Historically, pay secrecy clauses have been standard in most employment contracts. The clause generally states that an employee’s remuneration is confidential and prohibits employees from disclosing, discussing and/or comparing salaries with one another. Breaches of those clauses have previously been valid and lawful reasons for employers to take disciplinary action against an employee for breach of the clause. They have also offered a level of protection to employers, by hiding wage disparity.
However, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (Act) now makes it a workplace right for employees to disclose (or not disclose) information regarding their remuneration and the terms and conditions of employment used to calculate their remuneration, such as rosters, shift penalties, bonuses, sales budgets etc.
This change means that employees are allowed to disclose this information and are protected by law if their employer takes action against them for doing so.
For employment contracts entered into before 7 December 2022, the Act and its amendments to the Fair Work Act have no immediate effect (the employees are still required to comply with any pay secrecy clauses in their contracts, but once the contract is varied, it cannot include a pay secrecy clause. So once the employee receives a pay increase, promotion or other change in their role, the pay secrecy clause ceases to apply from the time of that variation.
Further, from 7 June 2023, employers who issue employment contracts that include pay secrecy provisions can be liable for penalties of up to $66,600 per contravention.
Once the secrets are out, this can open a whole other can of worms as well – so make sure that your salaries are not based on protected attributes such as gender, family status, race etc., make sure you are paying equal pay for equal work and if you do not have a strong, transparent remuneration model, it is time to get one!
Reach out to the HR Gurus team to review your contracts and remuneration model to ensure they comply with the new legislative amendments and protect you from costly errors.
Written by Louise Betts