Pay secrecy clauses or salary confidentiality clauses? It’s very common in business to have staff at varying rates of pay. This can be for a variety of reasons, such as varying levels of skills and experience or differences in salary banding.
Differences in pay can be justified as long as the differences are not due to discriminatory factors, for example, failing to reward a contractual salary increase to someone who is absent due to disability-related absence or breaching the Equal Pay Act, i.e., paying women less than men for the same work. However, when employees chat about their salaries, it can often give rise to misunderstandings and disputes.
In this article, we explore whether employers can prevent their staff from discussing pay and explain more about pay secrecy and salary confidentiality clauses.
What is the legal position on salary confidentiality?
Pay secrecy or salary confidentiality clauses do exist and are aimed at restricting the disclosure of salary information. Many of these clauses direct employees not to disclose their salary or remuneration packages. The aim of such clauses is usually to try to protect the privacy of employees and reduce conflict.
Since the introduction of the Equality Act in 2010, such clauses are deemed unenforceable if the employee is discussing their salary for the purposes of determining whether discrimination and pay inequality are being carried out.
So, pay secrecy clauses are illegal?
They are not necessarily illegal, but employers need to be very careful about how to apply them and understand the limitations of their use.
For example, a female employee believes they are being paid less than their male colleague who carries out the same or similar work. They discuss their salary with that or another colleague, and based on the information arising from those discussions, they raise a complaint citing a breach of the Equal Pay Act. Their contract has a clause prohibiting the discussion of salaries at work.
Whether the complaint is justified or not, if the employee were subject to any detriment as a result of those discussions, for example, if they faced disciplinary action or were dismissed, the employer will not be able to safely rely on the breach of the pay secrecy clause as reasonable justification for the dismissal; it will also likely result in a discrimination claim as well.
When can discussing pay become a disciplinary issue?
While pay secrecy clauses can have their limitations, this doesn’t mean that employees have to reveal their salaries to their colleagues on demand. Salaries are confidential, and many employees do not like to discuss their salaries on a point of principle.
Therefore, even if someone has concerns about a legitimate pay dispute, this doesn’t mean they are able to bully or harass someone into revealing that information. If they do, this type of conduct could result in disciplinary action being taken against them.
Likewise, those employed in positions where they have access to salary information, such as in HR and payroll, should only ever discuss or reveal salary information where it is within the remit of their role. If they were to disclose their salary, or indeed any confidential information they have acquired in the course of their duties, without the authority to do so, this could amount to an allegation of gross misconduct, which may lead to the summary termination of their employment.
The dos and don’ts of managing pay discussions:
- Do ensure that staff know how to raise any concerns they may have about pay or any matters affecting their employment, such as via the company grievance procedure.
- DO ensure that when you have discussions with employees about pay, such as in pay reviews, that you remind your employees that the content of the discussion is confidential.
- DO ensure that where pay is linked to performance, your KPI’s, targets, and bonus/commission structures are clear, reasonable, and not indirectly discriminatory.
- DO ensure managers lead by example; if they are openly discussing pay, then their direct reports will take their cue from them! Remind managers of the need for professional boundaries and discretion
- Don’t impose a pay secrecy clause to deliberately conceal pay inequality; the truth will always come out!
- Don’t shy away from pay transparency. The more you try to stifle reasonable pay conversations, the more staff will think you have something to hide when chances are you don’t.
And finally, for more information on equal pay, please see our employer’s guide here: An Employer’s Guide to Equal Pay
Avensure can help you determine the best course of action for your business regarding employee salary discussions.
If you need advice on related factors like pay rise, or problems arising from pay discussions, contact us at Avensure for more information.
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