Pay Secrecy Clauses Now Banned in Australia

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7 Dec, 2022

With the passing of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill by Parliament and the Royal Assent of the Act on the 6th of December 2022, clauses in contracts and workplace policies that enforce pay secrecy are now banned.

Pay secrecy was often used to enhance employer bargaining positions during salary negotiations. However, it often also led to actual and perceived wage inequities.

This section of the Act is intended to encourage pay transparency to allow employees to assess if their pay is fair and comparable with other employees, creating a more equal playing field for wage negotiations. It is also designed to reduce entrenched gender and racial pay gaps.

Schedule 1, Part 7 of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act amended the Fair Work Act to add a new section that gives employees the right to disclose or not disclose to any other person their pay and terms and conditions of employment that are reasonably necessary to determine their pay.

In addition, the Fair Work Act now gives employees the right to ask any other employee (whether employed by the same or a different employer) their pay and terms and conditions of employment that are reasonably necessary to determine their pay.

This includes past employees and the right by prospective employees to ask what individuals earn.

This right is discretionary, which means employees can choose not to disclose their pay, but people now have the workplace right to ask.

Pay Secrecy Terms in Contracts Have No Effect

The Fair Work Act goes on to say that pay secrecy provisions in any contract or agreement now have no effect.

It is now illegal if an employer attempts to add them to a contract of employment or agreement.

Civil remedies can be pursued against the employer (i.e. fines of up to 600 penalty units for serious breaches or 60 penalty units).

What Employers Need to Do Now

  • All employers should review all employment contracts and remove any pay secrecy clauses.
  • Given that employees will have greater transparency around pay, employers may want to review the remuneration of all employees to ensure pay equity.

We will update our Employee Manual suite of products with a new clause around discussions about pay over the coming weeks.

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AEM01@EM

HR Author and Lecturer with over 25 years' experience in human resources and workplace relations in Australia. Lead Author of Instant HR Policies & Procedures, NDIS Direct Employment HR Manual, and Employee Performance Reviews: Tips, Templates and Tactics.

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