Mercer encourages companies to take ownership of their pay transparency journey.
Pay equity is about driving diversity, equity and inclusion (DEI), but at the current rate it will take over 135 years to achieve pay parity across the globe. And South Africa does not have much to boast about.
“South Africa is one of the most inequitable countries in the world,” says Carla Daniels, consulting lead at Mercer South Africa. She adds that not only do South Africans have a large income parity gap, but that it mostly affects women. “On average, women in South Africa are paid about 30 percent less than men, and the needle hasn’t moved in the past two decades,” says Carla.
She explains that South Africa has one of the highest representations of women in politics in the world, but that the agenda of ensuring pay equality is not being driven as it should be, especially in a country where many households are headed by women. She says that the cycle of poverty can be broken if pay equality is heeded by employers.
“We believe that organisations should be proactive and be doing more, and that legislation need not be the driver,” says Carla. She says that Mercer, a prominent global consulting firm, is encouraging companies to take ownership of their pay transparency journey.
Many companies are showing resistance, however. They say they believe that being transparent about pay policies in their business comes with a risk of employee dissatisfaction, decreased productivity, and a potentially negative effect on employee engagement.
Carla believes that the opposite will be true: that companies that embrace pay transparency to close pay gaps will start seeing an organisational shift towards a more positive and productive environment.
A practical approach
While Carla advocates for pay equity through transparency as an “obligation to society”, she has a practical approach to how companies can start addressing pay inequalities in their organisations.
She says one needs to be realistic about the journey and about how organisations will proactively move in that direction.
“We’re not saying it’s an easy solution. It will cause discomfort,” she notes. And while she encourages companies to take charge of pay transparency and lead it as an organisational imperative, she acknowledges that it is a complex process. She advises that companies will need to bring in a variety of experts to assist them in navigating the process. She says it is also not a once-off process, but one that requires “continuous monitoring”.
For Mercer, achieving pay equity will require a combination of analysts, psychologists, sociologists, economists, DEI specialists and rewards experts who understand all the facets, to assist businesses in executing a short-, medium- and long-term strategy that is of benefit to both the company and its employees. While this is a potentially arduous process, the benefits to companies extend beyond being legally compliant. Reducing staff turnover is the first advantage.
“Attracting and retaining top talent is definitely a plus, with employees having the opportunity to feel as though they are being treated fairly and being more connected to the organisation,” she adds.
And for the talent that stays, companies may also see increased productivity and loyalty. It can be great for the bottom line as well. Carla highlights that a study completed in Switzerland showed a decrease in sales for companies that reported a skewed ratio in employee remuneration. The converse can also be true.
Companies that are transparent with pay policies can reap economic benefits from attracting and retaining new customers.
A business imperative
Carla notes that consumers are more aware of companies that they support. This ranges from environmental considerations to governance. Consumers will see the contradiction in a company promoting its environmental, sustainable and governance (ESG) policies without being transparent about its remuneration policies. “Consumers are aware of what is happening,” she says.
While the business benefits are clear, Carla mentions that ultimately it’s an ethical issue. Companies that are prepared to embrace the discomfort of a pay transparency transformation process, can be proud to be strong, sustainable businesses that consumers can relate to.
The Companies Amendment Bill of 2021, which requires a company to disclose the total remuneration of the highest paid employee, the lowest paid employee, the average and median remuneration of all employees and the remuneration gap between highest and lowest paid employees, is currently out for public comment.
Whether the proposed amendments are implemented or not, organisations should really see this as an opportunity to start or accelerate their journey towards increased transparency. It is not an easy journey and it might take time, but being a fair and equitable employer ultimately contributes to building a sustainable economy that benefits businesses, employees and societies.