How new working trends can change how we get paid in South Africa

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

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

Dr. Bussin said that while there are multiple Trends, the following are the most important as they represent key directional shifts:

Institutions and Regulators flex their muscles

Underlying many of these Trends is the indisputable fact that both institutional investors and Regulators are getting much more specific about what they want from companies in which they are invested. In particular, Advisors like 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 a board matter

Environment, social and governance (ESG) reporting has become mandatory globally. “The move to include non-financial metrics is positive, as it supplements traditional backward-looking and quantitative financial metrics with a new set that are essentially forward looking and qualitative,” he said.

“However, measurement is much more difficult and there’s no real objective way of doing it yet.”

Human capital reporting grows up

Another move to a more qualitative approach inside traditional reporting based on figures relating to gender and race being complemented by a Deeper look at how the company is managing its Talent. “We’re looking beyond numbers-based affirmative action to consider things like dignity, respect and, above all, inclusivity,” Dr Bussin said.

Pressure to simplify remuneration

Variable remuneration frameworks designed to drive performance have become so complex that it has become virtually impossible to establish what anyone really earns, and so benchmarking cannot be done.

Focus on the vertical and horizontal pay gap continues to grow

The vertical pay gap — the CEO’s salary compared to that of the lowest paid worker — seems less and less useful as a measure. The top jobs are becoming more and more complex, and so attracting higher wages, while the lowest remain Static. “The vertical pay gap will continue to widen and, in any event, redistributing the CEO’s salary to employees would make absolutely no impact,” said Dr. Bussin.

“For that reason, companies are moving towards paying 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 highly controversial issue. The global average is in the region of 25% whereas in South Africa it falls into the 10% -20% range. While the issue is not as clear cut as it might seem — other factors such as genuine parity of the work done and differing work / life priorities play a role — this is something that is receiving more focus.

Work-from-anywhere trend raises significant issues

Remote working has been growing in Popularity over the past decade or so, strengthened by recent lockdowns. On the governance side, this work style will demand a move from input-based to outcome-based performance management.

Getting this right will surely only be a matter of time, but the tax question is more vexing: to whom would a Consultant living in country A and working for multiple clients in various other jurisdictions pay tax? No firm answer to this question exists as yet.

A related issue is the growing number of contractors, freelancers, part-timers and consultants: what kind and level of benefits are they entitled to receive? If the answer is none, then should they not be paid a premium?

Read: Bad news for pay hikes in South Africa


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