Discussing salaries and remuneration is often a controversial and clandestine topic in the office. However, there has been a recent push towards greater pay transparency to allow for a more equal workplace in light of social and political changes concerning issues, such as the gender pay gap. This article will discuss whether an employer can enforce pay secrecy onto their employees, and what the potential advantages and disadvantages that having pay transparency can have.

The Legality of Pay Secrecy

The simple answer is: it is not illegal to discuss your pay. However, employers can restrict your ability to discuss your pay or remuneration within your employment contract. These clauses can be particularly common in industries where discretionary incentives are offered or where pay differentiates between employees based on performance.

Pay secrecy clauses have been banned in other jurisdictions, such as the United States and the UK, in order to reduce workplace discrimination. In 2015, Australia’s Gender Pay Gap Bill attempted to ban pay secrecy clauses, but it was unsuccessful. So whilst pay secrecy is still legal in Australia, it is important for businesses to make considerations based on their industry and business specifically, so it is important to seek personalised and experienced advice when making these decisions.

Advantages of Pay Transparency

As mentioned above, pay secrecy has been linked with actual or perceived workplace inequality. Actual inequality arises when businesses use pay secrecy clauses to unfairly differentiate the remuneration of employees based on discriminatory or unfair factors such as gender, ethnicity or age. Whereas perceived inequality occurs when employees assume that, due to the mere presence of a pay secrecy clause, that remuneration is unequal. Therefore, facilitating greater transparency can operate to quash any negative perceptions and demonstrate your business to treat all employees fairly.

Other advantages of pay transparency include:

  • Increasing employee motivation and job satisfaction;
  • Improve workplace culture;
  • Promoting flatter management structures; and
  • Improving the business’ reputation.

Disadvantages of Pay Transparency

Whilst there are clearly some advantages to abandoning pay secrecy clauses, these must be balanced with benefits that can come from enforcing pay secrecy in certain workplaces. These include:

  • Greater organisational control;
  • Less workplace conflict;
  • Protection of employee privacy; and
  • Maintaining greater employer bargaining power.

It is worth noting that pay secrecy will become more disadvantageous if competitors or the industry as a whole begin moving towards pay transparency, despite the advantages mentioned above.

How Etheringtons Solicitors can help

With over 30 years’ experience, Etheringtons Solicitors have a proven track record in providing tactical advice and representation in various contentious and non-contentious employment matters. Whether you are a business owner or an employee, our team are well placed to provide advice across a wide range of matters. If you or your business require further information in relation to pay secrecy, please contact us on (02) 9963 9800 or via our contact form here.