the salary may need to be increased — even if this could lead to a more favourable treatment of the TFW than other workers similarly employed by the organization.

These changes will also impact the eligibility criteria for applications under the Intra-Company Transferees/Specialized Knowledge Category.

Best practices

The issues raised above are only the beginning of a profound discussion about additional obligations imposed on employers across the country with respect to a non-Canadian workforce.

Yet another illustration of the additional burden on employers is any salary change including routine annual reviews should be disclosed in writing to Service Canada for all LMIA-based applications.

Failure to do so could lead to non-compliance if the employer is audited.

Traditionally, systems in place for compensation and salary con-formity verified compliance with legislation in areas such as labour standards, equal pay, labour rela¬tions and human rights.

Today, employers need entirely new human resources toolkits to ensure they are also in compliance with immigration-related legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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