Pay transparency in Australia: What employers need to know

Money is a controversial and personal topic – it forms the backbone of our lives, adds a numerical value to our presence in society, and can affect how we interact with others. It’s such an important part of life and yet speak to any etiquette expert and they’ll tell you, it’s not a dignified topic to include at the average dinner party.

Is that really the case though? And more importantly, is secrecy around money holding us back?

Those questions have been reverberating around the world of employment, as greater calls for transparency around pay and salaries have gradually been appearing in Australian news. Employees are beginning to wonder if the old way of keeping quiet about how much they’re taking home each month has actually been affecting their financial success.

So today we’re going to ignore the etiquette experts and talk about something taboo. Let’s discuss pay transparency – what it looks like in reality, whether employers should consider it for their business, current Australian legislation and the potential of a candid future about all things money and work.

The origins of pay secrecy

History, they say, is written by the victors. The culture around keeping our salaries a secret is a great example of that – the benefit of salary secrecy has always lain primarily with the employers and those in charge of the purse strings. After all, if their employees know how much their colleagues make, they could have a useful bargaining chip in salary negotiations. It could also lay bare potential discriminatory practices, malicious or unconscious, that could land the company in hot water.

Then, of course, general cultural factors have led to salary secrecy too. Particularly for older generations, open discussions of money and salary may be in conflict with the values that they were raised with. There could also be feelings of shame, or affected self worth, that put employees off sharing their take-home pay.

All those factors have contributed to salary secrecy, but it’s also a turn against those factors that have led to a call for openness.

A move to openness around pay

We’ve seen an increase in people calling for greater pay transparency in Australia. Whether they’re trying to build greater pay equity in the workplace or are job seeking with no visible salaries in sight, Australians are asking companies to be more open about the salaries they offer. That may include sharing salary bands across the business, putting salary expectations on job ads and promoting open conversations about salary reviews and changes.

That said, despite discussions we’re still far from an overnight change. Personal finance website Finder surveyed more than 1000 Australians recently and just over three-quarters felt they couldn’t talk openly about their salary. The research found that men and younger workers were more likely than women and older workers to feel comfortable broaching the subject.

The benefits of pay transparency

The calls are loud but they’re not unanimous – yet. For pay transparency to become more widespread and culturally acceptable, all those involved in employment need to see the benefit, and that includes employers. There are a few benefits out there that Australian employers should seriously consider.

It demonstrates a commitment to pay equity and ending the gender pay gap

The data speaks for itself – deliberate or not, discriminatory pay practices exist. A recent gender pay gap report in Australia revealed that a woman is paid, on average, $18,000 less than a man over a year.

For those in the disabled community, the median gross personal income of people with disability is less than half that of people without disability. And while there’s precious little data when it comes to pay equity by race in Australia, Aboriginal and Torres Strait Islander people are also paid less compared to non-Indigenous Australians.

Reducing pay secrecy will reveal where bias and discrimination has affected the process, and allow companies to remedy it. If a company is serious about showing commitment to inclusion, salary transparency should absolutely be one of its first steps. An issue cannot be fixed if it is kept in the dark, and making strides to fix any pay disparity will show that an employer is serious about being a fair workplace for all of their team.

It improves trust and engagement

In being open about salaries, employers can take steps to show how pay levels are set by skill and experience level. This is a critical way to demonstrate their credentials as a fair employer working against bias. As a result, it can improve employee trust and engagement in the organisation. Employees are likely to feel happier about their salaries if they know and understand how the number on their payslip was reached, and how it fits into the wider team.

Getting rid of pay secrecy can also be helpful in driving performance levels in a team. Just as proactive HR teams set out clear job descriptions to give employees targets to meet if they want to move up the ladder, setting clear salary bands can help them understand the value of each role. Working hard for a promotion can become a whole lot more appealing if an employee can see exactly where they could financially benefit too.

It can give companies a competitive edge for talent

If you’re searching the market for the best and brightest to join your team, you may want to consider being transparent about your salaries. It may just net you your next best hire.

Why? As the cost of living continues to bite, Australian employees are asking for more from employers when it comes to salary, and they’re willing to move to get it. According to Employment Hero's Talent Insights Report, 51% said that they would accept a role in another organisation if it meant a salary increase. If you’re hiring with a competitive pay package on offer, it’s probably time to shout it from the rooftops. You could end up with a lot more interested parties.

