 The South African Reward Assocation (SARA) has launched A guide to the application of King IV™: Principle 14 - Governance of Remuneration. The guide was co-authored with the Institute of Directors in Southern Africa (IoDSA) and is intended to help reward specialists – as well as members of governing bodies and other stakeholders – better understand and apply the principles of King IV in regard to remuneration.
“Many reward specialists struggle with the practical application of the remuneration principles and recommendations of King IV,” says Martin Hopkins, Master Reward Specialist and Exco member of SARA. “A particular sticking point is the reporting of the organisation’s remuneration policy and the implementation report, especially given King IV’s emphasis on increased disclosure.” Hopkins joined his fellow SARA Exco members and Master Reward Specialists Morag Phillips and Laurence Grubb in launching the Guide at a breakfast attended by 150 reward professionals who are responsible for the design, development and implementation of reward strategies, policies and processes that will support organisational strategies. King IV is only applicable to integrated reports relating to financial years ending after 1 October 2017. The first King IV-compliant remuneration reports are only now being published. These reports will be the first examples for professionals to learn from. One of King IV’s most notable innovations is the requirement that the remuneration disclosure should reflect a single total figure of remuneration for each member of executive management relating to the reporting period. This single figure should encompass the salary, benefits, short-term and long-term incentives and any other remuneration elements. The values for the short and long term incentives should be reflective of the period of performance covered in the annual report and not necessarily of the time of payment. The idea being that the reader can relate the payments to the performance during that period. The single figure follows broadly the principle established in the United Kingdom, and now part of its company law. It is intended to make it much easier for stakeholders to establish what remuneration an individual received during the reporting period, and to compare this with performance. The single figure also makes it easier for readers to compare remuneration across reporting terms. A fundamental principle of single-figure disclosure is to identify when remuneration is received or receivable, in order to enable this comparison between remuneration and performance during a specific period. King IV also requires unvested awards to be reported, again in order to promote transparency and to give stakeholders a clear indication of future liabilities contingent on the performance targets being met. Establishing these values can be complex, says Hopkins, because many performance incentives have a number of variables, such as vesting dates and valuations, and may refer to share prices or other measures. The Guide details the principles informing how each of these elements should be disclosed. More broadly, the Guide contains detailed notes on each of the Recommended Practices relating to King IV’s Principle on remuneration (Principle 14). Remuneration is an important performance driver, but a remuneration policy that is unfair or is perceived to be unfair can negatively impact an organisation’s sustainability and it’s shareholder voting. King IV aims to provide a framework for achieving a fair and effective remuneration policy that can be defended convincingly. “However, it is a complex area and sufficient implementation will only be achieved over time and as the result of focused effort by the remuneration committee. This Guide is designed to provide practical help to achieve the outcomes envisaged by King IV.” The Guide is available at http://www.sara.co.za/sara/file%20storage/Documents/2017/Nov/KingIVGuide_ToTheApplicationOfRemunerationGovernance.pdfwww.sara.co.za/sara/file%20storage/Documents/2017/Nov/KingIVGuide_ToTheApplicationOfRemunerationGovernance.pdf 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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 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  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  Companies usually base how they pay and reward their employees on financial data. Deon Smit, Chartered Reward Specialist and Executive Committee Member at the South African Reward Association (SARA), says that corporate communications like emails or instant messages, social media posts and many other data sources should be used to provide deeper insights.
