Paymaster Magazine
Be | Prepared

Preparing for Minimum Wages and Equal Pay

Ian Hurst Author: Ian Hurst — Managing Director, Paymaster People Solutions

During the 21st Annual NEDLAC Summit held on 9 September 2016, Deputy President Cyril Ramaphosa said that NEDLAC was making progress in achieving labour market stability by working to reduce income inequality and through the introduction of the concept of a national minimum wage.[1]

Are you preparedBe prepared — avoid burying your head in the sand

It would be prudent for the business and commercial sector to be suitably prepared, by not burying its head in the sand.  The new minimum wage and equal pay framework will almost certainly be introduced in South Africa. Consequently, no longer are the impending minimum wage changes to be regarded as an “if” question, but rather this issue now ought to be considered with the inevitable “when?” question.

Preparedness is prudence. Therefore, let us prepare ourselves by making absolutely sure that, as we anticipate the arrival of changes to the national minimum wage, we know (and understand) what needs to be done.

Equal pay for equal work

Equal pay for equal work means that your remuneration framework needs to be structured in such a way that employees receive the same pay for doing the same work. In other words, employees who possess the same experience and education are to receive exactly the same wage.

For further insightful reading read Johann Scheepers’ article published on the website. Another helpful document worth familiarising yourself with is the Code Of Good Practice[2] provided by the South African Department of Labour.

Test for equal pay

3 StepsAsk yourself the following three questions —

  1. Are the jobs that are being compared the same, substantially the same, or of equal value in terms of an objective assessment?
  2. Is there a difference in the terms and conditions of employment (including the remuneration of the employees) for whom the job positions that are being compared?
  3. If there are differences in the terms and conditions of employment, can these be justified on fair and rational grounds?

Minimum wage — 3 steps to help you prepare

1.     Evaluate the value of jobs by employee

  • Endeavour to accurately assess the level of responsibility that is demanded of the work, inclusive of the levels of responsibility to be exercised over other people/employees, finances and materials. This includes tasks that have an impact on who is accountable for delivery of the organisation’s goals. For example, how much accountability does the employee have that is directly related to the organisation’s profitability, financial stability, market coverage and health & safety of its clients. It is important to consider the various types of responsibilities associated with the organisation’s goals. This must be assessed independently, regardless of the hierarchical level of the job position, or the number of employees supervised in that job position.
  • Endeavour to accurately assess the skills, qualifications (including prior learning) and experience required to perform the work tasks — whether formal or informal. This includes knowledge and skills which are required for a job. What is important is not how these were acquired, but rather, that their content corresponds to the requirements of the job being evaluated. Qualifications and skills can be acquired in a variety of ways including academic or vocational training certified by a diploma, paid work experience in the labour market, formal and informal training in the workplace, and volunteer work.
  • Endeavour to accurately assess the physical, mental and emotional effort required to perform the work. This refers to the difficulty-level, and fatigue/tension caused by performing the job tasks. It is important to not only consider physical effort, but to also take mental and psychological effort into consideration.

The assessment of working conditions may include an assessment of the physical environment, psychological conditions, time and geographic location where the work is performed. For example, one may consider factors such as noise levels and frequent interruptions for office jobs as conditions of work.

2.     Equal pay for equal work — do the analysis

  • Group employees by bands as per the evaluation conducted in the preceding section.
  • Consult the minimum and maximum remuneration for each salary band.
  • Evaluate why there are differences, and whether these can be well justified.
  • Differences that cannot be justified need to be addressed as a matter of priority.

Note: there are areas when differentiation in pay/remuneration may be justified — the Code of Good Practice is very clear on this (see section 7 of the Code of Good Practice).

Costs versus benefits
Hand drawing Costs-Benefits graph with black marker isolated on white.

3.     Costing the changes, planning the changes

This is when you are truly able to demonstrate your experience and ‘worth’ to your organisation. The first priority imperative is to correct the imbalances that have been in existence within your organisation. Because the payroll department has access to ‘the numbers’, it is up to payroll administrator (and/or manager) to sit down and (accurately) highlight the differences, as well as to attach costs to these differences too.

Of course, it also goes without saying that the payroll administrator (and/or manager) will be expected to prepare a plan outlining exactly how the potential changes will be implemented and to propose how much these will cost the organisation too.

As a starting-point, consider working with the following three (highly probable) minimum wage amounts: R 3500, R4000 and R 4500. By making your prudent projections and plans using these three amounts, you should be in the approximate ball-park of future scenarios.

Note: remember to take the following into account for all your related (projected) financial calculations —

  • Medical Aid
  • Pension Contributions
  • Increase in UIF
  • Increase In SDL
  • Increase in WCA
  • Increase in Overtime

Woman Making PresentationThe final step in the proactive preparation process

Finally, present your well-considered (prudent) plan to management in a clear, logical and constructive manner. Be sure to provide your management (or executive team) with likely alternatives, and cost scenarios too.

Presentation tip: go strongly visual — graphs with key information (infographics) will be much more effective than reams of long-winded text.

This article strongly supports the fact that the anticipated changes will definitely become a reality. Now is the time to be proactive and to plan for implementation of the new minimum wage and equal pay framework. Be proactively prepared – preparedness is prudence.

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[2] Published as Government Gazette, Volume 600, 1 June 2015, No. 38837.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Ian Hurst

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