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09 Jul 2015 15:34
Runaway pay increases and bonuses for JSE bosses slowed last year. (Paul Botes, M&G)
Runaway pay increases and bonuses for JSE
bosses slowed last year, but the pay gap between the lowest and highest wage
earners in South Africa remains a concern.
According to the latest report on executive
pay released by advisory firm PwC on Thursday, chief executive officers were
awarded total guaranteed package increases ranging from 2.1% to 7.7%, with the
median increase reaching 4.8%, or R4.3-million.
Their short-term incentives, or bonuses
based on company and individual performance, rose by a modest 3% in 2014.
is significantly down from the 131% increase in short-term incentives that were
given to company bosses in 2013.
Nevertheless the median short-term
incentives package for large cap companies across all industries amounted to
The median salary for large cap resources
companies in 2014 was R21.7-million.
In 2014 however, only six firms in this
sector were listed on the stock exchange versus 11 in 2013. As a result the
remaining six large-cap companies would be in the upper quartile, or outliers,
the report noted.
The median pay package for CEOs running
large cap financial services firms was R7-million in 2014 versus R6.6-million
in 2013. Chief executives at large industrial firms meanwhile were paid a
median of R13.9-million.
average levels of pay remain high relative to workers, and are viewed as
excessive by labour and the general public, increases in total guaranteed pay
have generally remained subdued and are below those granted to workers,” said Gerald
Seegers, head of human resource services for PwC, Southern Africa.
to the report, some of the Top 40 JSE-listed companies have “addressed the
internal wage gap in one form or another”.
have elected to address the wage gap by mitigating the average base salary
increases for executives and increasing the salary increase percentages for
management and general staff,” it said.
Internal wage gap
companies’ CEOs have foregone salary increases entirely in order to demonstrate
their commitment to addressing the internal wage gap”.
year, Khetso Gordan, the former boss of cement manufacturer PPC, famously took a
R1-million pay cut and froze salaries for top managers, enabling the company to
The report also measured the Gini
co-efficient of South Africa’s employed, which is substantially lower than the
The Gini coefficient is a broad measure of
inequality. It is a ratio between 1 and 0 where the higher, or
closer to 1 a country’s coefficient is, the greater the inequality in that
According to the report, South Africa’s Gini
coefficient for the employed in 2014 was 0.44, versus the national
statistic of 0.65. The effect was thanks to the high levels of unemployment in
unemployment in South Africa is potentially a more compelling social and
ethical issue than the pay gap, as it drives inequality, hardship and social
tension,” it said.
report revealed a growing concern by companies for the financial wellness of
their junior employees, with a particular focus on the debilitating effect of
“Several companies have been focusing on the
issue of employee garnishee orders, and have reviewed the legal status and the
outstanding balances of existing garnishee orders,” it said.
“In many cases they discovered
that the orders were
either improperly levied or the balances were already paid-up.”
Garnishee orders – or deductions made directly
from an employee’s salary – were a major contributor to worker unhappiness on
the platinum mining belt, resulting in violent strikes and the massacre of
workers at Marikana.
Meanwhile, this week the Western Cape High Court’s Judge Siraj Desai declared deductions taken from employees’ salaries for garnishee orders were illegal.
The report said the importance of paying a “living wage” to
workers could be part of the solution to the problem of the pay gap.
While there were fears that escalating minimum
wage levels would hurt job creation, for those employed “it has been found that
productivity and living standards are linked”, the report noted.
“Continued restraint in the approach to
executive pay and focusing on the financial wellness of junior workers and
aspiring to pay at least a ‘living wage’ is a sound strategy,” the reported
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