Pay secrecy Q&A

Background

On 7 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) came into effect.

Pay secrecy is one of the amendments that took effect from 7 December 2022 and has grabbed the attention of many employers and employees. The government’s rationale behind the prohibition of pay secrecy is to allow employees to discuss their pay and hopefully enable employers to address any gender pay gap issues in the workplace.

The pay secrecy provisions result in the introduction of two new workplace rights protected by the general protections under the FW Act:

• a person can ask another person, even someone who is employed by another employer, what their pay is; and
• a person has the right not to disclose their pay if they are asked.

What do these changes mean for business?

Contracts should be reviewed, and any pay secrecy clauses removed from contract templates. A 6-month transitional period (or ‘grace period’) is currently in place until 6 June 2023.

From 7 June 2023, pay secrecy clauses will be prohibited and an employer may face civil penalties if they are found to have pay secrecy clauses in their employment contracts.

Contracts issued before 7 December 2022

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

General protections

It has been common for employers to discourage employees from discussing their pay with one another. The introduction of these amendments means that this practice cannot occur going forward. Employees have a workplace right to disclose or not to disclose their pay.

An employer who prevents a person from disclosing their pay or acts against a person who chooses not to disclose their pay may be at risk of receiving a general protections claim.

What should employers do to prepare for these changes

As noted above, pay secrecy took effect from 7 December 2022. The penalties for non-compliance come into effect on 6 June 2023. Employers should use the grace period wisely by reviewing and removing any pay secrecy clauses in any employment contract templates.

Guidance

The Fair Work Ombudsman has released some guidance on pay secrecy:

Pay secrecy - Fair Work Ombudsman