Is the tide turning on pay secrecy?

Companies are increasingly challenging the long-established practice of pay secrecy, allowing their employees to openly discuss remuneration in a step which could help to narrow the gender pay gap.

In April, Westpac became the first Australian organisation to scrap pay secrecy clauses in contracts across its workforce, and other organisations including PwC, NAB and Commonwealth Bank have since followed suit. It’s part of a growing global trend. In 2018, Iceland introduced a world-first policy requiring companies to prove that they pay men and women equally for a job of equal value, with fines for those that fall short. 

“Will pay transparency help with reducing Australia’s massive gender pay gap? Yes, I think it will,” says Danielle Dobson, author of Breaking the Gender Code.

“It helps organisations to be more proactive in terms of how they structure compensation, and it empowers employees when it comes to review time. But it cannot be a tick box exercise: it must be part of a much larger plan.”
 

Australia’s gender pay gap currently stands at 13.8 per cent. According to the Workplace Gender Equality Agency, this translates to women in full-time work earning an average of $255.30 less per week than their male counterparts. It has hovered between 13 per cent and 19 per cent for the past 20 years. In Europe, the gender pay gap is 14 per cent and the European Union recently proposed making pay transparency a binding measure for member states. 

The financial and insurance services sector has been slow to address pay inequality but is starting to catch up. The gender pay gap reduced from 23.6 per cent to 20.6 per cent over the past year, taking it above industries such as professional services and health care. 

Westpac group executive of human resources, Christine Parker, says scrapping pay secrecy clauses was “the right thing to do”, and reflects “contemporary employee relations”.

The move is part of fulfilling Westpac’s commitment to gender pay equity, she says.

“We did not make the change as a way of achieving gender pay equity, but it's part of the totality in terms of people understanding how they are being paid, and being able to have open conversations about it,” she tells Westpac Wire.

“As an example, if someone were to find out that their equivalent male Marketing Manager was being paid more, they could go and discuss it with their leader. Maybe the person came in with more experience. Their leader can explain what they need to do to get the same pay. Or it could identify a gap that we didn't realize existed.”
 

However, Parker does not believe that the change will make conversations about pay any more common. 

“I don't think it will make a huge amount of difference in terms of what actually happens,” she says. 

“In reality, the people who discuss their pay will continue to do so, and 99 per cent of the people who didn’t discuss it, still won’t want to discuss it. It’s more about changing the perception. I think that it’s really important as an organisation not to be seen as gagging discussions about pay.”

In Parker’s 16 years at the bank, no employees had ever been disciplined over breaching pay secrecy, she says.  

Furthermore, Westpac had already done the groundwork to ensure gender pay equity existed at an aggregate level.

“When we complete our remuneration reviews each year, we do a full, detailed review of every division and level, and like-for-like roles and like-for-like experiences in terms of pay grades. Where there are gaps, we address them. We report that to the board.”

She says that there have also been “deep dives” over the last 12 months to investigate whether there were any pockets of difference. 

“Were those differences for the right reasons, such as someone being entry level? If not, we make commitments to close the gap. Technology was an area that we spent a lot of time focusing on and closing the gap,” she says.

WGEA has not stated a firm view on whether pay secrecy helps to eradicate the gender pay gap as the research is inconclusive, but acknowledges studies that have found it can help women better negotiate pay.

Athena Koelmeyer, managing director and principal at Workplace Law, believes that achieving gender pay equity is ultimately up to organisations. 

“As the employer, you know very well what you’re paying Sam and Samantha for the same job,” she says. “Lifting the lid on salary discussions is not the answer to the problem. The answer is for employers to pay people the same for the same job.” 
 

She also believes there are potential pitfalls if the transition isn’t handled thoughtfully.

“Employees may feel pressured to talk about what they're earning if someone asks them,” she says. 

“Conversations about money in the workplace are always awkward. Just because you can, it doesn't necessarily always mean should.”

She also thinks that there is the potential for resentment to breed, and that people will “vote with their feet if they don't feel they're being compensated sufficiently”.

Parker remains confident that the change will not deliver unintended consequences. 

“There's always work to do regarding gender pay equity because it's never static – things can change throughout the year. It's about ensuring that we've got all the right checks and balances in place so that if there are issues, we address them,” she says.