Australia: Pay Transparency in Australia
Author: Sarah Younis
Employers banning their workers from discussing their salary amongst colleagues has been a controversial matter for some time. Conversations with co-workers regarding their pay were previously either subject to disciplinary action or culturally discouraged in many businesses. Recent changes in Australian law has led to workers now having a right to openly discuss their salaries and employment conditions with others, including their colleagues, without fear of retribution by their employer. Employees are also afforded an additional layer of legislative protection as employers must not treat them adversely because they have discussed their pay with co-workers.
In 2022, laws were introduced in the Fair Work Act 2009 (Cth) (FW Act) (see sections 333B, 333C and 333D) which give a worker the right to:
- disclose, or not disclose, their pay as well as any terms and conditions of their employment (such as their hours of work) to any other person; and
- ask other employees (with the same or different employer) about their pay and terms and conditions of employment.
The application of these laws, however, depends on when the relevant employment contract was entered into.
That is,
- any term in an employment contract entered into, or varied, from 7 December 2022 that prevents the employee from discussing their salary with other employees has no effect and cannot be enforced;
- pay secrecy terms in employment contracts entered into before 7 December 2022 will continue to operate, until those contracts are varied; and
- from 7 June 2023, any new employment contracts must not contain pay secrecy clauses.
Pay secrecy terms in a workplace instrument (such as a Modern Award or Enterprise Agreement) have no effect and cannot be enforced after 7 December 2022. This applies regardless of whether the instrument was made before, on, or after this date.
Further, an employee’s right to discuss their salary and terms of employment is a workplace right protected by section 340 of the FW Act. That is, an employer cannot take adverse action against an employee, or prospective employee, for discussing their pay or terms of employment with others.
Violating these provisions carries heavy penalties for employers who try to enforce pay secrecy terms or take adverse action against employees for discussing their pay. The maximum penalty for violating these sections is $93,900 per breach.
Key Issues:
- Pay transparency is increasing in significance from a moral and legal perspective.
- Pay secrecy clauses are now banned in employment contracts and employers can no longer force their employees to keep their pay a secret.
- By adopting pay transparency, businesses can improve staff retention and trust.
Key Action Points for Human Resources and In-house Counsel
In light of the above, to avoid incurring any financial penalties, it is vital that organisations:
- amend their existing employment contracts to, if necessary, remove pay secrecy clauses; and
- do not subject their employees to disciplinary action or other detrimental conduct by reason of them discussing pay related topics with their colleagues, including remuneration increases and performance bonuses.
