In Short
- Employees can now freely discuss their pay, and any clauses preventing this are unlawful from 27 August 2025.
- Employers must review employment agreements to remove pay secrecy and update broad confidentiality provisions.
- Pay transparency reduces the risk of discrimination and helps build trust in the workplace.
Tips for Businesses
Update your employment templates to ensure confidentiality clauses don't restrict pay discussions. Be proactive in revising agreements for both new hires and existing staff. Transparent pay practices not only ensure legal compliance but also improve morale, reduce risks of disputes, and help protect your business from personal grievance claims.
Employees in New Zealand are now free to discuss their pay openly, with new rules banning contract clauses that prevent such conversations. The Employment Relations (Employee Remuneration Disclosure) Amendment Act 2025 ('Amendment'), which came into force on 27 August, stops employers from restricting employee pay discussions. This article examines the significance of transparency regarding pay in the workplace and the implications of the Amendment for employers.
Pay Secrecy Clauses
A pay secrecy clause is a clause in an employment agreement that prohibits employees from disclosing their remuneration to others. Employers typically add pay secrecy clauses in industries where bonuses or discretionary incentives are offered.
The purpose of the Amendment was to "ensure that employees can voluntarily discuss and disclose their own pay rate to others without detrimental repercussions to their employment", as stated in the Education and Workforce Committee commentary.
Benefits of Pay Transparency
1. Reduces Opportunities for Unequal Pay
Employers might have good intentions when offering differing salaries to employees. However, there is always a concern that these pay rates are based on stereotyping or bias. Notably, employers may use pay secrecy clauses as a facade for unfair discrimination. Typically, pay secrecy policies in companies have heightened the gender pay gap. Additionally, the lack of pay transparency enables employers to avoid justifying pay differences, exacerbating the potential for discrimination.
Pay transparency is, therefore, a practical safeguard against pay discrimination. By allowing employees to discuss their remuneration, employers are held accountable for ensuring differences in pay are based on legitimate factors such as experience, performance, or qualifications.
This openness reduces the likelihood of hidden bias or systemic inequalities going unchecked, improving the ease of identifying and addressing unfair pay practices.
2. Positively Impacts Workplace Culture
A lack of transparency in the workplace can make your employees feel undervalued and distrusted. When employees assume that you are not rewarding them for their efforts, workplace productivity declines, hindering your business' success.
Pay transparency can help build trust between employers and employees. When staff understand how and why pay decisions are made, they are more likely to feel valued and fairly treated. This openness can improve workplace morale, strengthen employee loyalty, and create a culture of accountability where performance and contribution are recognised more consistently.
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What Are the Implications of the Amendment?
The Amendment establishes a new category of personal grievance under section 103 of the Employment Relations Act 2000, specifically targeting "adverse conduct for a remuneration disclosure reason".
'Adverse conduct' includes:
- dismissing an employee;
- denying an employee equal terms, conditions or benefits compared to other staff members;
- subjecting an employee to disadvantageous treatment; or
- forcing an employee into retirement or compelling them to resign
Additionally, a 'remuneration disclosure reason' covers situations where an employee:
- discusses their pay with another person (regardless of whether actual salary figures are revealed);
- makes inquiries about a colleague's remuneration;
- engages in remuneration-related discussions with other employees; or
- responds to questions about their own pay.
Are Employers Liable?
For you, as an employer, to be found liable for adverse conduct based on remuneration disclosure, your employee's disclosure must constitute a "substantial" reason behind your actions against them.
Importantly, you have the burden of proof. This means that you must demonstrate, on the balance of probabilities, that your employee's remuneration disclosure was not the primary driver of your adverse conduct.
Impact on Existing Employment Agreements
Employment agreements signed before 27 August 2025 containing pay secrecy or confidentiality provisions do not require formal amendment or variation. However, these clauses are void as of 27 August 2025.
Recommended Actions for Employers
You should ensure you take the following steps to remain compliant and protect your business:
- Review Agreement Templates: It is recommended that you review your employment agreement templates to remove pay secrecy or confidentiality clauses for all new hires from 27 August 2025 onwards.
- Examine Confidentiality Provisions: Additionally, employers should examine broader confidentiality provisions, as some agreements may not explicitly prohibit remuneration discussions but instead contain general confidentiality clauses covering "terms of employment".
- Update Provisions: These broader provisions should be updated to specifically exclude employees' rights to discuss their remuneration, ensuring they do not inadvertently restrict pay discussions.
This proactive approach will help ensure compliance with the new legislation and avoid potential personal grievance claims.
Key Takeaways
Employees now have the right to discuss their remuneration without facing adverse consequences such as dismissal, unequal treatment, or forced resignation under the Amendment, effective 27 August 2025. Existing pay secrecy clauses automatically become void from this date.
As an employer, you should ensure that new employment agreements do not include pay secrecy clauses or confidentiality provisions that restrict remuneration discussions. Taking action against employees for exercising these rights could result in a personal grievance claim being lodged against your business.
If you have questions or would like assistance with pay secrecy clauses, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Will the Amendment affect general confidentiality clauses in my employment contracts?
Yes. Even if an agreement does not explicitly ban pay discussions, broad confidentiality clauses covering "terms of employment" could still inadvertently restrict remuneration conversations. These should be updated to explicitly exclude pay discussions to ensure compliance.
Do I need to provide payslips to ensure pay transparency?
While payslips are not legally mandatory in NZ, employees do have the right to access information about how their pay is calculated. This includes hours worked, deductions, and leave balances. Providing accurate and timely payslips is therefore a valuable best practice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
