The secrecy around salaries: How to address pay transparency

It’s one of the last taboos of the workplace: asking a colleague what they earn. Yet secrecy around salaries not only leads to gossip and griping around the water cooler, it’s also a big factor behind discrimination and the gender pay gap.

Pressure on the big financial institutions to address this has led to the recent announcement by Westpac and the Commonwealth Bank that they are to scrap secrecy clauses in new and existing employment contracts – bringing them in line with ANZ and NAB.

Julia Angrisano, National Secretary of the Finance Sector Union of Australia said greater transparency would only help to improve workplace culture.

“This announcement by the banks will not in and of itself drive down the 26.9% gender pay gap in our industry but it is certainly an important first step.”

Crucially, it also means that tens of thousands of employees no longer have to worry about disciplinary action or even facing the sack for talking about their wages. Previously, this kind of loose talk would have been viewed as a breach of contract, says Aaron Goonrey, workplace relations and safety lawyer at Lander and Rogers.

It is also a way of ensuring an employer abides by the law.

“Greater visibility about wages and allowing employees to discuss with one another their remuneration may assist in removing unjustified, and potentially unlawful, pay discrepancies,” added Goonrey.

Secrecy clauses in employment contracts are banned in the US and the UK in an attempt to decrease discrimination and disempowerment of employees. But it doesn’t necessarily make people more open about what they earn, says Roxanne Calder, founder of recruitment agency EST10.

The fact is that talking about money is, for many people, an uncomfortable experience.

“It’s intensely personal and attached to our sense of worth. Religion, politics, and money are society’s taboo topics,” said Calder. Getting people to feel more comfortable about discussing money will depend upon a company’s overall culture.

“If the culture is already one of full transparency, providing a strong sense of psychological safety, then discussions on compensations are likely expected,” added Calder. “An open approach to wages and compensation can make employees more productive, satisfied and collaborative and it gives a company a competitive edge, attracting diverse talent drawn to where they know they will be paid fairly.”

Jo Alilovic, director at 3D HR Legal, told HRD that a culture of secrecy is tacitly encouraged by bosses who hate people talking about wages “because they don’t want to be found out for being unfair, they don’t want people getting ideas about asking for pay rises and leading to them having to have uncomfortable conversations, or perhaps because they just think it is a private matter and shouldn’t be discussed”.

Whatever the reason, it’s counterproductive to good working relationships.

“By sharing openly and honestly about how remuneration decisions are made, employees will have increased trust in their employers. The extreme alternative, creating a secretive process around pay rates and their changes is more likely to generate toxicity in the workplace culture. In truth, the best option is usually somewhere in the middle,” says Alilovic.

But it’s not just employers who resist public discussion around wages and compensation, some employees don’t like what they consider a private matter being made public. This is particularly the case when the factors that influence pay are not made clear – allowing resentment and jealousy to build among those earning less.

While it can be argued that someone doing exactly the same job as someone else should be earning the same wage, it doesn’t always work out like that, according to Alilovic.

Remuneration policies can be based on a number of factors, such as performance, tenure, experience and knowledge.

“An employee starting in a new role could be less knowledgeable and efficient in performing their duties compared to someone who has been doing the role for several years. Conversely, a new employee might have skills or insights gained from elsewhere that they are bringing to the role,” explained Calder.

Clarity around a remuneration process reduces the headache for everyone. “It makes decision making easier for employers and leads to less enquiries from employees when they understand what they need to do in order to justify/obtain a pay rise, less gossip and undercurrents of dissatisfaction as people don’t need to speculate as much about their colleagues' pay rates,” added Alilovic.

Advocates for greater wage transparency to tackle the gender pay gap emphasise that if discrimination or unfair pay practices are present, ending secrecy leaves nowhere for a company to hide.

Take Denmark, for example, where the government required mid-sized companies to share information about the pay gap between men and women. Soon after, data showed the gaps at those companies grew smaller.

And while there is no single solution to ending workforce discrimination – pricking the secrecy bubble around remuneration can only help to clear the air.