How to Comply with Equal Pay for Work of Equal Value?

The South African economy is beleaguered by inequality in a number of different forms. Unfortunately, South Africa’s political past has played a significant role in the creation of these inequalities; however, legislation and policies have been put in place to address these issues. The most important piece of legislation in this regard is that of Equal Pay for Work of Equal Value.

In short, this legislation seeks to ensure that individuals who perform substantially the same level of work are remunerated in a consistent manner, so that the level of work and level of pay correlate to one another. This is termed equal pay for work of equal value and is all about fairness, transparency and non-discrimination. This legislation monitors pay practices within singular organisations rather than across industries or the national market – internal relativity between employees’ remuneration is the focus of this legislation. The legislation is designed to support pay equity through limiting and/or reducing unfair discrimination and unfair discriminatory practices. This recently-passed legislation supports and re-enforces the Employment Equity Act.

Recently, a number of cases claiming that this legislation has been violated have been filed. Labour minister, Mildred Olifant recently stated that the speed of transformation needs to be accelerated and that 21 companies had recently been fined for violating the Employment Equity Act. Minister Olifant stated further that she believes that harsher penalties should be put in place for those who violate the Employment Equity Act. Often the rationale behind why these cases have been filed is not fully understood by the employer as this is an area of specialisation. A result of a limited understanding of the legislation’s limits is the employer’s ability of how to prepare a solid defence against breaching the legislation. What can the employer do to limit the risk of CCMA cases against the company for unfair discrimination? Four specific items are of particular importance as they provide a sound background against which equality can be managed.

•Job grades are of paramount importance as these effectively value the position and allow positions to be compared against similar positions. Job grading is a process of evaluating the ‘value of the job’ or ‘sizing’ the job within an organisation. It forms the basis of a number of remuneration tasks such as, pay scale modelling and salary benchmarking. This will ensure that jobs that are of substantially the same level of work are positioned at a similar size within the organisation. If equality within grades is maintained, then by default, the pay of all races and genders that contribute to the sample should be in line with each other.

•Pay scales are instrumental in controlling the variation of pay that is considered acceptable within an organisation at each level and between levels. Developing a pay scale is a process whereby an organisation sets out an acceptable scale within which pay per grades can vary. When implementing this, the requirement must be to set levels which that pay may not exceed at the upper and lower limits of the scale per grade. This too will ensure race and gender equality if the organisation, as a whole, has implemented its pay scale correctly.

•Performance Management is important as this allows defendable performance scores to dictate why certain individuals may earn more than others, within an acceptable range. Performance management is a process of evaluating each employee’s execution of their role within an organisation and this allows high performers to be differentiated defensibly from poor performers when it comes to reward.

•Finally, and most importantly, a sound Remuneration Policy is critical in defensible remuneration practices. This defines the goals and ambitions of an organisation’s remuneration structure and sits at the heart of all remuneration decisions taken within an organisation. This should be viewed as a critical component of an organisation’s constitution as it governs the expenditure on what is, often, an organisations largest expenditure line item – human capital. Human capital is also a key strategic driver of an organisation and as a result, it is of fundamental importance that this is set in line with the strategic goals of the organisation.

The prevalence of Equal Pay for Work of Equal Value disputes finding their way into the market is on the rise. In recent times Labour Minister Mildred Olifant has been particularly vocal about wanting to impose harsher penalties on companies that are in contravention of the Employment Equity Act – Equal Pay for Work of Equal Value complements this Act.

Although, it is expected that most organisations operate in a manner consistent with the Employment Equity Act, unfair discrimination may be levied at the organisation in the absence of the Four main building blocks. Make sure your organisation has a sound and documented grading system, a robust performance management system, well-designed and defensible payscales and lastly a bullet proof Remuneration Policy.

Article by Bryden Morton and Chris Blair

Bryden Morton, B.Com (Hons) Economics, Data Manager – bmorton@21century.co.za

Chris Blair, B.Sc Chem. Eng., MBA – Leadership & Sustainability, CEO – cblair@21century.co.za