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South African strikes expose problematic pay gap

South Africa’s ongoing labour action has called into question the massive disproportions between the salaries made by mining executives and the earnings of entry-level workers.

This comes on the heels of the resolution of the five-month wage strike in the platinum sector, which has been the longest and costliest strike that the country has ever seen and is threatening to push South Africa’s economy into a recession.

Now, South Africa’s metalworkers’ union Numsa is demanding a 12-15 percent annual wage increase for its members and has rejected employers’ latest offer of a 10-percent increase this year, 9.5 percent in 2015 and 9.0 percent the year after that, saying black workers are still underpaid.

Nevertheless, PwC head of human resources services for southern Africa Gerald Seegers believes that although the gap is widening, “we’re not the worst in the world and we still look at the big economies such as the US and the UK … the pay gap is much wider.”

In an interview with Business Day TV, Seegers argued that it is difficult to accurately calculate the pay differential because “the moment we throw in short-term or long-term incentives, that gap becomes massive and almost not worthwhile to even compare or even try to measure. Should we be measuring the pay gap? That to me is the important question because I’m not too sure we should be. It’s really measuring internal equity and should be dealt with internally.”

Rather than measuring the gap, Seegers explains that “What we are looking for is more gain sharing, more kind of profit sharing, but linked to productivity. At the executive level, metrics are measured against profitability and maybe other metrics. But up until now the focus has only been financial and it shouldn’t only be financial.”

Nevertheless, Seegers emphasises that regulating pay gap and executive pay would not be effective in South Africa, where a self-regulatory environment should be cultivated instead with a level of moral obligation. “Executive pay is coming under attack from many angles, but if we just look at it from just an employer’s perspective, I would like the executive to look his low-income earner in the eye and say, ‘Look, that guy’s lifestyle has actually improved over the last year.’ If it hasn’t, you’ve got to ask questions: is that because we’re not paying him enough, or have I taken too much?”

The financial wellness of employees is critical, Seegers states, adding that “Employees do not understand, never mind their own pay, but what are they actually earning – not only in cash, but the multiple of other benefits that are in play.

“Some annual reports do highlight what they do take into account for employment or as an employment benefit and it’s ironic because when we were putting the report together, we were still talking about looking at the metrics of executive pay and bringing in a focus on natural capital what we call EKPIs (Environmental Key Performance Indicators) but unfortunately that has been overshadowed by this whole debate around pay differential.”

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