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2022 brings big changes in governance and remuneration

13/4/2022

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Dr Mark Bussin, EXCO member of the South African Reward Association (SARA), says that powerful international trends are changing the governance and remuneration landscape significantly.

“These trends are ushering in a profound shift in how we think about governance and remuneration, and smart boards and executive teams need to understand their implications,” he says. “Many of them are developing trends, so companies will need to keep their eye on the ball, and develop flexible strategies to respond to a shifting set of variables.”

Dr Bussin says that while there are multiple trends, the following are the most important as they represent key directional shifts:

Institutions and regulators flex their muscles
Underlying many of these trends is the indisputable fact that both institutional investors and regulators are getting much more specific about what they want from companies in which they are invested. In particular, advisors like Lewis Glass and Institutional Shareholder Services are gaining more influence as they provide advice to large clients, and their agendas are thus gaining traction. Key agenda items include ESG and human capital measurement.

ESG becomes a board matter
Environment, social and governance (ESG) reporting has become mandatory globally. “The move to include non-financial metrics is positive, as it supplements traditional backward-looking and quantitative financial metrics with a new set that are essentially forward looking and qualitative,” he argues. “However, measurement is much more difficult and there’s no real objective way of doing it yet.”

Human capital reporting grows up
Another move to a more qualitative approach sees traditional reporting based on figures relating to gender and race being complemented by a deeper look at how the company is managing its talent. “We’re looking beyond numbers-based affirmative action to consider things like dignity, respect and, above all, inclusivity,” Dr Bussin says.

Pressure to simplify remuneration
Variable remuneration frameworks designed to drive performance have become so complex that that it has become virtually impossible to establish what anyone really earns, and so benchmarking cannot be done.

Focus on the vertical and horizontal pay gap continues to grow
The vertical pay gap—the CEO’s salary compared to that of the lowest paid worker—seems less and less useful as a measure. The top jobs are becoming more and more complex, and so attracting higher wages, while the lowest remain static. “The vertical pay gap will continue to widen and, in any event, redistributing the CEO’s salary to workers would make absolutely no impact,” says Dr Bussin. “For that reason, companies are moving towards paying a living wage (rather a minimum wage) to all employees as a way to make a real impact on people’s lives.”

The horizontal pay gap—also known as the gender pay gap—remains a highly controversial issue. The global average is in the region of 25% whereas in South Africa it falls into the 10%-20% range. While the issue is not as clear cut as it might seem—other factors such as genuine parity of the work done and differing work/life priorities play a role—this is something that is receiving more focus.

Work-from-anywhere trend raises significant issues
Remote working has been growing in popularity over the past decade or so, strengthened by the recent lockdowns. On the governance side, this work style will demand a move from input-based to outcome-based performance management. Getting this right will surely only be a matter of time, but the tax question is more vexing: to whom would a consultant living in country A and working for multiple clients in various other jurisdictions pay tax? No firm answer to this question exists as yet.

A related issue is the growing number of contractors, freelancers, part-timers and consultants: what kind and level of benefits are they entitled to receive? If the answer is none, then should they not be paid a premium?

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, rosa-mari@atthatpoint.co.za, 060 995 6277, www.atthatpoint.co.za 
For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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SARA calls for centralised remuneration committee for SOEs

7/3/2022

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The litany of serious governance failures laid bare in the published elements of the Zondo Report is a wake-up for South Africa, and remuneration issues are at the heart of the problem—and it’s solution, argues Dr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA).

“In many instances, inappropriate remuneration is the coalface of corruption and incompetence in our state-owned enterprises (SOEs) because, after all, it boils down to money,” he says.

“If we sort out remuneration, we are half way to putting our SOEs back on the path for growth, with tremendous knock-on benefits for the economy as a whole.”

A major contributor to the problem comes from the way in which Ministers often appoint CEOs directly. Best practice as recommended in King IV’s Supplement on SOEs advises that Ministers only appoint CEOs from a shortlist compiled by the board.

Bypassing the board reduces it—and its committees, including the remuneration committee—to a mere rubber stamp. A CEO that is appointed directly by the Minister is in a position to instruct the remuneration committee to approve unjustified and excessive pay hikes and bonuses as has been done in numerous SOEs.

