Continued lack of pay transparency to spell trouble for Aussie employers

Despite changes to pay transparency laws, employees are still being left in the dark when it comes to remuneration at their company. Here’s why HR managers and other C-suite executives should look to change this going forward.

Late last year, the Australian government passed the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, enacting changes to a number of existing rules and introducing a range of new workplace laws.

Key to the changes was an end to pay secrecy, meaning employees are no longer legally prohibited from disclosing or talking about their pay to each other.

The amendments also invalidate any contractual clause in an existing contract that prevents employees from discussing pay and prohibit employers from including such clauses in new employment contracts.

However, despite the abolition, some employers still have some way to go before there is pay transparency within their organisation.

According to Hays’ FY23–24 Salary Guide, in Australia, over one in four organisations are not transparent with employees about how salary levels and increases are set.

Breaking it down by sector, the property, marketing and digital, and defence industries fared the worst. Forty-five per cent of those in the property space and the same amount in the marketing and digital space said their organisation is not transparent with employees about salaries. Meanwhile, 41 per cent of those in the defence space said the same.

Twenty-seven per cent of those in human resources said their organisation is not pay-transparent.

On the opposite end, 11 per cent of those in policy and strategy roles, 16 per cent of those in contact centre roles and 18 per cent in education roles said their organisation is not transparent about salaries.

Employers would benefit from ensuring pay transparency was up to better standards, according to Hays, which noted it’s a key factor to consider in one’s retention strategy.

Employees who feel as though their employer is transparent about salaries are 1.42 times more likely to stay at an organisation, it found.

“We also found that those who felt they could challenge team bias without consequence were 1.74 times more likely to stay,” Hays said.

“These psychological safety indicators can be correlated with organisations that reported salary transparency, learning and development programs and DE&I strategies in place.”

How to increase pay transparency

Employers and HR managers alike need to be wary about how transparency of wages can impact their reputation, the morale of staff and relationships between employees, according to global law firm Herbert Smith Freehills (HSF).

“You will need to review your template employment contracts and remove pay secrecy provisions.

“Consideration should be given to whether any changes are required to remuneration as a result. It is also an opportune time to consider how your organisation is managing gender pay equality more generally,” HSF said.

The firm’s summary of the Secure Jobs, Better Pay Act changes highlights how the abolishment of pay secrecy instils a “positive ability for employees to disclose (or ask someone to disclose) their remuneration or terms and conditions of their employment that are reasonably necessary to determine remuneration outcomes”.

“This positive ability will be a ‘workplace right’ for the purposes of the general protections provisions …,” it said.

As mentioned above, the amendments mean there will need to be changes made to any contracts that prohibit employees from discussing their pay.

“As such, employers should urgently review their template contracts of employment. More broadly, employers may wish to review their remuneration policies and company messaging around remuneration,” HSF said.

“An employer may be liable for a civil penalty where they include a pay secrecy clause in a new employment contract.”