Prohibiting Pay Secrecy

The new laws will now act to protect employees from adverse action if they exercise their right to discuss (or not discuss) their remuneration with others.   The changes to the Fair Work Act 2009 have been introduced in the hope they will help to narrow the gender pay gap, reduce discrimination and increase wages.

New Employment Contracts
It is now unlawful to include a pay secrecy clause in a new contract of employment created on or after 7 December 2022 and the term will have no effect.  There is a transitional period of 6 months and after this employers who continue to include such terms in new agreements will be in breach of the prohibition.  Penalties may apply in these cases.

Existing Employment Contracts
Any existing Employment Contract which contains a pay secrecy clause will continue in effect until it is varied or updated or a new contract is entered into, after which time the clause will have no effect.

Recommendations
Employers should act to review all their employment contracts sooner rather than later to ensure they are not including these terms in any new agreements.  Failing to do this after the 7 June 2023 deadline could lead to penalties being issued.

Pay disparities between employees can be poorly understood between employees and can often take into consideration a range of factors, so it might be worthwhile adding a policy/procedure into employment handbooks to explain and be transparent about how remuneration is awarded at your workplace.

If you can introduce uniform pay structures tied to performance and KPI’s so that it is clear what employees need to successfully achieve to move to a higher remuneration rate, your employees may feel more secure in the knowledge that this is a fair process.

Fixed Term Contracts
The Govt has also changed rules around Fixed Term Contracts which are planned to come into effect on 6 December 2023.  Fixed term contracts are used where an employee is only engaged for a particular purpose or period of time and are often used in conjunction with training contracts, maternity/paternity leave positions, seasonal jobs etc.  The change means that Fixed Term contracts will be limited to two years (or two consecutive contracts – whichever is the shorter), for the same role.

If these laws are breached, the contract will still be valid except the expiry or end date will not be valid and the employee will be considered a permanent employee.  They will then become entitled to permanent employee entitlements such as notice of termination, redundancy payments, and unfair dismissal.

There will also be a new Fixed Term Contract Information Statement that will need to be provided to all employees.
The changes will only apply to new contracts entered into after the commencement of the legislation. However, any fixed term contract that was in place prior will be counted towards the two year limit.  Some exceptions will apply.