Another key issue that emerges from the Zondo Reports is the negative impact of cadre deployment. With political connections counting more than competence or ethics in many of these deployments, many remuneration-committee members are incompetent even if they are not actively corrupt.

This means they cannot properly interrogate remuneration benchmark studies and ask the right kind of searching questions.

“In fact, these incompetent but politically connected individuals can easily be led to a foregone conclusion,” he says.
Dr Bussin believes that too many board members rely on their emoluments from a single board, inclining them to adopting a passive role when it comes to controversial issues, such as the perennially vexed question of executive pay.
To preserve their independence, non-executive directors should not be allowed to earn more than 20% of their income from one company, he says.

“The real culprit here is cadre deployment which simply loads overheads onto companies for scant benefit. One way to attack this problem would be simply to do away with individual SOE remuneration committees, and institute a central one under the auspices of National Treasury,” he says.

A similar approach was evident in President Ramaphosa’s 2022 State of the Nation, which indicated that moves were afoot to implement a centralised shareholder model for SOEs to improve governance. Many commentators pointed out that in essence the plan suggests that the only way to bring the sector under control is to impose governance from above.

A centralised remuneration committee would immediately eliminate the need for hundreds of expensive board posts—a quick win for cash-strapped SOEs.

“More important still, this approach would re-establish the link between remuneration and executive performance and value delivered to the company. It would also make being a deployed cadre much less attractive to incompetent and corrupt individuals,” Dr Bussin concludes.

“Centralising remuneration could be accomplished easily and the payoffs would be large and immediate.”

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, rosa-mari@atthatpoint.co.za, 060 995 6277, www.atthatpoint.co.za 

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association

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What is Still Driving the Gender Wage Gap?

5/8/2021

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The underlying causes and current barriers of the gender pay gap are often misunderstood, says Dr Mark Bussin, Master Reward Specialist and Executive Committee Member of the South African Reward Association (SARA). With Women’s Day coming up, it is appropriate to point out that the gender pay gap in South Africa has been between 15 – 18% for many years and while South African legislation and company policies have been put in place to address the issue, the statistics aren’t changing speedily enough.

“Section 6 of South Africa’s Employment Equity Act was implemented several years ago and it stipulates that companies may not discriminate in terms of remuneration; they are legally obliged to offer equal pay for work of equal value. In America and Canada, similar legislation has been around since the 1960s, but the gender pay gap in these countries still exists. Legislation isn’t solving the problem and this isn’t a uniquely South African problem,” says Bussin.

Many companies have openly stated their commitment to gender pay equality and regularly review whether they are paying equally for equal work, but this isn’t having an effect on the gender pay gap either.

Legislation isn’t Bridging the Gender Pay Pap
“The only thing that has changed is a heightened awareness of gender pay discrimination. Company remuneration policies and legislation has been around for years, and it isn’t bridging the gender pay gap. A major underlying cause is the power of prejudice,” says Bussin.

Bussin says that many prejudices exist about women in the workplace. Companies have down-sized, right-sized and are leaner than ever before, but leading recruiters and HR professionals tend to be even more wary about hiring or promoting a female candidate. Maternity leave, time spent away from work to care for children, or the possibility of a new mom deciding to not return to the workforce after childbirth, are still scenarios that are ingrained in the minds of people in power positions. This has given rise to a new term I call the “mommy gap”. Women may never catch up to men once they have had a child – the gap stays with them in perpetuity.

“Unfair assumptions and scenarios such as these still count against women. Whether recruiters, HR managers and directors are open about their prejudices or not, these prejudices still exist in the back of their minds,” says Bussin.

Questioning and Negotiation
Adding to the challenge is that women are less likely to question the salaries that they are offered and less likely to negotiate better pay.

“Recruiters and HR managers may subconsciously assume that they can pay a woman less because she might have a partner that helps support her and her household. Women, in turn, are part of the problem because they trust that the remuneration that they are being offered is fair, when they should actually be researching market related salaries as well as the company’s pay scale, and be advocating for fairer pay,” says Bussin.

