How new job trends can change how we are paid in South Africa

Dr Mark Bussin, EXCO member of the South African Reward Association (SARA), says that strong international trends are significantly changing the governance and reward landscape.

“These trends lead to a profound shift in how we think about governance and remuneration, and smart boards and executive teams need to understand their implications,” he said. “Many of them are developing trends, so companies need to keep their eye on the ball, and develop flexible strategies to respond to a shifting set of variables.”

Dr Bussin said that although there are multiple trends, the following are the most important because they represent significant changes of direction:

Institutions and supervisors flex their muscles

Underlying many of these trends is the undeniable fact that both institutional investors and supervisors are becoming much more specific about what they want from companies in which they are invested. Advisers in particular, such as Lewis Glass and Institutional Shareholder Services, are gaining more influence as they provide advice to large clients, and their agendas are thus gaining traction. Key agenda items include ESG and human capital measurement.

ESG becomes an administrative issue

Environmental, social and governance (ESG) reporting has become mandatory worldwide. “The move to incorporate non-financial metrics is positive because it complements traditional backward-looking and quantitative financial metrics with a new set that are essentially forward-looking and qualitative,” he said.

“Making it is much harder, however, and there is still no real objective way to do it.”

Human capital reporting is growing

Another step towards a more qualitative approach is seeing traditional reporting based on gender and race figures complemented by a deeper look at how the company manages its talent. “We look beyond number-based affirmative action to consider things like dignity, respect and, above all, inclusivity,” said Dr. Bussin.

Click to simplify rewards

Variable remuneration frameworks designed to boost performance have become so complex that it has become virtually impossible to determine what someone really deserves, and thus benchmarking cannot be done.

Focus on the vertical and horizontal lean gap continues to grow

The vertical pay gap – the CEO’s salary compared to that of the lowest paid worker – seems increasingly less useful as a measure. The top orbits become increasingly complex, thus attracting higher wages, while the lowest remain static. “The vertical pay gap will continue to widen and, in any case, redistributing the CEO’s salary to workers would have absolutely no impact,” Dr Bussin said.

“For that reason, companies are going to pay a living wage (rather a minimum wage) to all employees as a way to make a real impact on people’s lives.”

The horizontal pay gap – also known as the gender pay gap – remains a very controversial issue. The world average is in the region of 25%, while in South Africa it falls in the range of 10% -20%. While the problem may not be as obvious as it seems – other factors such as true parity of the work done and different work / life priorities play a role – this is something that is gaining more focus.

Work-from-everywhere trend raises important issues

Remote work has increased in popularity over the past ten years or so, reinforced by the recent lockdowns. On the board side, this work style will require a shift from input-based to outcome-based performance management.

Getting this right will certainly be a matter of time, but the tax question is more annoying: to whom would an adviser who lives and works in country A pay taxes for multiple clients in various other jurisdictions? There is no fixed answer to this question yet.

A related issue is the growing number of contractors, freelancers, part-timers and consultants: at what type and level of benefits are they entitled to receive? If the answer is no, then should they not be paid a premium?

To read: Bad news for pay rises in South Africa

How new job trends can change how we are paid in South Africa

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