19 November 2015
What role might allowing employees to freely discuss their salaries play in closing the gender pay gap? That is the question that will be considered by a Senate inquiry into the Greens’ Fair Work Amendment (Gender Pay Gap) Bill 2015 (the “Bill”) over the coming months.
The Bill’s Explanatory Memorandum asserts that “when pay is set in secret by individual negotiation, women are at a disadvantage” and that “pay secrecy can help hide discrimination, unconscious bias and bad decision making”.
Australia’s gender pay gap currently sits at around 17.9% based on average weekly full-time earnings. Most would agree this is an issue that needs to be addressed; however, the idea of salaries being freely discussed in the workplace comes with other concerns for employers.
In theory, salary transparency has the potential to encourage productivity through competition if employees know that colleagues in similar roles are paid more than they are. However, this theory can only work in practice if employees’ pay correlates directly with employees’ performance. In reality, the factors that determine salary levels are multifaceted, dependent in part on market conditions, business performance at the time of employment, and the long-term value an employee is seen as adding to the organisation, for example.
In this context, discussions of salary between colleagues in the workplace may do more harm than good, by creating disharmony between employees. Additionally, such discussions threaten to place disproportionate emphasis on salary as the only indicator of an employee’s worth to an organisation. In fact an employer may show it values an employee’s contribution to the workplace in a number of ways, particularly when money is tight – for example, by providing:
- pathways for career advancement, skill diversification and training and education;
- flexible working arrangements; or
- longer term incentives, like share and bonus schemes.
Further, it is an organisation’s prerogative to keep its financial position confidential. Such confidentiality is essential if an organisation is to have the freedom it needs to make strategic decisions in the interests of long-term growth and success, to the ultimate benefit of all stakeholders.
This is not to say that, as a practical matter, an organisation’s position with respect to pay and finance should be shrouded in total secrecy. Sharing certain information with employees can help an organisation’s leadership team to keep everyone on the same page and geared towards achieving organisational goals.
It is clear that in assessing the viability of strategies to close the gender pay gap, there are complex considerations at play. Employers need not wait for legislative change to play their part, however. By identifying obstacles to gender equality at an organisational level, employers can help overcome them, and should work to ensure that employees are rewarded based on merit rather than personal characteristics.
 Workplace Gender Equality Agency, Gender pay gap statistics, available at <https://www.wgea.gov.au/sites/default/files/Gender_Pay_Gap_Factsheet.pdf>, 3.