Fin24

SA wage gap among world's highest

2011-11-01 10:41

Johannesburg - The wage disparity between top executives and entry level employees in SA is particularly high in comparison to other developing and in some cases first world countries, according to Professor Barney Jordaan, the director of the Africa Centre for Dispute Settlement at the University of Stellenbosch Business School (USB).

"South African companies are facing extreme pressure to address growing employee dissatisfaction due to wage disparities. Employers are urged to review existing structures, as well as investigate the most appropriate method of remuneration for their company structure," Jordaan said.

He added that the issue was clearly outlined in the PricewaterhouseCoopers (PwC) Executive Directors Remuneration Practices report issued in June, which illustrated how the wage gap in SA was growing and was one of the highest in the world.

The report highlighted that listed companies on the stock exchange increased their total guaranteed pay to executive directors and top management by 23.3%, noted Jordaan.

High executive remuneration has captured the spotlight lately and most recently it emerged that food and clothing retailer Woolworths Holdings [JSE:WHL] paid CEO Ian Moir R13.6m, including a bonus of R8.25m added to his R5.312m normal package for the year.

Jordaan said while there was a place for salary differentials and that chief executives should be paid more than other employees due to their experience and responsibility, it is difficult to determine whether such complex situations were acceptable or not.

"Significant increases do not necessarily lead to better performance or productivity, albeit there are methods with which to narrow the wage gap that businesses should consider.

"By simply adopting and implementing good governance principles, coupled with collective bargaining, provides vehicles to narrow high gaps," he said.

Management and employee incentives were an attractive alternative method employers should adopt that rewarded staff at all levels for good performance, according to Jordaan.

"If one only provides substantive rewards, employee engagement is not only limited, but also cultivates a culture of self-centred gain.

"On the other hand if management and employees are involved in decisions that affect them, in addition to whatever substantive rewards they might receive, one develops a culture of engagement that not only motivates but also improves decision-making and implementation of decisions," he concluded.

Comments
  • NOFX1609 - 2011-11-01 10:57

    disgusting

      JJ - 2011-11-02 00:10

      I agree it is disgusting with so many uneducated and unskilled workers/citizens.

      JJ - 2011-11-02 00:12

      The other week I heard on radio that 1200 ppl showed up to interview for 10 positions. Disgusting!

  • Ohmikehunt - 2011-11-01 11:02

    It's called supply and demand. There is a high demand for skilled executives who bring strategic thinking to their companies - hence a competitive edge. There is also an under-supply of such people, hence they can demand (and get) top dollar for their services.

      Baloo - 2011-11-01 11:27

      It is still disgusting that top executive earn that kind of salary. It is pure greed.

      PyroSA - 2011-11-01 12:02

      Indeed - supply an demand, how a healthy economy should be driven! The exponential increase from management to executive levels do still raise a LOT of question marks though. Any salary over R2 million a year raises a lot of questions. Incentives have several drawbacks though, and also leaves itself open to exploitation if not driven fairly.

      quidditas - 2011-11-01 12:46

      Agreed. All disgruntled commentary is indicative of sour grapes.

  • muhhamedvefa.dag - 2011-11-01 11:02

    What IAN done for Woolworth's , absolutely nothing ... Wasting salary .... TAKE HIS SALARY DISTRIBUTE BETWEEN ENTRY LEVEL STUFF

      quidditas - 2011-11-01 12:45

      If you had bought Woolies shares at the beginning of June 2011 you would have paid R29.74 On 31 October they were trading trading at R40.39 which equals 35.91% appreciation in 5 months; and that is why the gent earns what he earns. Don't confuse a performing CEO with a disgruntled, unsatisfied, badly motivated worker. If said CEO was employed in government and could apply business principles without any hinderance to said department - how much better do you think it would be?

      rusted.axe - 2012-10-30 15:55

      Quidditas implies that capitalism has the monopoly on morals and ethics. The fact is that the people who man the production machinery are the ones making the profits possible in the first place. Its not about the "intellectual investment". It is ultimately about the price of bread and the fact that a family of 4 cannot afford 1 on a day, where a greedy bastard living off them can afford 1000.

      Joey Barton - 2014-03-09 12:13

      @quidditas - Woolies shares are above R60 at the moment. What do the execs at SAA,SABC,Eskom have done to deserve their salaries?

