The minimum wage has gone up in Ontario. Starting October 1, 2025, the Ontario government increased the minimum wage from $17.20 to $17.60. The wage increase is mandatory, and all employers must comply with these updates to avoid legal risks.
If you haven’t already, it’s essential to update your compensation strategy to account for the increased budget. Below is a list of important considerations to adjust your compensation strategy:
1. Notify employees of the wage changes
Send out a notification to all employees about the changes to the minimum wage. Let them know who will be impacted, when the changes come into effect, and provide other information as required.
2. Review all recruitment materials
Recruitment agencies in Toronto recommend that all employers review all recruitment materials. Update your compensation section on job ads, social media, career sections on your website, and other online locations to reflect the wage change.
Revise job offer letters, job postings, and employment contracts that reference wages. Confirm that employee handbooks, policies, and onboarding materials are updated to reflect the changes. This is particularly important for employers who are hiring entry-level employees with minimum wage roles.
3. Review payroll and compensation documentation
Employers should review their payroll practices to ensure compliance with the new minimum wage rates. Review all employees’ earnings at or near the new minimum wage. Update their pay rates to comply with the legal requirement, and make sure payroll systems reflect these changes promptly.
Enter the updated rates into payroll software and verify the effective dates to prevent errors. Recheck overtime, holiday pay, and premium pay calculations, as these may be impacted.
Assess whether wage increases affect eligibility for bonuses, benefits, or retirement contributions tied to earnings, and update benefit calculations as needed.
Organizations that employ student workers, homeworkers, hunting, fishing, and wilderness guides should ensure that the category-specific rates are adhered to.
4. Address wage compression across the organization
Employers should proactively account for the potential ripple effects of minimum wage increases, such as wage compression.
Wage compression can occur when the pay gap between lower-wage and more experienced or senior employees narrows due to rising minimum wages. This may result in disaffected employees who may feel their compensation no longer reflects their skills, experience, or responsibilities adequately.
Preventing wage compression is critical for maintaining employee morale, retaining talent, and preventing skills gaps within the workforce. Review employee compensation for potential wage compression and consider adjusting salaries on a case-by-case basis.
A final word about Ontario minimum wage increases
As Ontario’s minimum wage has increased to $17.60 on October 1, 2025, employers must take steps to remain compliant while also protecting employee satisfaction and retention. By updating policies, payroll systems, and recruitment materials, and addressing potential wage compression, organizations can ensure a smooth transition. Staying ahead of these changes not only minimizes legal and financial risks but also demonstrates a commitment to fair pay and a positive workplace culture.
More insights about salary and benefits
Salary Benchmarking: What is an Ideal Salary for the Job?
