Job Advertisements and Pay Secrecy Clauses

On 6 December 2022 the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act) was enacted by Parliament which introduced significant changes to how employers are to engage with their employees and prospective employees. A summary of the primary provisions of the amendments can be found Here.

While the Act was enacted in December, the various sections in the Act have staggered commencement dates over the course of 2023. We will continue to provide our clients with detailed updates as and when each section commences. For now, two of the more significant changes that are now in force are detailed below.

  1. Pay Secrecy Clauses – 6 December 2022

As of 6 December 2022, the Fair Work Act 2009 was amended to provide employees with the right to discuss their remuneration and any other term or condition that would be reasonably necessary to determine remuneration. In short, from 6 December 2022, employers are prohibited from including pay secrecy terms in a contract of employment. The reasoning behind this is that the government wants to support all employees to determine whether they are being remunerated fairly and comparably.

We note that this will apply to existing and new employment contracts. Existing contracts that were entered into prior to 6 December 2022 will not need to be varied. Instead, the Act provides that the term will simply have no legal effect.

Employers entering into new employment contracts after 6 December 2022 will need to be cautious and ensure that a pay secrecy clause is not contained in the employment contract. Contravening this provision of the Act could result in the employer incurring a pecuniary penalty. As of January 2023, the penalty could vary from $16,500 to $165,000 per contravention, subject to the seriousness of the contravention.

It is important to mention that employees are not forced to disclose their remuneration, they simply now have a choice.

Further, the right of an employee to discuss their pay will constitute a workplace right. Consequently, employees will be protected from adverse action when attempting to exercise their rights on this issue.

  1. Job Advertisements – 7 January 2023

As of 7 January 2023, it is prohibited under the Act for employers to advertise positions of employment at rates of pay that would contravene the Act or a fair work instrument (e.g. an Award). The reasoning behind this is that the Migrant Workers’ Taskforce found that migrant workers are specifically targeted with jobs advertised at below minimum wage rates, which increases the risk that these workers will be underpaid once they commence work.

Accordingly, it is imperative that employers ensure they review the relevant Fair Work instruments that will cover a position of employment prior to posting an advertisement. Of importance, an employer will need to consider:

  1. The format in which the rate of pay is presented (i.e. annual salary, hourly rate etc.)
  2. The level of experience required in the position;
  3. The hours of work the employee will be required to perform;
  4. The days on which the employee will be required to work (i.e. weekend work may attract penalty rates);
  5. Whether they will be permanent or casual employees; and
  6. Relevant loadings or industry allowances.

Some practical considerations include:

  1. Ensuring that casual loading is mentioned if the position is casual;
  2. Taking care when offering flexible working hours, such as weekends, to deal with penalty rates;
  3. Referring to a salary to encompass all hours worked, without considering the annualised salary provisions of the relevant award;
  4. Ensuring that the business is aware of the relevant Award and the classification of the position under the Award.

This amendment is also a civil remedy provision meaning that if an employer contravenes the section, they will be at risk of incurring a pecuniary penalty.

Steps to take

To accommodate the new changes, employers should:

  1. Ensure that their employment contracts (and templates if they use them) do not contain pay secrecy clauses;
  2. Remove pay secrecy clauses when varying existing employment contracts;
  3. Review employee duties when posting job advertisements to ensure an employee is appropriately classified under a fair work instrument (i.e. knowing the Award and how it applies) and for Award free employees that they are receiving above minimum wage; and
  4. For Award based employers and employees, regularly review the Award rates of pay as they are updated by the Commission to ensure that their record of rates are accurate for jobs they are advertising for.

These changes can have a significant impact on businesses if not addressed or implemented correctly. If you wish to discuss any of the above or have questions relevant to your specific workplace, please contact our employment team on (02) 4927 2900.