The run into Christmas is always a hideously busy time and most of us just scrape through with our sanity intact. As we kick into January, many of us have more time to update ourselves on things we missed in the December haze and we note that we are receiving a number of questions about the new employment laws that came into effect on the 7th December. There are a number of areas that will see change so we are going to take a look at them over the next few weeks. Today, we look at pay secrecy as it seems to be top of mind for many employers as we embark upon a new year.
Most of us have spent our careers never really knowing what our colleagues earn. In fact, confidentiality around remuneration has generally been a clause within employment contracts that had serious consequences if breached and many of you would have this expectation and requirement of your teams now. Or at least you did, because the legislation regarding pay secrecy lifts the lid and your employees can now have a chat about their remuneration if they want!
What the?
Let’s understand why this kind of legislation has been introduced because most of us are recoiling in horror at the thought of what kind of trouble is going to rear its head when employees start comparing notes about their remuneration. I mean, who hasn’t seen the drama that this kind of knowledge can cause. When working for a global business some years ago, the HR manager of the day inadvertently sent out an excel spreadsheet to ALL STAFF that listed EVERYONE from the CEO to the junior receptionist, with specifics about what they were earning and the bonus structure they had. Popping my head into the HR office and letting them know what they had unleashed and how it had impacted my team already, set off a panic I have never seen in the HR manager previously. Good times.
I digress.
While we all know that sharing information about remuneration in many industries will cause upset, the Government rationale behind pushing this change is that it is primarily aimed at addressing gender pay discrimination issues. But how is the big question. The view is that transparency will enable employees to approach employers and have frank discussions about where they sit and why they aren’t paid at the same level. In some cases, it may well be justified as it could relate to experience, qualifications or longevity within the business.
Imagine though, if an employee discovers that a colleague who has the same experience, the same qualifications, the same tenure, is paid significantly more and they only difference may be gender, a business could be facing a problem that they are going to need to resolve. And by problem, I mean it could be as simple as having a conversation or negotiation around pay equity or it could blow up into a social media nightmare as employees take to public platforms to complain about current or former employers who discriminate – or are perceived to discriminate – based on gender. Nobody has time for that.
Who does this impact
Short answer – everyone. All employees, past and present, as well as those from outside your business, have the right to discuss their pay and conditions and ask your employees about theirs. Naturally, each individual has the right to disclose or keep private their own situation.
Further to this, it is now deemed a workplace right and employers cannot take any actions that would prevent or punish employees exercising this right. That would constitute grounds for a general protections claim right there and you will be courting trouble if you attempt to inhibit any conversations around pay.
Let’s take practical actions
In terms of your current contracts that would have a pay secrecy clause, the best course of action is to consider them essentially null and void, invalid, kaput. You won’t need to reissue new contracts either but you absolutely can not enforce the pay confidentiality clause. If you wish, you can elect to provide your employees with a letter of variation outlining that the clause is no longer relevant however, many businesses are choosing to stay silent on this and simply recognise the clause is no longer valid if, or when, employees start having open conversations about their remuneration.
And for new employees coming since the 7th December, the clause needs to have been removed altogether. There will be civil penalties for companies that continue to include the secrecy clause but there is a grace period of six months until the 7th June 2023 to get your employment contracts updated.
For those of you who already use HR Staff n’ Stuff for employment contracts, your contracts are already reflecting this change and there will be nothing for you to worry about. You’re welcome.
We would also recommend you make sure the leaders within your business are across these changes. It’s an FYI conversation only – they don’t need to, nor do we suggest, that they raise the conversation with their team members. Your leaders and managers simply need to know that employees are free to discuss their pay and conditions and they can’t impose any restrictions on these conversations.
The reality is that the gender pay gap in Australia currently sits at 14.1% or $263.90 per week. This means that women are more likely to struggle financially now and when they retire as this impacts superannuation as well. We are not suggesting that everyone deserves to be paid the same to avoid trouble – you have the right to assess individual circumstances that will determine what you pay your people outside of Awards and other such remuneration instruments. You just need to be aware that you may be asked to justify the differences from disgruntled employees and it may cost you talented employees if you don’t have valid grounds.
There are a lot of changes to be across under the Industrial Relations Reform and as outlined above, we are going to take you through them all in the coming weeks, however the topic of pay secrecy has really captured considerable attention. If you have any questions or concerns about how this change impacts you or your business, we are here to help as always.
