Big banks ditch pay secrecy clauses

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Tens of thousands of employees at the Commonwealth Bank and Westpac can now freely discuss their salaries with other colleagues without fear of breaching their contracts.

Both banks scrapped pay secrecy clauses in the past two weeks, which brings them in line with ANZ and NAB.

The Commonwealth Bank was saving as much as $500 million each year by "enforcing pay secrecy and perpetuating the gender pay gap", according to the Finance Sector Union, which has been conducting a campaign seeking reform in the area.

westpac cba scrap salary privacy clauses in contracts

The Westpac initiative is a step towards eliminating bias and supporting equality for women inside the organisation, says Christine Parker, group executive for human resources at Westpac.

"More broadly, the past two years has seen increased visibility and awareness of important issues including gender equality, women's economic security and women's safety. There is more to do, but we're encouraged by the current conversations and willingness to engage."

How common are pay secrecy clauses?

While the major banks have now moved to scrap secrecy provisions, plenty of businesses continue to have them on their books because pay secrecy clauses are not illegal in Australia.

Michelle Brown, Professor of Human Resource Management at the University of Melbourne, says that because of the nature of the subject, it is hard to gauge just how prevalent they are.

"We do know that pay secrecy is a lot more prevalent in the private sector than it is in the public sector. Many businesses in the private sector have some sort of formal or informal policy of pay secrecy," she told Money.

"It's important to note that a lot of the secrecy occurs around the add-ons. For example, people might have an enterprise agreement, but there may be some level of secrecy around their incentives or bonus pay."

Pay equity and shifting attitudes

At the heart of calls for greater transparency are issues of fairness and pay equity - particularly, as Westpac acknowledged, in relation to improving pay equality for women.

"Secrecy contributes to the gender pay gap," says Professor Brown.

"What tends to happen is that men often get paid more and women get paid less. For a long time, the argument was that women were just bad negotiators, but recent studies have found that women ask for pay rises just as frequently as men - they just don't get the pay rises.

"We know that employees really want to be treated fairly, and the only way you can know this is by having comparable information. You can assess if you're being treated fairly if you know the pay of someone doing similar kind of work."

Professor Brown also believes that, more broadly, the idea that conversations about money being taboo are changing.

"A common assumption is that nobody wants to talk about pay, but what you see is that young people are actually quite comfortable doing so."

"There's really stuff coming out saying that young people are interested in sharing information because they understand that it's power - both in terms of monitoring employers' decisions and in making sure they get access to their entitlements."

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.

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