  • Francois - 2011-11-01 11:07

    I think the ANC led government must lead the way when the employ cadres to Telkom, Eskom, Transnet, PetroSA, SAA, the SABC etc and not anymore come up with the excuse that the salary these people like Maroga earn must compare with the private sector. What is the use of having a cadre to help you embezzle money and pay him an equivalent private sector salary? Also Ministers and the Prez and the DGs must follow suit. Say 30X the salary of a cleaner on contract?

      ispeakmymind - 2011-11-01 11:14

      no where does this article talk about the public sector, but the private. you just look at any excuse even if there's no to blame the ANC. look at your people first who are earning millions compare to their juniours in all these private companies. I know you wont comment because that's how its suppose to be right.

      Bob - 2011-11-01 12:49

      Francois has a fair point, the government should lead by example, I know the PM of Australia earns AUD 200,000.00 per annum, that converts to roughly R1,600,000.00, I dare bet that is considerably less than Zuma and many more in government, and she runs a successful country with very little or no corruption, if the ANC government was paid on performance they would be owe the country and not even lifting a salary.

  • Marion - 2011-11-01 11:18

    As far as I'm concerned there should be a government moratorium on all salaries over x amount per annum, including benefits, for the next x number of years. Thereafter there should be a maximum increase allowable for them whether in cash or in kind. 10% of 10 million is a helluva lot of money for anyone to get as an increase. These salaries have long been way over the top. Supply and demand is not the issue in my opinion. What is a realistic salary for anyone is.

  • Tahir - 2011-11-01 11:19

    I agree with Professor Barney Jordaan. In addition, in a country where half of households suffer from food poverty, workers deserve decent annual salary increases, this will begin to address the massive wage gap. Contrary to what Minister Pravin Gordhan and some analysts have been saying – workers must demand double digit increases. In fact with such grave poverty witnessed in our country, workers ought to demand nothing less than double digit increases, so that they may dig themselves out of the trenches of inequality. It is also about time CEO's annual salary hikes are capped to 5%.

      Spade - 2011-11-01 11:41

      The dilemma that faces us today is one of numbers. We have too many (the majority) unskilled people. Our productivity is not good. If we have to pay our workers what they deserve, they are probably over-paid already. If we have to pay them a decent salary or wage, we will probably have to lay off thousands again. If we want more people to earn a decent income, we will have to focus our attention and resources on education and training. This means increasing the standards, not like the current scenario where we are lowering the standards and pass rates. We will also have to increase our productivity. This means changing the culture of resistance to one of work ethics. We can only achieve this if we have brave, responsible and educated leaders.

      JJ - 2011-11-02 00:23

      Agree with spade. It all starts with education. Your government employees are already overpaid. Groceries are the same price or more expensiv than in e.g. Uk or sweden. 10 years ago South Africa was inexpensive - today not so much. The market will eventually correct this and severely devalue the currency.

  • Anonymous Thinker - 2011-11-01 11:22

    There is not reason for top exec's to be earning hundreds of thousands a month, while the staff earn less than 1% of that. This is why the people that deal with customers are not always of the best quality, which then leads to need the exec to sort it out. If exec's took a pay cut and lower level staff got paid properly, you'd find that less theft, less attitude and better service would become the norm.

  • Spade - 2011-11-01 11:27

    I think its a mistake to compare wages with executive packages. The real challenge and disparity lies in growing the middle class, so that they can become the majority, rather than the poor as is the case today.

      callan - 2011-11-01 11:45

      @spade, you hit the proverbial nail on the head

  • Tahir - 2011-11-01 11:37

    CEO's salaries must be regulated and workers must be given a decent living wage, there is no other way to deal with the ludicrous wage gap in SA. If you still not convinced, consider this; REAL monthly wages of workers declined by 23%, from R3558 to R2744 per month or 2.6% per annum between 1995 and 2005.

      Kailif - 2011-11-01 12:06

      And what happened to productivity indices during the same period, which happens to be the time during which affirmative action took hold and all sorts of additional costs were being added to the RSA expenditure portfolio? Not to mention how the calculation of price indices were adjusted to hide the massive rises in inflation which is borne out by the drop in real income.

      Spade - 2011-11-01 12:58

      CEO's salaries will not alleviate the wage gap. the gap exists between the poor and the middle class, NOT executives. The gap is also NOT an indication of income disparities, but of employ-ability. South Africa is becoming a welfare state, where the minority middle class must subsidize the majority poor.