Bussin says that company directors should be concerned about the gender pay gap for a number of reasons. Not only can discriminatory pay be damaging to their brand, but it can negatively impact their businesses in a number of ways.

“If a case about gender pay discrimination makes its way to court, the CCMA or the media, it could be very damaging to your brand. Not only do employees want to work for a company that remunerates fairly and sustainably, but it’s also good governance. It’s simply the right thing to do,” concludes Bussin.

ENDS

 
MEDIA CONTACT: Idele Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
 


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COVID-19’s impact on fixed and variable pay: where we are now

19/5/2021

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Authored by: Dr Mark Bussin (Master Reward Specialist) and Yolanda Sedlmaier (Chartered Reward Specialist), Executive Committee Members of the South African Reward Association (SARA)

Before COVID-19 hit the world, the approach to reward was well defined. Organisations paid their employees a fixed basic salary, plus a set of additional benefits that effectively sweetened the pot.

The fixed portion served to ensure workers received an equitable market-related income. The variable portion, on the other hand, extended into performance related rewards such as sales commissions and annual bonuses.

Variable pay itself is categorised into two components. Short-term incentives (STIs) are attached to annual performance. Long-term incentives (LTIs), like company shares, are often contingent on employees meeting negotiated performance criteria.

At the same time, employers were embracing experiential rewards, like wellness programmes, workplace comfort, flexitime, outstanding performance recognition and other non-financial benefits.

The pandemic has turned this model on its head, forcing employers to consider different ways to attract, retain and motivate talented workers, and this without the resources previously at their disposal due to the wide ranging economic impact of the pandemic.

How fixed pay has changed
There have been no permanent changes in fixed pay policy itself. However, with so many staff being retrenched and businesses closing down, employees are more willing to accept the pay cuts their employers are forced to implement. It is obviously better to have less income than no income at all.

What has changed is that employers are offering more options. These could include flexible working hours, paid or unpaid sabbaticals, or reduced hours for reduced pay.

Something we are seeing, however, is a global trend towards lower variable pay in exchange for a small increase in monthly fixed pay. This is to provide the security employees need in the short term, although its adoption is not as prevalent in South African boardrooms, although we expect it will be in the near future.

How variable pay has changed
Variable pay is generally accepted to be that part of the reward package more readily tweaked to motivate employees and encourage better performance from them.

Now, with almost all employers struggling to save jobs and keep their doors open, they face limited options.

Most have managed to retain basic benefits, like medical aid and retirement funding. What has been more affected is incentives, such as sales commissions, overtime, annual bonuses, and even executive performance bonuses.

With the global business slowdown, workers are unable to reach previously achievable targets, so employers aren’t earning the profits needed to reward them.

To date, most organisations have been unable to innovate their reward programmes. They’ve been too busy trying to cut costs and negotiating with employees to choose between retrenchments or pay cuts. Unsurprisingly, workers generally opted for a lower salary over the uncertainty that they might be the ones left without a job.

Productivity
In spite of these dramatic events, many companies report an increase in productivity. This is due to flexible working arrangements allowing employees to save time and money not travelling to the office.

It’s also an indicator that employees who are allowed to schedule their own time will do so responsibly. They can start working immediately and will often put in additional hours to make up for time spent on personal tasks. These might include caring for children, home schooling and homecare duties, or transporting them to school and back.

Stay-at-home employees also insist they are working longer and harder than ever before.

The effect of vaccination on rewards
As vaccinations start rolling out in South Africa, we don’t expect this to have a direct or immediate effect on rewards.

However, the more South Africans are vaccinated as a society, the quicker employees can return to work full time, and the sooner secondary effects will be realised, like the return of tourists to our shores.

As this happens, we can expect a gradual economic recovery that should have a positive effect on employee reward packages.

Two main trends
In terms of their workforce, employers are focusing on two main concerns.

The first is a complete review of their HR policies in relation to dealing effectively with and setting pay for workers who are not located on premises. These new policies are no longer founded on inputs and time spent at the place of business. Instead, they consider the outputs, outcomes and impact of these workers, and how to prepare managers to lead them remotely.

