Changes to the Fair Work Legislation
Did you see the latest changes employment laws introduced by the Australian Federal Government? (December 2022)
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 introduced a change where employers can no longer prevent employees discussing their salaries or including a pay secrecy clause in your employment contract.
It’s only going to be a problem if they talk to each other. If there’s no chance of that then I’d suggest you’ve got bigger problems.
So, it’s time to brush up on your small talk skills and get ready for some potentially awkward conversations that originate from the tea room.
But, all jokes aside, this change could have a significant impact on your business.
Get ready for that awkward conversation when one of your employees approaches you and asks, “Why is Michael getting more than me and we do the same job?
Can you justify your Remuneration Policy?
It’s not unusual for a business to have a ‘range’ of salaries, but is it justifiable? Do you have a remuneration policy? Do you have Job Descriptions that identify can be used to Job Size positions.
Can you now be accused of being discriminatory?
When there are inconsistencies in the salaries within a single organisation the term used is “internal inequity”.
It simply means that the remuneration for the same position is paid at different levels and this causes descent in the staff ranks. The ones who are paid less feel undervalued and the ones paid more feel threatened.
Common traps to be avoided
In my experience, the reason for the differences are not necessarily intentional. They are however, as a result of little or no thought to the way people are compensated for a job.
They usually fall into a few common traps.
Salary creep. Where an individual has been with a company for a long time (more than 5 years which is becoming rarer and rarer) and they have had a pay rise each year because they’ve done a ‘good job’.
They are a new recruit and the business had to pay them more than the job is worth, simply to fill the role.
The person was promoted but weren’t given all of the salary increase until they could prove themselves.
I’ve seen these situations, and a myriad of others, even when the business had a dedicated HR team looking after this area.
Up until this latest Legislative change it wasn’t a problem because salary discussions were frowned upon. That genie’s now out of the bottle.
To be clear the Legislation doesn’t force the business to disclose the salaries, and as an employee you can ask, but the other person doesn’t have to answer.
In my humble opinion, I think if you’re fofocusingn secrecy then you’re looking at this all wrong.
Employees don’t leave their employers because of money. They’re unhappy with their conditions, start looking and then move for more money.
Then everyone races around saying we need to pay the next person more and then the cycle begins.
There are other metrics that will give you the canary in the mine, but that’s a whole different blog.
Now that the prospect of having to answer the salary question is imminent, and you may think that it won’t happen to you, all I can say is good luck with that.
What are your options?
The direct impact on your business is obviously financial. The indirect, and often forgotten impact, is the personal tension it creates between you and your team, and in some cases between team members destroying relationships and culture.
The good news is that there are steps you can take to address this issue proactively.
Complete a Remuneration Review. Examine all positions pays and graph the results so you can see the outliers. Above and below the salary grades. This can be done with a guesstimated Job Sizing exercise each position.
Remuneration Grading. Develop a pay grade framework based on the value of each job. Initially it will feel like you are trying to shoe horn the existing grading into a structure. Invariably it won’t work, as is, and it’s not possible to make immediate wholesale changes. But, once you have the framework in place you can make adjustments when the ‘natural’ times occur. These could be anniversary of employment, end of year salary review, or a performance review.
Communicate your intentions to your staff.Being on the front foot is essential. They’ll eventually find out so you may as well be the one to tell them. The key is to communicate with all employees that each job will be included in a grading structure that is designed to be fair and equitable.
Action NOT Inaction
It may seem like a daunting task, but it’s much better than sweeping it under the rug and dealing with the fallout later.
From my experience, I can tell you that tension between management and staff cause a massive disruption to operational efficiency.
Resolving the salary differential is a specialist area and unless you have a HR Team experienced in remuneration planning, don’t try this on your own.
We offer a comprehensive and proven solution in building a robust grading and salary structure that can help you navigate these changes with ease.
I saw something similar in Papua New Guinea when the EXXON Project came to town. They recruited thousands of PNG citizens and caused a major staff shortage, leading to unsustainable pay increases.
I can see how the changes to the Australian Legislation will now just add fuel onto the rising salary pressure of inflation and interest rate hikes.
Solving this problem is just another thing to add onto your to-do list. It may not be urgent, but it is (and will become more) important over time.
We know each business has its own nuance, and the solution you need will depend on your existing remuneration and grade structure and policy, assuming you have one.
That’s why we’re offering a complimentary 30 minute call to explore how we can help you develop a customised solution for your business.
Just use this link to provide your details and book a 30-minute call.