Previously, employers could include salary confidentiality or "pay secrecy" clauses in employment contracts.
These clauses could prevent employees from openly discussing their salary, bonuses and other remuneration with colleagues.
However, changes to the Fair Work Act 2009 (Cth) introduced new workplace rights concerning pay secrecy from 7 December 2022. Employees now have a workplace right to share, or choose not to share, information about their pay and certain employment conditions needed to determine their pay.
The reforms are intended to improve pay transparency and support gender equality in the workplace. Greater transparency can also help employees identify and raise concerns about differences in remuneration.
Can an employer tell employees not to discuss their salary?
In most cases, no. Employees now have a protected workplace right to:
- Disclose, or not disclose, information about their pay.
- Discuss employment terms and conditions needed to determine their pay, such as hours of work.
- Ask other employees about their pay and relevant employment conditions.
- Choose whether to answer questions from other employees about their own pay.
Importantly, this right is not limited to discussions between colleagues working for the same employer. Employees can ask employees of the same or a different employer about their pay or relevant employment conditions. The person being asked is under no obligation to disclose the information. These rights can also be exercised after employment ends.
Employers must not take adverse action against employees because they have, or have not, exercised these workplace rights. Doing so may expose a business to a general protections claim and potential penalties under the Fair Work Act.
Can employees discuss bonuses?
The legislation protects an employee's right to disclose information about their "remuneration". This is broader than an employee's basic salary or hourly wage and can extend to other components of their remuneration arrangements.
Accordingly, employers should be cautious about attempting to prohibit discussion of bonuses, commissions, incentive payments or similar elements of an employee's remuneration.
Different rules can apply to older employment contracts containing existing pay secrecy clauses. If an employment contract entered into before 7 December 2022 contains an inconsistent pay secrecy term, that term may continue to operate until the contract is varied. If the contract is varied after 7 December 2022, the employee's new statutory pay secrecy rights apply.
This means employers should obtain advice before seeking to rely on an older pay secrecy provision, particularly where an employee's contractual arrangements have subsequently changed.
Since 7 June 2023, employers can also face penalties for including prohibited pay secrecy terms in employment contracts or other written agreements covered by the legislation.
Should employers update employment contracts and policies?
It’s not uncommon for businesses to have legacy employment contracts and workplace policies containing outdated pay secrecy language.
Employers should review:
- Employment contract templates.
- Executive agreements.
- Bonus and incentive plan documents.
- Employee handbooks.
- Confidentiality policies.
- Workplace conduct policies.
Provisions that improperly restrict employees from exercising their statutory rights in relation to remuneration should be removed or updated. Keeping outdated or unenforceable wording can create confusion, damage employee relations and increase compliance risk.
Businesses should also be careful that broader confidentiality clauses do not inadvertently operate as pay secrecy clauses.
What can employers still keep confidential?
The pay secrecy reforms do not require employers to publish their payroll or provide employees with access to colleagues' salaries. Instead, the legislation gives employees rights concerning the disclosure or non-disclosure of their own pay information and the ability to ask others about theirs.
Employers can still take appropriate steps to protect genuinely confidential business information, including:
- Customer information.
- Trade secrets.
- Financial forecasts.
- Pricing models.
- Business strategies.
- Mergers and acquisitions information.
- Confidential payroll and personnel records.
- Other legitimately confidential commercial information.
There is an important distinction between employees discussing their own remuneration and an employee disclosing confidential information belonging to someone else.
For example, an HR or payroll employee who has access to other employees' payroll records does not gain a general right under the pay secrecy provisions to disclose information obtained through that role. The statutory right concerns an employee sharing their own pay information or asking another employee about theirs.
What should an employer do if employees discuss salary?
Salary discussions can expose perceived inequity, inconsistent remuneration practices or misunderstandings about how remuneration decisions are made.
If employees discover differences in pay, it’s natural for questions to arise, particularly where employees performing the same or similar roles receive different remuneration.
Employers and managers should be prepared to address these concerns fairly, consistently and professionally. Legitimate differences in remuneration can arise for numerous reasons, but employers should be able to explain the objective factors underpinning their remuneration decisions.
Where an employee raises a concern:**
- Give them an appropriate opportunity to discuss the issue.
- Listen without being defensive.
- Clarify the employee's concerns.
- Document relevant discussions.
- Explain applicable remuneration and review processes.
- Avoid taking adverse action because an employee has exercised a protected pay secrecy right.
Good remuneration records may document relevant factors such as:
- Skills and qualifications.
- Experience and industry expertise.
- Performance and achievements.
- Seniority and experience with the business.
- Additional responsibilities or leadership duties.
- Market conditions or other legitimate remuneration factors.
Employers should also consider periodically reviewing remuneration practices for issues such as:
- Gender pay disparities.
- Inconsistent starting salaries.
- Legacy pay arrangements.
- Unexplained differences between comparable positions.
Salary discussions can become difficult when employers or managers cannot clearly explain remuneration differences. Employees may perceive differences as unfair, even where there are legitimate reasons for them.
Transparent salary frameworks and documented remuneration criteria can help minimise disputes and improve employee trust. Clear career pathways showing how employees can progress into more senior positions and remuneration levels may also assist with engagement, motivation and retention.
Ultimately, remuneration decisions supported by objective, consistently applied and well-documented criteria are generally easier to explain and defend. For expert advice and answers to your questions about wages, salary, entitlements, modern awards or enterprise agreements, call and speak to a Peninsula specialist.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.