“When the Employment Equity Act was being negotiated in 1997, a most unusual provision was inserted at the insistence of the trade union side.  This became section 27 of the EEA, which states that every designated employer must submit an annual statement to the Employment Conditions Commission ‘on the remuneration and benefits received in each occupational level of that employer’s workforce’.  Where disproportionate income differentials are reflected in the statement, the employer ‘must take measures to progressively reduce such differentials’.”

This is an extract from Prof Darcy du Toit’s editorial in May 2015 on IR Network published by LexisNexis and entitled  Inequality, low wages, growth and section 27 of the Employment Equity Act [subscription required].

In a recent post entitled Pay differential: proportionality without a wage gap the following was stated:

“Our labour laws require all enterprises to create constant proportionate pay and work frameworks based on seven occupational (work processing) levels.  Pay has to be aligned with the work done or contribution of each employee.  It is unreasonable to expect enterprises to ‘reward’ employees for ‘inputs’ that do not add extra value.  Unless a qualification or long service adds additional value, or there is a shortage of those skills in the market, there is no point in paying ‘premium’ wages to employees.  This is the value exchange equation.  South Africans expect to live in a free and competitive market.  Any premium paid must be earned by offering premium value.  It is unfair and unreasonable to suppose that consumers will pay for the cost of unnecessary premium wages, or to assume that entrepreneurs will cut their return on investment.  There is no other way of funding that premium.”

In commenting on the recent amendments to the Employment Equity Act Darcy du Toit had this to say:

“The new reporting format will certainly make it easier to see whether (say) black female managers are earning less on average than white male managers.  If the differential is deemed to be “disproportionate”, the employer will need to take measures to reduce it.

However, it will also reflect the differential between (say) “Top Management” and “Unskilled” (which section 27 was originally about).  International comparison may well show that these vertical differentials are “disproportionate” in many South African companies.  If so, employers will be under a duty to address them, in the first place through collective bargaining.

Ironically, this duty exists regardless of whether trade union bargaining partners raise the relevant demands or not.  If they do not, it is legally incumbent on the employer to place it on the agenda.

This is no doubt a far cry from the real world of labour relations, where employers or trade unions do not take on obligations unless they have to (read: are compelled to by a court order which may be taken on appeal all the way to the Constitutional Court).  But it is less far removed from the world of market realities, market distortions and market corrections (which is one of the several functions that labour law is seen as performing).

Assuming the dynamic originally envisaged by section 27 were allowed to unfold, it is possible to imagine progress towards a society marked by less explosive inequalities, greater purchasing power and greater growth potential.  Assuming we stay with the belief that low wages spell economic progress and section 27 of the EEA is only concerned with horizontal income differentials, on the other hand, we can expect more of the same.”

View earlier posts for more information

Wage gap: gaffes over differentials

There is a general misconception about what is referred to as the ‘apartheid wage gap”.   There is no doubt that in the early 1970s the wage structure discriminated against employees of colour.

Flawed EEA9: 7 occupational levels needed

EEA 9 is flawed with six instead of seven occupational levels.   In any event all jobs in the top two levels never exceed 2% of all jobs in an organisation.   In addition the inherent job requirements at these top levels cannot be determined by demographic considerations.

Measuring pay: Internal equity & external parity

Measuring ‘external parity’ and ‘internal equity’ is an essential function of management.   Section 27 of the Employment Equity Act of 1988 creates a framework (EEA 9) obliging the management of every designated employer to state the remuneration, including all benefits, in each occupational level of the business, from top to bottom, to ensure there are  proportionate income differentials in the business.

CCMA facilitators should offer EEA solutions

According to a press report Sibanye Gold is considering closing a mine shaft with the possible loss of 2,500 jobs.   Our labour laws do not prevent management from dismissing employees for reasons based on ‘operational requirements’.   That is apart from the right to dismiss for a fair reason related to conduct or capability.   But there are conditions and procedures.   It could be now or never for management to integrate the goals of employment equality with  operational requirements.   Hopefully CCMA facilitators will inform managers about the need to adopt occupational  frameworks, as provided by the Employment Equity Act (EEA), coupled with the need for rational and proportional pay structures based on the concept of ‘equal pay for work of equal value’.

Minimum pay: Ministers = 34 and farmers = 13 times

To illustrate the importance of applying labour law correctly, in 2012 the annual earnings of government ministers were R2,006,292 and the public service minimum pay was R59,226.  Ministers earned 34 times more than entry-level public servants.  At the quoted annual entry level of R30,275 for farm owners they only earn just over 13 times more.

Value exchange: decent work and worth

A Member of Parliament is classified as a job level 11 and in 2010 earned R802 873 – regardless of length of service in the 5 year political cycle.   By comparison the equivalent pay range for a job level 11 doctor is R643 065 to R780 400 and an individual will qualify to enter this range on various promotions and continuous service of between 13 and 18 years post graduation.   Most doctors regardless of job levels and service, are not earning anywhere near R780 000.

Value exchange: equal and comparative justice