The second is that we’re witnessing a major shift towards protecting employees’ mental health and well-being, and assisting them with professional loneliness. As the pandemic drags on, this will doubtless become a key element of every organisation’s reward strategy.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za 

For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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Supporting mental wellness in the COVID-19 era workplace

24/3/2021

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COVID-19 has brought greater stress to the world of work.

According to Dr. Mark Bussin, Master Reward Specialist and Executive Committee Member of the South African Reward Association (SARA), employers need to realise that their workforce is under immense pressure.

“Protecting mental wellness in the extended workplace is as important as other occupational health and safety measures,” he says.

The “extended workplace” refers to the virtually integrated on-premises, remote and work-from-home locations over which employees now find themselves spread.

Mental hazards
The World Health Organisation (WHO) says that “Mental health is a state of well-being in which an individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and is able to make a contribution to his or her community.”

However, modern workers face a range of hazards that can severely impact their mental well-being and, by extension, their ability to do their best work.

For those working from home, it may be dealing with professional pressures while caring for house-bound children. For those on-premises, it could be the risk of being in close proximity to potential COVID carriers and the threat of becoming infected.

A stressful working environment, isolation, discrimination and inequality, domestic violence and many other factors can all contribute to employee distress.

“Companies who do not focus on promoting mental wellness stand to lose not only profits but also their reputation as employers of choice,” says Dr. Bussin.

Flexibility
When the going gets tough, tough leaders get going. It’s in their nature to meet threats with tireless effort and unrelenting focus.

Unfortunately, they often demand the same from a workforce not blessed with their mental fortitude.

“Maintaining profits is important but driving stressed employees harder will only demoralise them and cripple their productivity,” says Dr. Bussin. Leaders need to slow down and consider how to motivate their workers intelligently.

Education
Organisations must educate themselves on the best approaches to creating a supportive extended workplace. First and foremost, they should institute an educational programme to help employees understand mental wellness, how to respond effectively to stress and how to develop personal resilience.

“Use the same technologies that have kept companies running during lockdown to provide on-demand information and professional counselling to the remote and in-house team,” advises Dr. Bussin.

Personalisation
People are not equally affected by conditions and do not respond identically to pressures. So employers should avoid a blanket approach to preserving mental wellness.

Instead, they need to consider the unique circumstances of individual employees and their personal capacity to cope with adversity in life. Single people working from home might benefit from being included more in virtual meetings whereas single mothers on-premises may be grateful for flexible working hours.

“Creating a customised work experience around mental wellness may be the best thing employers can do right now for their workers,” says Dr. Bussin.

Mental rewards
Just as employers are judged by their support for equality, fairness and safety in the workplace, their reputation will now be determined by how sincerely they promote their workers’ mental wellness.

Reward practitioners can help them devise a corporate mental wellness offering as a core benefit for attracting, retaining and motivating employees.

“Employers unable to offer the same packages as before can make up for it by providing the peace of mind and coping mechanisms their staff earnestly need to keep going,” says Dr. Bussin.

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za 

For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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COVID-19 exposes gender inequality beyond pay gap

18/2/2021

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The National Income Dynamics Study – Coronavirus Rapid Mobile Survey (NIDS-CRAM) is a study tracking income, employment and welfare in South Africa. The report reveals that women have been hardest hit by the impact of COVID-19 lockdowns.

“Although survival and saving jobs is paramount, equal pay initiatives within organisations have not been forgotten,” says Dr Mark Bussin, Master Reward Specialists and Executive Committee Member of the South African Reward Association (SARA). “However, we need equity programmes that extend beyond the enterprise.”

The current economic slump has affected women so badly, it has been dubbed the “shecession”.

Job losses
The NDIS-CRAM survey reports that, of the three million jobs lost between February and April 2020, two million had been held by women. Between April and June 2020, employment increased by 3.2% (220,000 jobs) for women and 3.5% (320,000 jobs) for men. Yet, in June 2020, women remained well behind men in returning to pre-COVID employment levels.

Income support
According to the study, 57% of those unemployed in June 2020 were women. However, they accounted for only 41% of TERS/UIF-TERS beneficiaries and only 34% of those were paid the Social Relief of Distress Grant (SRDG) in that month.

