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June – December 2020

Equal pay for equal work: How does South Africa measure up?

Equal pay for equal work: How does South Africa measure up?

By Prof Anita Bosch and Shimon Barit

  • DEC 2020
16 minutes to read

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Mind the gap
The International Labour Organization (ILO) has had conventions for equal remuneration and non-discriminatory employment practices in place for over 60 years. Despite this, there is still a gender pay gap in industrialised countries, and an even greater one in developing countries.

South Africa has various pieces of legislation aimed at preventing gender discrimination in the workplace. Yet, the country has a stagnant median gender pay gap of between 23% and 35%. According to the ILO, the average global gap is about 20%.

South Africa has various pieces of legislation aimed at preventing gender discrimination in the workplace. Yet, the country has a stagnant median gender pay gap of between 23% and 35%.

The gender pay gap – or the difference in wages between men and women for the same type of work or work of equal value – is therefore a stumbling block in achieving gender equality in South Africa. It seems to affect women in the middle and upper wage bands the most.

This is where pay transparency – making gender differences in wages known to employees, government and the public – can force employers to remunerate fairly and equally.

The gender pay gap – or the difference in wages between men and women for the same type of work or work of equal value … seems to affect women in the middle and upper wage bands the most.

How can we increase transparency in gender pay in South Africa? What do legislators, activists, board members, trade unions, academics, and organisational leaders need to know about transparency mechanisms to support efforts in this regard? What are other countries doing about this?

This article – based on the journal article titled Gender pay transparency mechanisms: Future directions for South Africa by Prof Anita Bosch and Shimon Barit – provides guidelines that can help.

The South African pay gap picture
In Africa, South Africa is ranked first on the Africa Gender Equality Index. Globally, South Africa is ranked 19 among 149 countries on the Gender Gap Index. But the details tell a different story: South African women’s economic empowerment is troubling. When we look at household composition, we start to understand why the country’s gender wage gap deserves attention as a factor in gender equality issues.

This is where pay transparency – making gender differences in wages known to employees, government and the public – can force employers to remunerate fairly and equally.

In South Africa, around 38% of households are headed by women. Female-headed households are approximately 40% poorer than those headed by men. Also, 48% of female-headed households support extended family members compared to 23% of male-headed households doing the same. In addition, women have to handle the following: supporting children, earning less than men, coping with domestic violence (which is alarmingly high in South Africa), and struggling with access to resources to improve their lives. This means power relations are skewed in favour of men.

In South Africa, the private sector labour market is largely market-driven. When there is greater reliance on the market, the impact of pay distortions may be increased as the role of transparent criteria, as enforced through regulatory rules, is reduced.

How do other countries measure up?
To find out what the bigger picture looks like in terms of wage transparency, this study started off with internet searches for ‘gender pay gap public reporting’ and ‘gender pay gap transparency’. Additional searches were also done, and various databases were consulted.

In South Africa, around 38% of households are headed by women. Female-headed households are approximately 40% poorer than those headed by men.

Over and above South Africa, 16 countries were selected to form part of this study. Employers in these 16 countries have to adhere to some form of legislated gender wage transparency. The countries are: Canada, Australia, the Scandinavian countries, the United Kingdom (UK), and countries identified by the European Commission (EC) of the European Union. Interestingly, the USA was not included in the study as no reporting mechanism has been introduced by the Trump administration.

In these countries, the implementation of the reporting mechanisms followed one of two routes: Blanket implementation by all qualifying companies, regardless of size, from the date imposed by law, or a phased implementation.

The selection of qualifying employers determines the scope of the implementation of gender pay enforcement mechanisms. This means the nature of the selection determines how much of the workforce is included in the mechanism’s ambit. This study looked at the size of the workforce (i.e. number of employees), whether it was a private or public company (most countries do not differentiate between public and private employers), and whether the company published an annual report or not

Reporting as a transparency mechanism
Wage transparency constitutes what is known to others about wages, beyond what is known to the employer. But policies and measures to reduce gender pay gaps need to be monitored and reported on so that the world has benchmarks for comparisons and proposing a way forward.

Wage transparency constitutes what is to others about wages, beyond what is known to the employer. But policies and measures to reduce gender pay gaps need to be monitored and reported on so that the world has benchmarks for comparisons and proposing a way forward.

In this study, gender pay reports were compared in terms of reporting (report, survey, audit, etc.), the reporting period, and the report’s intended audience. For example:

