By Katie Stargardter
Compensation is one of the most pressing and sometimes most confusing areas for small businesses in Ontario. Unlike larger organizations with entire HR teams dedicated to pay strategy, small businesses often balance limited budgets with the need to attract, retain, and motivate talent in a highly competitive market. As an HR consultant, I often see owners and leaders asking the same question: How do we get compensation right without overcomplicating it?
1. Start with Compliance: The Non-Negotiables – What Are Compensation Rules for Small Businesses in Ontario?
Ontario’s Employment Standards Act (ESA) has clear standards that set the floor for compensation. Every business—no matter the size—needs to be aligned with:
- General Minimum wage: On October 1, 2025, the general minimum wage will increase from $17.20/hour to 17.60 /hour. This rate is adjusted annually.
- Equal pay for equal work: Employees doing substantially the same job under similar conditions must receive equal pay, regardless of gender or employment status.
- Overtime pay: Most employees are entitled to 1.5 times their regular wage for hours worked over 44 in a week.
- Public holidays, vacation, and leaves: These come with statutory pay entitlements that need to be factored into payroll.
2. Go Beyond the Minimum
Staying compliant keeps you safe. Going further keeps you competitive.
- Check the market: Peek at postings, industry surveys, or free salary tools.
- Think total compensation: Flexibility, growth opportunities, and culture can carry as much weight as salary.
- Be transparent: Even a simple pay range in job postings builds trust.
3. Create a Simple Pay Framework – How Do Ontario Small Businesses Pay Their Employees?
Small businesses don’t need complicated grids or formal pay bands, but they do need consistency. A simple pay framework could include:
- Defined salary ranges for common roles.
- Clear pay progression to show how and when employees can expect increases.
- Documented guidelines to apply the same principles when making pay decisions.
4. Plan as You Grow
What works for a 10-person team may not work when you’ve grown to 25 or 50 employees. Consider:
- Budgeting for annual increases
- Formalizing bonus or incentive programs
- Documenting pay policies
Final Thought
Small businesses in Ontario don’t have to choose between being compliant and being competitive. With a clear understanding of the Employment Standards Act of Ontario and a thoughtful approach to your total compensation strategy, they can build pay practices that attract great people, foster loyalty, and position them for growth.
Need advice on how to set up your total compensation strategy or with HR compliance in Ontario? Reach out to us today to schedule a free HR consultation.