  • Karien - 2011-11-01 11:40

    Skills, that's what it's all about. Top executives earn what they do because their skills are needed, and if one company won't pay them what they ask, another will. Further, these guys have the skills and experience to work internationally, so, if companies in SA won't pay them, companies in first world countries will and thus trying to curb their income through government will only contribute to the already problematic levels of the socalled 'brain-drain'. If lower level staff increase their level of contribution and thereby necessity in the respective companies, they would have a stonger argument for higher earnings.

      Karien - 2011-11-01 11:47

      Pricing low level staff out of the market certainly doesn't help the unemployment rate either.

      Kailif - 2011-11-01 12:17

      Agreed. How many people would have been employed by Apple if Steve Jobs didn't want to run the company? He is just one example and I know he worked for a dollar a year for certain reasons (he made his money from share price increases) but how many people's (low) salaries were paid the past 20 years because he was there? how many people would have been out of work if he wasn't there? The IMF is already saying RSA labour cost is costing us jobs. That's not news. A lot of people have known that for a long time already.

  • birdman - 2011-11-01 11:43

    Take my little company that I've been running fo 24 years. We currently turnover R3,5M per annum. I employ 15 staff, run 5 vehicles and we all get by just fine. The"newest" employee has been working for us for 6 years. Everyone gets a 10% salary increase each year and a double check at Christmas. All get medical and are on a pension provident fund. How can one man earn R26M per annum. What the hell does he do that constitutes him earning R2M plus per month? It's ludicrous. No-one should earn more than R2M per annum unless they run their own company. Money actually has little meaning to these people.

      Dave - 2011-11-01 11:57

      ...maybe he can walk on water???

      Spade - 2011-11-01 13:06

      Where 15 depend on you for a livelihood, thousands depend on "these people". They also have a profound impact on the economy of South Africa, and even political leaders here and elsewhere. "these people" move in circles where competition determines their price. Cut their income, and they leave the country. This will have a devastating effect on our economy, as we will undergo major disinvestment. The net result will be an ever increasing population of poor people, and ultimately nobody will "get along just fine". Look north of our borders, and see for yourself.

  • Clarence - 2011-11-01 12:01

    The only way possible is to have more people with the same level of skills. This can be achieved by government providing free higher learning education to deserving and performing students. Everyone wants to earn millions and the trick is to get the right skills and experience.

  • ADRIAN - 2011-11-01 12:03

    with this kind of disparity i wonder where SA be in a few years .....people may just "storm the Bastille"..

  • Batman - 2011-11-01 12:09

    Payment for skill and expertise? I dare say you can go to any big company and find 20 more staff who has equal or better skill. In my experience, luck had more to do with getting the top job. That and who you know.

      Karien - 2011-11-01 12:17

      Last time I checked there weren't too many MBA's running around... maybe it's just me? Besides, there 21 people you are referring to are all top executives earning large salaries in top companies.

  • Kailif - 2011-11-01 12:12

    Well, we can always look at the statistics for a country like Tanzania where there is no economy that consists of two parts like in RSA - old European and new African. Look at the disparity in executive to low level staff salaries in that country and then also look at how ineffective that country's economy is compared to RSA. If it wasn't for foreign mining companies that contribute large amounts of income to Tanzania, where would they have been? The same applies to dozens of other African countries.

  • William - 2011-11-01 12:17

    Woolworths C.E.O package does not come near that of WHITEY BASSONS package. SHOPRITE CHECKERS is paying WHITEY the highest of any company, and the store staff who make the money are all payed the dregs!!!!! ask any of them.

      Mark - 2011-11-01 12:53

      Pity his name has to be Whitey :)

  • MarkC - 2011-11-01 12:45

    Only way to close wage gap is to close education gap. ANC government has not only failed to do this in 17 years it has actually managed to increase the gap. Some cynics might suggest this is intentional.

  • BigAl - 2011-11-01 13:03

    In many cases, the directors do far less than other workers. Often, they take wrong decisions, only to have the other workers cover up or fall in line. The so-called 'skills' cost the companies millions. It would be better to pay them a salary in line with other employees, and give them shares, so that their earnings are in line with their performance. In this way, they are rewarded according to what they do. Further, by saying that they can go to other countries and be paid similar salaries, this is not always the case. There are much fewer executive positions, so it is not possible to place all of these individuals. Also, if the wage disparity in other countries is much smaller, then the salaries of executives will not necessarily be as high. Just look at a country like Australia, with minimum wage vs executive salaries. By paying the executive such high salaries, you give the unions more reason to strike for huge, unsustainable annual increases.

