Pay secrecy: is there such a thing?

Hi Bare Bones Consulting, I recently heard two of my employees discussing their pay. I thought pay secrecy was a standard condition of employment?

Hey there and thanks for your question…it’s a good one! Like many things around HR and employment, the answer is going to be “it depends”. Let’s delve a little deeper and get the right information for you to determine whether your team member discussion is permitted or not.

On 7 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) came into effect. Under this Act – and effective from 7 June 2023 – it has been unlawful for an employer to include a “pay secrecy clause” in an employment contract. A pay secrecy clause is a clause that prohibits or limits an employee from disclosing their remuneration to someone else, or asking someone else about their remuneration.

Employees (and future employees) now have the workplace right to share (or not share) information about:

• their pay; and/or
• their employment terms and conditions that would be needed to work out their pay, such as their hours of work.

Employees cannot be forced to give this information to another employee if they don’t want to. Employees can also exercise these rights even after they leave their employment.

Now…here’s the “it depends” factors. The workplace introduced in 2022 rights apply to employees with:

• employment contracts that were entered into on or after 7 December 2022, or
• employment contracts entered into before 7 December 2022 where the contract doesn’t include pay secrecy terms that are inconsistent with these rights.

Pay secrecy clauses in contracts that were issued prior to 7 December 2022 will continue to have effect until the contract itself is varied. If an employee changes their position, receives a promotion or pay rise for example, this may be enough to constitute a variation and then the pay secrecy prohibitions will apply to that contract.

Bottom line? It’s long been tradition for employers to discourage employees from discussing their pay with one another. The introduction of amendments to law means that this practice is no longer enforceable: employees have a workplace right to disclose or not to disclose their pay. An employer that enters into an employment contract after 7 June 2023 which contains a pay secrecy clause will be deemed to have committed a breach of the Fair Work Act and will be exposed to having to pay civil penalties.

Need more info or some clarification on your particular HR situation? Give Bare Bones Consulting a call. There’s no secrets here.