New Zealand is moving towards greater pay transparency with amendments being recently passed to the Employment Relations Act. This brings fundamental changes to how employers might look to stop employees discussing their own pay.
The key changes
The most significant change is allowing employees to file a personal grievance if treated unfairly for asking about pay. This represents a major shift in workplace culture, where discussions about salary recorded in individual terms of employment have traditionally been discouraged or outright prohibited as being confidential.
Under the proposed amendments, employers will be required to review and amend any codes of conduct that currently make discussing pay grounds for disciplinary action. Workplaces currently include clauses in their policies or employment agreements that prevent disclosure of remuneration details. These clauses will become unenforceable once the legislation takes effect.
What this means for employment agreements
Employment agreements containing pay secrecy clauses will need review. Any provision that prevents employees from disclosing their own pay rates will no longer be enforceable. This doesn't mean employees are compelled to share their own remuneration – the choice remains entirely theirs. However, employers cannot prohibit, discourage, or penalise employees who choose to be transparent about their earnings.
The pay equity angle
The legislation represents another way to address pay equity issues. Historically, employers have been able to maintain pay disparities by relying on confidentiality provisions. Without these barriers, employees, especially women affected by pay inequity, may be better able to negotiate when they know what colleagues earn.
However, there's an important limitation to consider: while employees can ask others about their pay, there's no obligation for anyone to disclose this information. The legislation protects the right to discuss pay, but doesn't create an automatic right to access someone else's salary details.
The reality check
This creates an interesting dynamic in practice. While it promotes transparency, its success depends on employees choosing to share their pay details.
There's no guarantee that workplace culture will shift overnight, or that employees will feel comfortable discussing their earnings despite legal protection.
There's also a possibility that some employers might find creative ways around the spirit of the legislation. For instance, nothing prevents informal arrangements where bonuses or pay increases come with "gentlemen's agreements" not to disclose details to colleagues. While employers cannot formally prohibit such discussions, informal pressure could still exist.
Practical steps for employers
Review all employment agreements for pay secrecy clauses
Update codes of conduct and workplace policies
Train management teams on the new requirements
Consider whether current pay practices support increased transparency
Develop clear procedures for handling pay-related discussions and grievances
The key principle is that employees retain complete control over whether they disclose their pay information. Employers cannot prevent, discourage, or punish such discussions, but equally cannot force disclosure.
Looking ahead
These changes reflect a broader global trend towards pay transparency, with similar legislation already implemented in various jurisdictions overseas. While the practical impact will depend largely on how workplace cultures adapt, the legislation sends a clear signal that pay secrecy is no longer acceptable as a business practice.
For employers, the message is clear: review your policies now, ensure compliance, and consider how greater pay transparency might actually benefit your organisation through improved trust and fairness in compensation practices.
