For a long time, how much one’s colleagues earn has been a subject shrouded in secrecy. In a nation too often plagued by tall poppy syndrome, New Zealand workers can be hesitant to disclose how much bacon they’re taking home.
Yet times are changing. Statistics show that millennials are almost twice as likely as the generation before them to disclose their salary to colleagues.
For employers, this begs the question whether employees can be prohibited from disclosing their wage or salary. Currently, nothing prevents an employer from including a clause in an employment agreement requiring an employee to keep their pay to themself. However, this may be set to change.
In June 2022, Parliament’s Education and Workforce Committee released a briefing paper recommending that the Government consider restricting pay secrecy in employment agreements.
If the Government adopts this recommendation, New Zealand wouldn’t be the first country to do so. In December 2022, Australia passed law prohibiting pay secrecy clauses in new employment agreements and rendering existing pay secrecy clauses invalid. Similar laws are seen in the UK and some US states. Despite New Zealand’s relatively progressive legislative landscape, we seem to have fallen behind the eight ball on this front. As such, our view is that a ban on pay secrecy is not a matter of if, but when.
So, should employers be worried? Well, the rationale behind prohibiting pay secrecy is to promote pay transparency, which in turn can help iron out pay disparities. Studies show pay transparency particularly benefits women, not least Māori and Pacific women who are statistically disproportionately affected by the gender pay gap.
In essence, prohibiting pay secrecy helps employees identify if they are being underpaid for performing the same work as their colleagues, and gives them the information they need to seek equal pay from their employer.
While a ban on pay secrecy may result in more difficult conversations with employees, employers who pay equally performing staff the same wage should have little to fear.
Employers should also be aware that, even without the above changes, enforcing a pay secrecy clause, by way of disciplinary action, comes with risk. An employee may cite pay parity as their rationale for disclosure and thereby call into question the appropriateness of disciplinary action.
Successfully navigating pay transparency and parity is seldom without challenge, but doing so is crucial to maintaining a workplace environment that champions equity whilst also rewarding performance. If you require advice or assistance in this area, please get in touch with a member our specialist Employment Law Team.
