Pay is now open for discussion – What does this mean for you?

Discussing pay in the workplace has long been considered taboo, and in some cases, it may even be in breach of an employment contract but following the Albanese Labor government’s Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, workers will now be able to discuss how much they are paid.

As employment lawyers, we recognise that the Act brings with it some of the most significant changes to workplace laws over the past decade, including a prohibition on pay secrecy. HR professionals, who will be at the forefront of these monumental changes, will need to consider the administrative and practical impact of these changes – from considering amendments to contract for compliance and preparing to have open and transparent conversations about pay and terms and conditions of employment.

What do the changes mean?

The Act amends the Fair Work Act 2009 (Cth) and enables employees to discuss their pay and terms and conditions of employment which affect pay outcomes.

Essentially, the change puts the onus on an employee to decide whether or not they will engage in discussions regarding their pay and conditions of employment. An employer can no longer bar an employee from having this discussion by including a pay-secrecy clause in their employment contract.

The impact on the workplace will vary from organisation to organisation, but the information is likely to be used by employees when they assess their pay and terms and conditions of employment and compare them to other employees in the same workplace or industry.

The changes make the stance on pay secrecy abundantly clear. Discussing these topics now constitutes a workplace right, which means it is unlawful to take adverse action against employees for discussing their pay.

When do the changes apply?

On 6 December 2022, the Albanese Labor government’s Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 received royal assent.

While the pay secrecy provisions commenced on 7 December 2022, some changes are subject to a transitional period which ends on 6 June 2023 as businesses make the necessary changes to remain compliant with the new legislation.

After 6 June 2023 however, it will be illegal for employers to enter contracts which contain pay secrecy clauses, with potential civil penalties for contravening these requirements.

Why are these changes so significant?

The Workplace Gender Equality Agency states that Australia’s national gender pay gap is currently at 14.1 per cent and that, on average, women earn $263.90 per week less than men.

The removal of pay secrecy clauses supports the objects of the Fair Work Act in promoting gender equity. Importantly, however, these changes also interact with other legislative changes, such as the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022, which brought significant changes to the Sex Discrimination Act 1984 (Cth), including a positive duty to eliminate sex discrimination.

The Albanese Labor government has been clear that the intent behind all of the changes is to address issues of discrimination in the workplace and to encourage, in particular, female participation and safety in the workforce.

The Explanatory Memorandum to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 for example, states that the prohibition on pay secrecy facilitates the removal of gender discrimination by enabling women to confirm that they are not being paid less than men for doing the same job.

These changes also create greater transparency and accountability for employers to eliminate discrimination against women through remuneration models and human resources practices.

What are employers and HR professionals doing because of these changes?

Administratively, employers and HR professionals will need to consider amendments to their employment contracts to ensure their compliance with the new laws, but HR professionals should also be preparing for the conversations that may arise as a result of the abolishment of pay secrecy clauses.

In preparing for more open discussions about pay and terms and conditions of employment, employers may consider their remuneration models and human resources practices to address transparency around pay.

The wider implications have yet to be seen but how these models and practices support or hinder compliance with a business’ positive obligation to eliminate sex discrimination will be at the forefront of every HR professional’s mind.

Laura Croce is an employment lawyer and Sapphire Parsons is a senior associate at Macpherson Kelley.

Note from the editor: This article has been prepared for informational purposes only and is not to be construed as advice (legal or otherwise).