Shhhhhhhh! New pay secrecy rules: What employers need to know

Summary

New pay secrecy terms were inserted in the Fair Work Act 2009 (Cth) (FW Act) from 7 December 2022, that will have a significant impact on the way employers handle remuneration and terms of employment for their employees.

These new sections aim to give employees more rights and transparency when it comes to their pay and employment conditions and are designed to increase gender equity, by allowing employees to discuss (and presumably compare) salary information.

More detail and key dates

Under these new sections, eligible employees have the right to disclose (or not disclose) any information regarding their remuneration and terms of employment that are reasonably necessary to determine remuneration outcomes. This includes the number of hours worked, and any other conditions that may be necessary to determine remuneration outcomes. Additionally, employees will also have the right to ask other employees about their remuneration and employment conditions.

Pay secrecy terms (often found in the definition of “confidential information”) in employment contracts that are issued or amended from 7 December 2022 are now unenforceable. From 7 June 2023 however, including pay secrecy terms in employment contracts or written agreements will itself be a breach of the FW Act and could lead to the imposition of civil penalties (fines) and Court proceedings.

What employers should do

With these new pay secrecy terms in the FW Act, it is essential that employers review their employment contracts and other written agreements (including rem review letters, promotion letters and potentially even deeds of release) and ensure they are compliant. Failure to do so could result in penalties and legal action from 7 June 2023.

Given these new provisions, employers should also ensure that HR and operational managers are trained on the new rules to ensure they do not seek to prevent eligible employees discussing their pay or otherwise engage in adverse action in breach of the FW Act. Employers may also wish to review their pay structures and confirm they have equitable remuneration arrangements within their organisations to ensure they remain an attractive employer and to mitigate the risk of discrimination claims.