Industries
The report suggests a number of contributing factors to the high level of unemployment among women. For one, many industries with high female employee counts were forced to reduce staff during the lockdown. These include childcare, personal grooming and hospitality. Another is their being employed in jobs where working from home is not possible or not being able to work the same hours due to childcare needs.

Childcare
Women often bear the greater share of childcare and healthcare responsibilities in the family. After early childhood development services and schools closed under lockdown, many may have been unable to work effectively while caring for their family. Due to divorce, women are also more likely to live with children than men are. In the report, 67% of women and only 25% of men reported they were looking after children themselves.

Lower earners
With no chance of daycare, many families had to decide which parent would leave their job to take care of their children. Since women typically earn less than men, they are the obvious candidates. This situation is unfortunately a result of existing inequality in pay between genders.

Within the enterprise
Although the study acknowledged a large difference between male and female incomes before February 2020, it measured no significant increase in the gap between then and June 2020. “In my view, the pay gap has not worsened because of COVID. It is still around and still present at the same levels as before,” says Bussin.

Conclusion
The NDIS-CRAM study suggests that one possible solution is state-subsidised childcare at reopened schools. This will help women to increase their work hours and return to their previous earning potential.

In addition, Bussin advises that organisations also need to do due diligence internally. “All organisations should conduct regular, thorough audits of all remuneration and HR practices to make sure that no poor practices or discrimination have crept in,” he says.

ENDS

MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za 

For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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What the SME focus of #Budget2018 and #SONA2018 means to HR and Reward Practitioners

21/2/2018

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The country’s celebration of a welcome change in leadership was quickly followed by an upbeat State of the Nation Address from newly-elected President Cyril Ramaphosa. Acknowledging that South Africa’s economy will be sustained by small businesses, the President stated that it is “our shared responsibility to grow this vital sector.” In a closing reference to Hugh Masekela’s song “Thuma Mina”, he concluded: “Now is the time to lend a hand. Now is the time for each of us to say ‘send me’.”

The reward practitioner's role
Dr Mark Bussin, Master Reward Specialist, Executive Committee Member of SARA (South African Reward Association) and Chair of 21st Century agrees completely. “There is a definite opportunity for reward practitioners to play a role and lend a hand to small businesses,” he says.

According to Dr Bussin, SARA members are typically employed by large corporations, but can still do their part by offering free advice and services to small business managers and startup entrepreneurs. “We may have family, friends or acquaintances who run or are starting their own business, and who employ several workers. This is a great opportunity to contribute to their growth because at that level, not many consider the productivity fostered by a solid reward structure.”

Introducing reward to small business
Small business owners are often completely focused on operations, finances, marketing and sales but miss the basic incentives needed to motivate staff to perform their best work. Reward specialists can help them lay the right foundations for job satisfaction to keep employees engaged as the company strives for growth.

Dr Bussin mentions several elements that must be in place from the start: “If these are cobbled together too late, only after dissatisfaction arises, employers could find their business suddenly struggling as their top workers exit.” His points include being clear on job descriptions and their responsibilities; establishing who reports to whom; defining pay scales with minimum and maximum limits; ensuring meticulous tax administration; documenting the rules governing bonus schemes; clarifying if employees have ownership in the company or not; having employment contracts that respect the law; and developing clear recognition schemes and promotion paths.

While small businesses are usually not capable of offering extended non-financial rewards, they should start planning for a time of growth when development, training, a pleasant work environment, wellness programmes and other incentive schemes become more important to attracting and retaining valuable talent.

How big businesses can help
Dr Bussin also strongly encourages large organisations to become involved in such initiatives rather than discouraging them. “Every corporation should identify several small business candidates and lend out their reward practitioners for free for an hour or two a week as part of their CSI projects,” he says. “Just doing this, they too could make a significant contribution to the economy.”

Small businesses face many challenges getting off the ground and surviving their first five years. Reward professionals can answer the call of “send me” by helping them build a motivated, loyal workforce to add greater assurance of their success, especially when the going gets tough.

