Is your organisation ready for legislated pay gap controls?  

How designated employers should prepare for amendments to the Employment Equity Act.

The long-awaited amendments to the Employment Equity Act (EEA4), which seek to enforce the “same work, same pay” principle, are expected to be gazetted soon. Once enacted, the revised EEA4 regulations will require certain employers to provide details around their remuneration structures and policies that not only show the gap between the highest-paid and lowest-paid employees but also reflect inequalities based on race and gender within various occupational levels.

This effectively means that employers will have to take an active interest in identifying and correcting wage gaps. The question is: where to begin?

First of all, each role within an organisation should have a job description with specific details about roles and responsibilities, reporting lines, requisite qualifications, and required skill-sets. In situations where individuals are performing the same or similar work, but are receiving different earnings, the income inequality gap must be addressed.

When conducting a vertical analysis to identify the overall wage gap from lowest to highest paid, employers must attempt to firstly close the gap in employees’ fixed earnings by offering a similar or same basic salary that is in line with the true value of the work and is in line with the pay-grade set within that particular occupational level, regardless of their race or gender. Furthermore, it may be more effective to offer all employees in the organisation access to same or similar incentives and benefits so that any variable income is based solely on performance.

Ultimately, employers need to devise policies that regulate the gini co-efficient of the organisation, keeping in mind that Employment Equity Act reporting is now aligned with Switzerland's policy, which states that the lowest-paid earner of an organisation should not be paid less than twelve times than the highest-paid earner.

Designated employers should be seeking assistance and guidance from the Department of Labour or a reputable Employment Equity specialist for in-depth income analyses, identification of inequality gaps and recommendations on how to address them.

Research featured in the Harvard Business Review early this year showed that gender pay gaps shrink when companies are required to disclose them.

The aforementioned study examined wage statistics of Danish companies before and after the introduction of the country’s 2006 Act on Gender-Specific Pay Statistics, which required certain companies with more than 35 employees to report on gender pay gaps. Not only did the legislation reduce the gender pay gap by seven percent, it also led to an increase in the number of women being hired and an increase in the number of female employees being promoted from the bottom of the hierarchy to more senior positions.