New Zealand businesses urged to prepare for pay secrecy law

New Zealand businesses are being advised to prepare for potential changes to workplace rules surrounding pay secrecy as the Employment Relations (Employee Remuneration Disclosure) Amendment Bill advances through Parliament.

The bill seeks to prohibit employers from including pay secrecy clauses in employment contracts, which currently prevent staff from discussing their remuneration. Should it pass into law, employees would be free to speak openly about their pay without risk of adverse consequences from their employer. The National Party has indicated ongoing support for the legislation, increasing expectations that it will be enacted.

Pay transparency push

According to Sanam Ahmadzadeh Salmani, Employment Counsel at Employment Hero and workplace law commentator, the proposed law focuses on greater pay transparency and addressing wage gaps.

"The legislation is designed to promote greater pay transparency and equality, helping to identify and address unjustified pay disparities. While it's a welcome change that will bring New Zealand in line with countries that have implemented similar measures, such as Australia and the UK, employers should take proactive steps now to prepare for if the Bill passes," said Sanam Ahmadzadeh Salmani.

The objective of the bill is to create an environment where employees can more readily compare pay, understand the criteria used to set remuneration, and highlight unexplained pay differences.

Advice for employers

Employment Hero has advised that employers can benefit from acting ahead of the legislative changes by revising their internal practices. Ahmadzadeh Salmani elaborated on the potential benefits and necessity of pre-emptive measures.

"This is an opportunity for employers to drive better pay transparency and better outcomes for both businesses and employees. Aligning with the legislation will not only ensure compliance if and when required but can also improve employee satisfaction and retention. Employees want to know they're being treated fairly and businesses that embrace this change will likely see stronger engagement and loyalty.

"By preparing and making any changes before the Bill passes, employers will be on the front foot and can avoid being caught out later down the track," added Ahmadzadeh Salmani.

Ahmadzadeh Salmani outlined three key steps that employers should take now: conduct a pay review, review employment contracts, and draft clear explanations of pay determination.

Pay review

Addressing the first recommendation, Ahmadzadeh Salmani said:

"Start by reviewing your current pay structures – look for any discrepancies and understand the reasons behind them – whether it's due to role differences, experience or something else. Being proactive here will help you not only stay compliant, but to spot payroll red flags early," advises Ahmadzadeh Salmani.

Contract reviews

The second step involves revisiting the language used in existing employment agreements:

"Employers should also review employment agreements for any clauses that restrict pay discussions. These might not be labelled as 'pay secrecy' and they could be buried under general confidentiality or remuneration clauses. Having a clear plan of what needs updating now puts you in a better legal position once the Bill is passed," adds Ahmadzadeh Salmani.

Clear communications

The third recommendation is to improve pay-related communications with staff:

"Transparency doesn't stop at removing secrecy clauses. Employers need to be ready to explain how pay is determined and what data or criteria is used, how performance factors in and how employees can progress. This builds trust and reduces confusion or resentment," she adds.

The Employment Relations (Employee Remuneration Disclosure) Amendment Bill, if enacted, would bring New Zealand into greater alignment with jurisdictions such as Australia and the United Kingdom, both of which have implemented measures relating to salary transparency in employment contracts.

Employment Hero has made free resources available to businesses in New Zealand to assist in understanding employment law updates related to pay transparency and compliance requirements.