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.