The Case for Pay Transparency

Most people are already aware that in 2022 the most significant reforms to Industrial Relations legislation passed parliament and is set to progressively become effective throughout 2022/2023. The legislation, known as the Secure Jobs and Better Pay Bill, is substantial and will drastically improve some of the rights employees have in the workplace.

In my view one of the under looked changes is the new prohibition on pay secrecy – let’s take a closer look at what this change is, what it means and how can be a win-win for employees and employers alike.

What is pay secrecy?

Pay secrecy generally refers to contractual clauses that restrict an employee’s ability to discuss details of their own pay and conditions with their colleagues and others. The view is that this benefits employers because:

• Pay can be a sensitive topic of discussion and cause workplace friction; and
• It reduces the negotiating power of employees, leading to lower “expenses” for employers.

What has changed?

A couple of things have changed and have been in effect since 07 December 2022:

1. Prohibition on pay secrecy clauses:
   1. This means employers cannot include pay secrecy clauses in contracts of employment that restrict an employees ability to share details of their pay and conditions.
   1. From 06 June 2023 employers can face penalties of up to $82,500 if they continue to include such clauses in employment contracts.
2. Creation of two new workplace rights:
   1. Employees can freely ask their colleagues and any other person about their pay and conditions; and
   1. Employees can freely disclose their personal pay and conditions to any other person.

As this is now a workplace right, employers who take adverse action (e.g., terminating an employee) against an employee for accessing a workplace right may be liable for costly General Protection claims through the Fair Work Commission.

There are some transitional provisions for employees who already had these clauses in place, but these will likely fade out overtime as contract variations are made expressly or verbally.

How does this benefit employees?

I think there is a clear benefit for employees to realise as a result of these changes. Imagine a situation where your employer hires someone new in the same role as you, and they tell you they’re being paid $10,000 more than you. With this information, employees will have far more confidence and negotiating power to ask for an increase or seek greener pastures (In my view this can be a very unfair position to be put in anyway).

Secondly, it will help reduce pay differences that might occur because of biases or structural issues with our society.

How could this possible benefit employers?

It’s not secret that transparency and open communication often leads to more productive and trustworthy workplace relationships. Thus if employers manage these changes correctly, they could benefit from:

• Increased fairness and reduction in unconscious biases/discrimination;
• A boost in morale, motivation, and productivity (e.g., if employees know what they can achieve and how to get there, they are much more likely to put in the effort); and
• Reduced turnover and recruitment costs due to more effective retention strategies; and
• More effective recruitment processes and outcomes (there is a lot of wasted time for both candidates and employers when salary expectations aren’t aligning and left until the end to discuss).

These benefits don’t come out of thin air however, so employer can’t just pretend this change alone will yield beneficial outcomes. It takes some decisive action, well thought our frameworks and proactive management (which has always been the case) to get that elusive win-win outcome.