Discriminatory pay practices exist but absolute equality is not good for business

Global Business Solutions senior consultant Natalie Singer discusses why pay practices are still discriminating against designated groups.

The principle of providing equal pay for work of equal value is entrenched within the Employment Equity Act and continues to gain greater coverage across the world, as governments try to redress imbalances of the past. Pay inequality globally tends to focus on the gender pay gaps that continue to exist in 2018 (even in world-leading economies like Denmark), and South Africa is also grappling with dismantling institutionalised discrimination against designated groups, namely black (African, Coloured and Indian) people, women and people with disabilities.

In my role as a consultant, I regularly engage with organisations to assist in educating and empowering Employment Equity Committees and part of the process, the barriers analysis, generates interesting conversations. Most organisations feel confident that their policies, practices and procedures do not unfairly discriminate against any employees and are applied consistently. This sentiment appears to be universal if one considers that, according to the 2018 EEC Transformation report, 90 percent of all employees reported no barriers in terms of remuneration and benefits in their annual Employment Equity reports.

"Pay inequalities still exist and continue to be perpetuated, even though organisations believe that their fair application of long-standing practices eliminates unfair discrimination."

Absolute equality is not good for business

It is true that absolute pay equality (per job) is problematic. I have experienced first-hand the unintended consequences of over-simplification of job classification and assigning a single, fixed value salary to each role. In this particular case, I was tasked with unpicking a structure in which all grades earned exactly the same salary (to the Rand), to try and mitigate the negative consequences that had resulted: loss of critical skill and exodus of valuable employees, and massive decreases in productivity.

People are people, and despite best intentions, the inevitable result of paying everyone the same is that those who are higher performers become disenchanted and demotivated and, if they don’t leave, will reduce their efforts meaning the organisation’s productivity drops to that of the sickest, lamest or laziest employee.

So how do you avoid this?

Reward and recognition are intrinsic motivators and essential components of a sound talent management strategy. Establishing pay ranges per job/role remains an acceptable practice, including compliance with equal pay legislative requirements, providing that this range has clear rationale and justifiable differences that are fairly and consistently applied.

Why would an employee justifiably be paid at the bottom – or top – end of the pay range?

And, although each employee is unique in terms of the qualification, experience and performance/output, the rationale applied should be consistent and defensible. For example, a qualification may equate to a five percent differential and performance an additional 10 percent.

Perpetuating discrimination

There can be no denying that designated groups, black people and women particularly, have been paid less than their white male counterparts on average for years. Much of this relates to the institutionalised discrimination entrenched under Apartheid and whilst we believe that we’ve moved on, pay hasn’t really. And it comes down to one simple employment practice.

"Insisting that prospective employees provide their current/previous payslip and using this as the benchmark when factoring the salary offer to be made for a new job."

Most employers consider any increase more than 25 percent on existing salary to be untenably high, without considering how the individual stacks up against other existing employees and in the context of the ‘justifiable reasons’ for differentiation. Further, the size and scope of the previous employer or job will also have factored into their current pay and is in no way relevant to future employment.

Given that many designated group individuals have had this process repeated time after time, experiencing “capped” increases based on what was an unfairly low salary, to begin with, its no wonder that they continue to be paid less than their counterparts.

It’s time to kick this practice. After all, what difference does it make what the person was earning elsewhere?

If this individual is going to be employed by your organisation, you need to be able to bring them into your existing pay structures in a fair manner and, if there is a difference in their pay you should be able to document the rationale and fairly justify it in the event you’re questioned by the employee and/or Department of Labour. Failure to do so immediately causes a pay anomaly and increases your risk of non-compliance.

Many countries and several states in the USA have already recognised that this outdated practice is a major obstacle to pay equality and have now made it illegal for organisations to ask prospective employees to provide their payslips. Perhaps it’s time that South Africa followed suit?

Until we recognise that bias and discrimination remain entrenched in practices such as these, we will struggle to achieve our collective goal of ensuring that all employees receive fair treatment and non-discriminatory labour practice.