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In New Zealand, unlike in some other jurisdictions, there is no specific legislation that addresses pay secrecy. However, employees have the right to discuss their wages with others if they choose to, and any clause in an employment agreement that prohibits an employee from disclosing their own pay information to another person may be considered to be in breach of the Employment Relations Act 2000.

While pay secrecy is not specifically legislated against, it is important to consider the implications of such clauses on workplace culture and the potential for discrimination. In New Zealand, the principle of good faith underpins the employment relationship, and this includes being transparent and communicative about matters that affect employees, which could extend to pay information.

So, while pay secrecy clauses are not common in New Zealand, their existence and legality can be complex. It’s crucial to consider whether such clauses align with the values of your business and the legal framework within which you operate.

Pay secrecy can contribute to a lack of transparency and may exacerbate issues such as the gender pay gap. It’s important to weigh the potential disadvantages against any perceived benefits.

If you’re considering the role of pay secrecy in your employment agreements, it’s essential to understand the legal and cultural context in New Zealand.

Continue reading to gain a deeper insight into pay secrecy and its implications for your business in New Zealand.

What Are Pay Secrecy Clauses?

Pay secrecy clauses, if present, would typically restrict employees from discussing their remuneration with their colleagues. However, in New Zealand, such clauses would need to be carefully considered in light of the Employment Relations Act 2000, which promotes good faith and transparent employment relationships.

While not common or specifically addressed in New Zealand law, employers should be cautious when considering the inclusion of pay secrecy clauses in employment contracts.

Internationally, there has been a move towards greater pay transparency to combat discrimination and empower employees. For example, in countries like the United States and the United Kingdom, there are legal provisions that support pay transparency and prohibit pay secrecy clauses.

New Zealand has made strides in addressing the gender pay gap, particularly in the public sector, through initiatives such as the Gender Pay Principles. These principles encourage transparency and aim to eliminate gender pay gaps.

While pay secrecy clauses might resemble confidentiality clauses, it’s important to distinguish between protecting business-sensitive information and restricting employees’ rights to discuss their own pay.

What Are The Disadvantages Of Pay Secrecy Clauses?

Before introducing pay secrecy clauses into your New Zealand business, consider the potential disadvantages, such as contributing to workplace inequality and undermining the good faith principle in employment relations.

1. Pay Secrecy Can Lead To Workplace Inequality

Pay secrecy can foster both actual and perceived inequality within the workplace.

Actual inequality may occur if pay secrecy is used to conceal unfair pay differences between employees performing the same role.

Perceived inequality can arise when employees suspect that pay secrecy is masking unfair pay practices, even if this is not the case.

For New Zealand businesses, fostering a culture of transparency and fairness is key to maintaining a positive reputation and adhering to the principles of good faith in employment.

Employees in New Zealand may expect pay equity, particularly given the country’s efforts to close the gender and ethnic pay gaps. Concealing pay information can lead to mistrust and dissatisfaction among employees.

Pay secrecy can also perpetuate systemic issues such as the gender and ethnic pay gaps, which are areas of ongoing concern and focus in New Zealand.

Considering the impact on the gender pay gap:

• In the New Zealand public sector, where efforts towards pay transparency are more pronounced, the gender pay gap has been decreasing.
• In contrast, the private sector, which may have less transparency, can sometimes show a wider gender pay gap.
• It is reasonable to suggest that pay secrecy could contribute to these disparities.

As such, there is a push towards pay transparency in New Zealand to address and eliminate these inequalities.

2. Pay Secrecy Can Decrease Motivation

Pay secrecy may not only lead to assumptions of inequality but could also dampen employee motivation and job satisfaction.

When employees are uncertain about the fairness of their remuneration, it can negatively impact their engagement and productivity.

Employees often gauge their value to a company by comparing their rewards to those of their peers. Pay secrecy can obstruct this comparison, potentially leading to decreased motivation.

3. Pay Secrecy Negatively Impacts Employee Culture

Employee culture, particularly in small and medium-sized New Zealand businesses, is crucial. Pay secrecy can create distrust and negatively affect the workplace environment and the business’s reputation.

Are There Any Advantages Of Pay Secrecy?

While there may be perceived advantages to pay secrecy, such as maintaining organisational control and reducing conflict, these need to be balanced against the potential for creating a culture of mistrust and inequality.

1. Pay Secrecy Can Create Organisational Control and Less Conflict

Some businesses may believe that pay secrecy prevents conflict by avoiding discussions about pay disparities. However, this approach can be at odds with the value of transparency in New Zealand’s employment culture.

2. Pay Secrecy Can Help Protect Employees’ Privacy

While pay secrecy may protect individual privacy, it’s important to consider whether this outweighs the benefits of transparency and the potential for fostering a more equitable workplace.

3. Pay Secrecy Gives The Employer An Advantage in Salary Negotiation

Employers may feel that pay secrecy gives them an upper hand in salary negotiations, but this must be weighed against the ethical considerations and the potential for perpetuating pay disparities.

So, What Is The Alternative?

Pay transparency is the alternative to pay secrecy, where employees have clear insights into pay structures and can ensure they are being remunerated fairly.

Adopting pay transparency can enhance your business’s reputation, contribute to closing the gender pay gap, and support a culture of fairness and respect.

Conclusion

While pay secrecy is not a common practice in New Zealand, it’s a topic that requires careful consideration in terms of legal compliance and workplace culture.

When deciding on pay secrecy or transparency for your business, it’s important to consider both the legal implications and the impact on your employees and company culture.

If you have concerns about pay practices, consider consulting with Employment New Zealand for guidance. For any legal inquiries or assistance, feel free to contact us at 0800 002 184 or [email protected] for a free, no-obligations chat.

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