Distinguishing pay and income: Section 27 of Employment Equity Act

In the context of section 27 of the Employment Equity Act 55 of 1998 (EEA) in South Africa, which deals with income differentials and disproportionate income gaps, it’s important to understand the difference between “pay” and “income”, as this impacts how employers must measure and report equity, and avoid unfair disparities.

In the context of section 27 of the Employment Equity Act, “pay” refers specifically to remuneration and benefits provided by the employer—such as salaries, bonuses, and allowances—whereas “income” is a broader term that includes all earnings from any source, including investments or outside business interests. The Act is concerned with avoiding unfair disparities in pay, not overall income. Employers are therefore required to assess and address disproportionate pay differentials within the workplace, particularly where they may reflect unfair discrimination or unjustified gaps between occupational levels.

 

🔍 Key Distinction: Pay vs. Income

Term Definition Example
Pay (also called remuneration) Refers to regular earnings paid by an employer, such as salary or wages, bonuses, overtime, and benefits (car allowance, medical aid, pension, etc.). A monthly salary of R30,000 plus R5,000 car allowance.
Income A broader concept that includes all forms of monetary gain, not just from employment. This includes pay, but also income from investments, rental properties, side businesses, etc. Pay (R35,000) + rental income (R10,000) + dividends (R2,000) = R47,000 total income.

⚖️ In the Context of Section 27 of the EEA

Section 27 requires designated employers to:

  • Audit their employment policies, practices, and remuneration systems to identify disparities.
  • Submit a statement of remuneration and benefits received by employees in each occupational level.
  • Take measures to reduce disproportionate income differentials, if present.

This section aims to promote equity in pay structures, especially where disparities are linked to race, gender or other unfair discrimination grounds.

Why the Distinction Matters:

  1. Focus of the Act:
    • Section 27 focuses on “remuneration and benefits” – that is, pay, not general income.
    • Employers are not expected to equalize total income (which may include private investments or inheritance).
    • The concern is with employer-controlled disparities, not external sources of income.
  2. Equity and Comparability:
    • When assessing equity across job levels or between demographics, only pay is relevant — because only pay is influenced by employment policies and decisions.
    • For example, if a male and female employee in the same role receive different pay packages, that’s a pay equity issue.
    • If one earns more due to outside investments, that’s not the employer’s responsibility.
  3. Avoiding Disproportionality:
    • Disproportionality here refers to gaps in pay between occupational levels or demographic groups that cannot be justified by legitimate factors (e.g., skills, scarcity, performance).
    • For example, a 10:1 CEO-to-worker pay ratio may need justification; if the gap is 100:1, it raises red flags under s 27.

✅ Summary

  • “Pay” = what the employer gives the employee (salary, benefits, etc.).
  • “Income” = total money earned from all sources (pay + other sources).
  • Section 27 of the EEA is concerned with pay disparities, not total income disparities.
  • Employers must ensure equity in pay structures, especially to eliminate unfair discrimination and excessive differentials that are not performance- or skill-based.