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@thatpoint.co.za, www.atthatpoint.co.za  

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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Reward professionals to play major part in Ramaphosa’s new dawn

19/2/2018

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The prosperity and equality of the nation’s workforce – alluded to in the recent State of the Nation address by President Ramaphosa – is in large part determined by reward practitioners: professionals that advise companies on how to structure financial and non-financial pay elements to compensate employees for their work.

“Inequality was mentioned at least ten times during the address,” says Dr Mark Bussin, a Master Reward Specialist, Exco member of the South African Reward Association (SARA) and Chairperson of 21st Century. “Reward practitioners must take this seriously in their practices and policies by reporting the wage gap in annual financial statements, and finding ways to close the wage gap in companies.”

Tough calls for private sector reward practitioners
Reward and HR practitioners also need to step up their focus on training and education. Tough calls are necessary on employing more people through internships, and creating entrepreneurs within companies.

Tougher yet will be the decision to release these successful candidates to industry in order to let the larger economy benefit from the initial training and development investment.

Tough calls for public sector reward practitioners
HR and reward practitioners in government will be tasked with cutting costs, cutting pay increases, and managing fruitless and wasteful expenditure across the public sector workforce.

“Reward practitioners need to be steady, well informed and consistent in their approach,” says Bussin. “They also need to stand up to those that resist changes for the greater good, as well as new leaders who want sweeping changes just for the sake of it.”

Tough calls for individual practitioners
HR and reward practitioners furthermore need to be the custodians of women representation as well as youth development in organisations. Bussin advises reward practitioners to follow national policy in all areas including benefits, working conditions and employment practices.

Reward practitioners will also have the added challenge of supporting government and business in creating increased remuneration for 6 million people. The implication of this is that practitioners focus on getting their remuneration governance right and working without any further delay.

“As per our President’s closing words, all reward practitioners have a chance to make a difference right where they are by moving beyond historic practices and being willing to say “send me” to do the tough work where it is necessary.”

ENDS

MEDIA CONTACT:
Juanita Vorster, 079 523 8374, juanita@thatpoint.co.za

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association


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Executive remuneration increases have been on par

30/6/2017

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​RESPONSE BY SOUTH AFRICAN REWARD ASSOCIATION
Executive’s pay has come under scrutiny after a report titled ‘Shareholder Alignment, Company Performance and Executive Pay’ was released by Deloitte earlier this week. Addressing inequality is an important national imperative and we support it wholeheartedly. Unemployment is at unacceptably high levels and as a nation, we need to do everything possible to create jobs. However, it is necessary to contextualise executive pay.
 
When reporting on executive pay increases, it is important to consider one executive at a time. Using this approach, we believe that executive remuneration increases have been on par and in most instances lower than the general workforce. Organisations have adopted this approach in an attempt to close the wage gap. If the Top 100 CEO’s or CFO’s remuneration is considered as a group, the increase in the remuneration will be impacted on by CEO’s and CFO’s who have left and the new ones appointed often at premiums to “buy” them.  This is also true for public service and public office bearers who have over the past several years taken smaller pay increases than lower level workers in order to address the pay gap ratio.
 
The allegation that executive pay is misaligned with performance is not true, even based on the author’s own research.   Total Annual Cash growth and shareholder value growth is in our view closely aligned over the period.  It is not aligned with HEPS growth, but that is due to the economic downturn in the final year which is reflected immediately in HEPS.  What is even more compelling is the Total Remuneration of executives (including LTI’s), which is the most holistic measure of actual pay, has gone up much less than the investment returns.  This allegation is thus wrong even on their own data and may be based on cherry picking measures.
 
Strengthening the link and evidence between organisation, individual executive performance and executive pay is high on the agenda of most Remuneration Committees. When analysing and substantiating this link, several measures of organisational performance can be used. There are different views as to the most appropriate measures, and certain measures are more applicable in certain industries. In the South African Reward Association library, there are several research reports that take on average 8 organisation performance measures and correlate them to CEO contribution and remuneration. Generally, several measures correlate positively and one or two may not correlate. From this, one should not take the one or two that don’t correlate and conclude that there is no correlation between CEO performance, pay and organisation performance. Care needs to be taken to arrive at the correct conclusion between organisation performance and executive pay.
 