      Karien - 2011-11-01 13:25

      I think it's pretty safe to say that the CEO of Woolworths, as an example, would have little trouble finding a high paying job overseas. Secondly, the lions' share of his income came from a bonus paid to him for a substantial increase in share prices, and therefore is performance linked remuneration for a job well done. Thirdly, the unions keep on inciting strikes for unreasonable increases anyway, and they are largely responsible for large companies having to retrench staff and limit employment levels simply because SA workers are too expensive.

  • Highblood - 2011-11-01 13:35

    How do they honestly sleep at night knowing that they get paid such large amounts of money whilst their own company employees barely make ends meet at the end of the month ? When will CEO's honestly care for each and every employees well being ?

  • Lynn - 2011-11-01 13:42

    Most comments are about the salary of one person, the Woolworths CEO. We should rather consider what can be done to raise the salary levels at the other end of the scale AND increase the number of people employed. There are just over 100 companies listed on the JSE so that how few senior jobs are available. We should rather apply our minds to the 10,000,000 jobs that exist lower down. The contribution to economic growth will be felt much more by raising economic value added and salary earned.

  • John - 2011-11-01 14:01

    People its all about a free market system. SUPPLY AND DEMAND! There is a huge supply of entry level personal and almost no supply of CEO's. Work it out???

  • kgalalelo.malesele - 2011-11-01 15:02

    you all have to stop this crazy thing of supply and demand.....its all selfishness made to look good and fair in the eyes of everyone and in the process this is making everyone develop selfish tendencies...corporations that pay their executives so much tend to forget the most important people that bring the most to the sustenance of such particular corporation and the end results are a non-caring, angry and selfish staff that wait for month end......stop this rubbish of supply and demand and concentrate on fair play

      Karien - 2011-11-01 15:13

      That is entirely dependant on one's personal perspective of 'fair play'. The fundamental idea behind a free market system is that one is paid in accordance with the value of your contribution to the welfare of others in work, goods, property etc. When you pay someone you cast a vote for what that individual/company/institution provides in value to you. The CEO's provide great value in management to companies and are paid accordingly by the companies, by the companies' choice. Free market democracy. If the workers provide more in value, companies would willingly pay more for their higher valued contributions.

      Karien - 2011-11-01 15:15

      Not wanting to provide value in skill and hard work for higher wages is selfish.

      Colin - 2011-11-09 11:54

      fair play would mean no work no pay and by work i mean work and not a job where you sleep the whole day and still get a paycheck end of the month

  • Dave Martin - 2011-11-01 15:54

    Our CEO's love to compare worker salaries with those in China. Yet in China CEO's of massive companies far bigger and more complex than in SA earn an average of R140,000 - R500,000 per year. If workers must earn Chinese salaries, then so must CEO's. The CEO mobility issue is mostly a myth. Perhaps a few of the monster company CEO's can move to a CEO job in a similar size business overseas, but CEO's of medium sized SA companies are not going to be viewed as anything special in large first world markets where there are millions of highly educated people... Call their bluff and lower their salaries.

  • JJ - 2011-11-01 23:16

    It's supply and demand silly. With such a large portion of uneducation and unskilled worker what do you expect the entry level salaries to be? Take garbage collectors in Sweden probably the highest paid non educated workers with up R40K per month due to working odd hours and weekends. Can SA afford to pay that? No - you need efficiency - you can't have 8 workers per car - Sweden don't have inefficient petrol attendant - what salaries are those ppl supposed to get compared to petrol CEOs? Wake up - education and skill is the answer!

      JJ - 2011-11-01 23:24

      Classic comment : Wake up! It's the economy stupid. I am working as an it consultant and earn up to GBP 600 per day. I worked hard all m life from studying at university and starting my own company and further my skills. It was my choice and I've done well for myself. There is always going to be jealousy. Change your mind and see it as an opportunity. Can JJ so can I.

      JJ - 2011-11-02 00:17

      I had to re-skill three times so far in my career. Do you have the energy?

  • baudtin1 - 2011-11-02 11:17

    A Co-Pilot in a US regional airline earns less than a greyhound bus driver(roughly $1600 a month) And thats a skilled job!!! Demand & supply!!!! Im a junior pilot and I earn less than 9k a month here in RSA Demand & supply!!!!

  • Mogomebad - 2012-10-30 15:09

    not yet uhuru!only true revolution can liberate us.

  • ChickExam - 2012-12-11 17:49

    The only difference is education and experience that value you income.

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