  • What is being reported? In France, employers only have to publish information on the size of the gender pay gap on their website. In Denmark, reporting takes the form of information submitted to Statistics Denmark; the data is then gender-segregated and returned to the employer, and employees also have access to this information. In India, companies are mandated to compile a register of employee data, including the number of men and women employed, their remuneration, and a breakdown of the components of remuneration, but there is no obligation to report this information.
  • What is the frequency of reporting? Most companies were required to provide annual reports.
  • Who was the reporting aimed at? The study also looked at the target audience of the reporting mechanism – was it meant for an internal audience (employees) or an external audience (the company website, trade unions, regulatory bodies and/or the public)? In six of the 16 countries the reporting was public facing. In four countries, it was only available to local union representatives, while in other countries it just had to be available for inspection by government authorities.
  • What indicators or measures were used? What is actually reported on is crucial to understand the nature of the gender wage gap in a particular country. The gap may be present in only certain occupational levels or industries, or within different components of a remuneration package. One common measure reported on is the employer’s gender pay equity objectives and policies. In some countries employers have to report on the actual remuneration and bonuses paid to male and female employees, as performance bonuses and variable pay may contribute to the gender wage gap to a greater extent than base pay.
  • What happens in case of non-compliance? Non-compliance can refer to not reporting or to non-compliance with the obligation to pay women the same as men for work of equal value. Penalties in the countries studied ranged from public naming and shaming to fines.

Mechanisms currently used in South Africa
Guidance on fair remuneration is provided in the Constitution, the Promotion of Equality and Prevention of Unfair Discrimination Act (PEPUDA – promoting ‘equal pay for equal work’, saying the state has a duty to intervene in the case of unfair practices), and the Employment Equity Act (EEA). There is also the King IV Report on Good Governance, which says a company’s board must approve reports on and the implementation of its remuneration policy, which should reflect that ‘the organisation remunerates fairly, responsibly and transparently’. The King Report is mandatory for  JSE-listed companies.

A way forward
The authors of this article made a number of recommendations for South Africa to find a way forward in terms of fair pay for all genders:

In some countries employers have to report on the actual remuneration and bonuses paid to male and female employees, as performance bonuses and variable pay may contribute to the gender wage gap to a greater extent than base pay.

Firstly, make it legal. Pass laws at regional and national level that place a duty on employers to give men and women equal remuneration for the same or similar work, or work of equal value. South Africa achieved this requirement with the implementation of Section 6(4) of the Employment Equity Act. Including both public and private organisations in mandatory reporting helps to identify patterns in gender wage gaps, and can be used to formulate policies aimed at closing the gap. However, the EEA addresses mainly pay discrimination at the individual job level.

While the EEA’s Income Differential Statement (IDS) serves as a preliminary mechanism to flag inconsistencies regarding a number of intersectional wage differentials at aggregated level, the format of the data only enables national comparison in certain occupational categories. Legislation specifying the duties of employers and penalties for non-compliance, as seen in Belgium and Sweden, is the preferred method to promote pay transparency and equality. This is an area in which South Africa can improve.

Secondly, penalise non-compliant employers. Penalties for non-compliance with stipulations serve as another effective transparency mechanism. It is recommended that a financial penalty be levied for unjustifiable and stagnant gender pay gaps among the employees of the same employer – one that is sufficient to act as a deterrent to non-compliance.

Penalties in the study countries ranged from public naming and shaming to fines.

The EU’s European Commission provided a benchmark of four mechanisms that South Africa could employ:

  • Make annual pay reports available: Refine the annual reporting obligation on gender-segregated average remuneration for medium and large companies already targeted by the EEA. Reporting that is too generic, as is presently the case with the IDS in South Africa, conceals structural inequalities, leaving policymakers to apply a one-size-fits-all approach instead of targeted solutions. Gender-specific reporting covering the main infliction points in the wage distribution could inform policies to close the gap in listed companies. Acknowledge an employee’s right to query another employee’s pay: The European Commission recommended that employers regularly communicate pay report information to employees or trade unions or other representatives. This is absent in South African legislation, and should be considered. Also, employees should be educated in remuneration principles and practices in order to limit misinformed queries and ungrounded discontent and disputes. A pay report that specifically provides gender-segregated pay information could be used as a precursor to an employee’s right to request pay information. However, an employee’s right to query another employee’s pay, could be problematic in South Africa due to a person’s right to privacy and confidentiality.

Implement pay audits at the level of the employer: The key differentiator between an audit and a pay report is the analysis of pay gaps found in the former. Such analyses can help to pinpoint problems and help with the development of targeted countermeasures. Ensure that companies discuss equal gender pay during collective bargaining: It is recommended that companies discuss equal gender pay, including pay audits, during collective bargaining. The effectiveness of this measure depends on the development of collective bargaining in a specific sector. The more developed the collective bargaining structures are and the more unionised the workforce is, the easier it will be to implement this measure.

… employees should be educated in remuneration principles and practices in order to limit misinformed queries and ungrounded discontent and disputes.

Conclusion
The authors found that South Africa could strengthen legislated transparency mechanisms, especially with regard to pay reporting and pay audits. Reigniting the debate on improving the country’s legislation and interpretation of existing governance codes in relation to the implementation, monitoring and enforcement of gender pay transparency mechanisms could provide the impetus to demonstrate that South Africa sees gender equality as an achievable reality, not an improbable ideology.

  • Find the journal article here: Bosch, A., & Barit, S. (2020). Gender pay transparency mechanisms: Future directions for South Africa. South African Journal of Science, 116(3-4), Art. #6772, 6 pages.
  • Prof Anita Bosch holds the Women at Work Research Chair at the business school.

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