We believe that the corporate governance processes in South Africa are, broadly speaking, working well. Arresting the pay gap ratio is something that we all need to work harder at. There are many ways to address this. Education is pivotal to this approach because higher skills leads to more skilled work, better productivity and better pay. Halving CEO pay will not address the problem. With the ever increasing regulatory and governance environment and increasing complexity of running a business, CEO’s are commanding higher salaries. This needs to be carefully balanced with the pay gap ratio. The gap between the unemployed and the lowest level worker is infinite.
 
Unemployment is our biggest problem. Let’s not ignore the wage gap but more importantly make sure whatever we do does not result in more unemployed. Institutional investors also need to come to the party and resist demanding ever higher returns from CEO’s which in turn exacerbate the pay gap ratio. As a Nation, we all need to address this problem collectively, and responsible reporting is also part of this solution.
 
SARA is a professional body aimed at promoting the reward profession and practices. While setting minimum standards for the industry, we award professional status to eligible members in various reward categories and create knowledge-building, sharing and networking opportunities for our members and those operating in our industry. We do this to promote and develop the reward industry and to ensure sound reward management practices and acceptable standards.
 
 As a professional body, we support strong and robust corporate governance, especially when it comes to remuneration. Strong media and shareholder activism goes a long way in supporting better governance and we are in support of both approaches to strengthen current codes of practice for example King IV, Sarbanes Oxley, Basel and Pillar frameworks and stock exchange requirements.
 
ENDS

 
MEDIA CONTACT: Carla Coetzee, 072 112 8347, carla@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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Tough times call for a creative remuneration approach

27/3/2017

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PictureDr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA)
With South Africa Inc facing strong economic headwinds, both the private and public sectors must take a radical, creative approach to remuneration, says Dr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA) and chairperson for 21st Century.  

“With economic growth officially in the 1 percent range, and closer to 0 percent in reality, employers and labour are going to have to face up to some tough decisions,” Dr Bussin says. “On the one hand, across-the-board increases are simply not sustainable but, on the other, the high performers in the company have to be rewarded and incentivised. In other words, our current way of thinking about wages has to change—and radically. Conditions are going to get tougher, at least for the next few years.”

As a result, reward will have to be more tightly linked to performance in order to ensure that companies receive value and bloated wage bills do not threaten their long-term sustainability. Over the past several years, wage demands have borne no relation either to the company’s health, the economy or workers’ performance. This, Dr Bussin argues, is simply unsustainable. In addition, companies will have to have the freedom to selectively reward the employees who have contributed to their growth or whose skills are particularly in demand. 

At the same time, though, he readily accepts that those who are being paid less than a living wage—creating the unwelcome category of “in-work poverty”—need to be prioritised. However, this legitimate drive to pay workers a fair wage still has to be linked to performance. Achieving this will require an investment in training as well as focused management input. One way to pay for this special category of increases could be for highly paid executives to give up their automatic increases and bonuses. This would also be a powerful tool for building employee engagement and defusing some of the antagonism between management and labour that continues to hamstring commerce. 

The fact that the President and other members of the executive, members of Parliament, members of the provincial legislative, judges and others government leaders agreed not to receive increases in the 2016-17 financial year is a good example that the corporate world has signally failed to follow. 

“Similarly, in the public sector, we cannot go on granting automatic increases on demand. There, too, pay has to be linked to performance. Cutting the huge levels of fruitless and wasteful expenditure could actually be linked to pay-rises in the sector, giving everybody an incentive to curb this abuse,” Dr Bussin argues. 

“In general, all parties—labour, management and shareholders—need to accept that they are in the same boat. If the company, or the country, for that matter, goes down, then everybody goes down with it. Simply put, we all need to do things differently, to think differently. “This will require political will on the part of leaders, but there is no alternative,” he concludes.

ENDS
 
MEDIA CONTACT: Cathlen Fourie, 082 222 9198, cathlen@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SARA please visit:
Website: www.sara.co.za 
Twitter: @SA_reward
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Facebook: SARA – South African Reward Association

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