Recent legal changes to pay transparency in Australia

Those benefits are important for employers to consider, but it’s also worth noting that whether they’re in favour of pay transparency or not, legislation may force their hand. The Australian Government has made key legislative changes in the last few years around salary transparency, and there could be more to come.

A ban on pay secrecy clauses in employment contracts

As of 7 June 2023, pay secrecy clauses have been banned in employment contracts, meaning that employers can’t force employees to keep their pay confidential. It was all part of the “Secure Jobs, Better Pay Bill” reform package, and was primarily aimed at reducing the gender pay gap.

Through this ban on pay secrecy clauses, employees and future employees have the right to share (or not share) information about their pay, or their employment terms and conditions required to work out their pay. They can also ask other employees with the same or a different employer about their pay without any negative repercussions.

This means that an employer can’t take adverse action against an employee because of these rights.

This legislation applies to employees with:

• Employment contracts that were entered into on or after 7 December 2022, or
• Employment contracts entered into before 7 December 2022 where the contract doesn’t include pay secrecy terms that are inconsistent with these rights.

Public registers for gender pay gaps

Changes to the Workplace Gender Equality Act 2012 were passed by parliament in March 2023, which made previously confidential data on earnings public this year. Around 5000 leading Australian companies have been providing the Workplace Gender Equality Agency (WGEA) with pay data for years, but those are now being published for all Australians to see. With that information, gender pay gaps are being highlighted for companies who employ over 100 staff.

This change lends greater volume to the calls for salary transparency, and places more pressure on employers to be open about what they pay their teams.

What Australian employers should consider for their business

While the benefits to pay transparency are there, many employers may still be reluctant to make the move to complete openness – and that’s fair enough. It’s a big one. However, there are some steps we’d definitely recommend you make, regardless of your stance. These steps will also help your company should pay transparency become mandatory in the future.

Effective salary benchmarking

As mentioned earlier, employees are asking more of their employers when it comes to salaries. Money talks, particularly in a cost of living crisis. With that in mind, we’d highly recommend that employers start to incorporate salary benchmarking when working on their business strategies, as well as when they conduct periodic pay audits.

We know everyone is feeling the economic pressure right now, but salary benchmarking is an important way to ensure that you remain a competitive employer in the market, and it can support you in budgeting for talent. It helps you ensure that you’re paying your team fairly and equitably too.

Check out our complete guide to salary benchmarking here, or try out our new Salary Insights tool.

Savvy compensation management

Thinking beyond salaries on their own, carefully managing and considering your compensation packages will also allow you to retain employees and become a top employer. That means considering what benefits you offer your team, as well as any performance incentives. Offering a wide-ranging compensation package also helps you tick more boxes in what an employee is looking for from their employer, beyond their take-home pay.

We’ve got a guide on compensation management to get you started.

Salaries on job listings

If you complete the other two steps, then this one in theory should be an easy one. Effective salary benchmarking and compensation management will make your offering competitive – and if it’s competitive, you may as well show it off in the market with salaries on job listings.

In turn, you might find it improves the quantity and quality of candidates. A recent SEEK survey found 87% of respondents believed advertising pay was important or extremely important. Three-quarters of respondents said they were more likely to apply for a job that listed a salary range.

Introducing pay transparency is just the start – we’re here to help you become an employer of choice.

The calls for pay transparency aren’t going away, and Australian employers should expect greater scrutiny around what they offer their teams. If you’re keen to stand out from the crowd and become an employer of choice, then reach out to our team at Employment Hero.

Our platform offers a heap of benefits and features that enable you to support your team. From building a high performance culture to improving employee engagement, we’ve got everything you need to manage your people effectively. We also have a Salary Insights tool to help you benchmark salaries and stay on top of your compensation packages.

And if you’re looking for top talent with the right fit for your business, check out SmartMatch by Employment Hero. It’s an AI-powered tool that connects you with great candidates instantly, and could save you up to 80% on hiring costs.

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Disclaimer: The information in this article is current as at 18 July 2024, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and to seek professional advice before making any decisions or relying on the information in this article.