These insights can help to keep financial and non-financial elements of remuneration relevant to what employees need as motivation. “Good data management and analytics will play a central role in developing future reward strategies. Effective reward solutions must be designed based on reality rather than assumptions,” says Smit. “Reward practitioners must start taking responsibility to gather the right information and develop the ability to draw valid conclusions from the data available.” Smit offers the following practical guidance: Start with a purpose It’s important to decide what business problems should be solved first and what data is best suited to that purpose. “Tackle the simple business problems first and build up to the big ones,” advises Smit. “This will help you get your data and your process right at each discrete level of growing complexity.” HR and people data will be central to efforts, but strategic, financial, and corporate communications data will also play an important role. Be a visionary For most problems, a large set of historical data is needed to facilitate predictive analysis and produce accurate results. “You have to decide what you want to measure in 6 months from now, build the datasets and make sure the data is accurately captured,” says Smit. “Only after that period will you have enough to work with.” Clean up “One of the first mistakes companies make is to start with incomplete, incompatible or mismatched data,” reports Smit. The data collection methodology employed must be consistent to ensure there are no information gaps that could produce misleading results. Learn Reward practitioners should understand how datasets are constructed, how relational databases work and how unstructured data found in emails, social posts and other digital sources can be collected. They also need to evolve past Excel and embrace programming languages like R (a statistical language), Python (a general programming language) or SQL (a database query language). In addition, business intelligence and data analysis skills are essential. This may seem unnecessary for reward programmes but Smit foresees that these competencies will be in demand in the future. “HR will start hiring data specialists over people specialists because data will become the key to understanding workforce behaviours and motivators,” says Smit. He suggests that practitioners become self-educated to increase their value. Universities now offer numerous free courses on these subjects through MOOC (massive open online courses) platforms. Don’t forget qualitative inputs Although quantitative analysis - mathematical and statistical modelling - is critical, reward specialists should not overlook qualitative analysis - the study of observable behaviour or structure. “Don’t become too focused on the numbers,” recommends Smit. “They need to be viewed in conjunction with phenomena like group dynamics, behavioural psychology, generational concerns, cultural norms and other non-numerical inputs.” Start over Data analysis must always solve a business problem. Once the collected information has been studied and understood, reward specialists can develop innovative solutions and drive their implementation forward. Smit concludes: “After a solution has been found, the cycle will start over so that another – more complex – business problem can be targeted.” 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  Inflation is typically used as the basis for calculating annual salary increases. But inflation is a poor guide for working out how to reward employees to ensure competitiveness when compared to the market, says Nicol Mullins, Exco member of the South African Reward Association (SARA) and Principal Consultant at Mercer South Africa.
Instead of inflation, he argues, employers need to take various other factors into account when calculating salary increases. If not, they can end up disadvantaging both employee and employer as well as, potentially, shareholders. “Using consumer price inflation (CPI) as a basis for calculating salary increases just does not make sense,” Mr Mullins says. “Inflation figures vary from one source to another and are far from perfect. Even if they were reliable, there is no logical reason why they should affect an individual’s salary. It makes much better business sense to use a scientific, evidence-based methodology for calculating salary increases that is based on what a particular role commands in the marketplace.” Inflation-based increases are not sustainable The fundamental point to understand is that a salary is paid to compensate an individual for doing a job. Therefore, a salary is actually dictated by the supply and demand of that particular skill, not what the inflation was for that year or the following. Even if one insisted on using CPI as a basis for this calculation, one should logically only apply it to that portion of the salary that is used to buy goods and services that are inflation-linked. Mr Mullins says that a valid argument could be made that employers should be protecting the purchasing power of employees, especially those at the lowest level. But this argument is somewhat negated by the fact that when such workers are employed, they are offered as low a wage as possible. “One of the most harmful effects of using inflation as a way to calculate salary increases is that it has the effect of steadily making an individual less and less affordable to a company as the supply and demand of the skills in the market are not linked to inflation. In turn, this means either that the company has to pay more than it needs to in remuneration, or the employee becomes too expensive” he says. “Neither of these outcomes is desirable. Rather, we want to determine what is externally competitive while ensuring internal equity.” Increases should consider across-the-board relevance Mr Mullins advises that the salary discussion should fall into two distinct sections: how all the salaries across the company should be increased, resulting in an overall salary increase budget; and then what increases should be granted on an individual basis to align those employees to their optimal placement within the company pay ranges where there is currently misalignment to the pay policy. The across-the-board salary increases budget should be related to supply and demand of the particular role, whereas the merit increases are based on individual alignment to ensure that salaries are aligned with the internal pay policy. For calculating salary increases, Mr Mullins advises following a logical methodology that looks at what the fair, market-related recompense would be, and what the overall budget for increases actually is. The process begins by determining what the market rate of pay for each role, grade or function is. As part of this process, the company’s own pay structure/scale or bands should be compared with market data. This step is known as the range-adjustment factor. The above adjustment should be made after taking into consideration the market-adjustment factor which in essence is the predicted movement of the market from when the data was collected to when the increases are going to take effect. Guidance on this should be provided by the company lead/lag policy. The company must then decide how it will adjust its salary bands to align with the market. The company needs to determine the range adjustment factor; how much budget it will assign towards adjusting to the market rate. Increases should consider individual employees Obviously, companies want to pay at the market rate. The next step must be to look at those employees who are being paid below the current company guidelines. Some of them will be new hires or inexperienced, but others will need to be adjusted upwards. A separate budget needs to be determined for this exercise – this is known as the equity-adjustment factor. The next step is to determine a promotion budget. Companies can make an assumption based on historical data that, for example, 2 percent of their employees will be promoted and receive 15 percent salary increases. By following this approach an organisation outlines their promotional increase factor. At a practical level, Mr Mullins advises that companies should consider adding unspent HR budget from the previous year to the budget for current year salary increases – this is known as recovery. The final step would be to consider merit increases. This is the process of aligning employee compa-ratios to their internal grading structure after the range adjustments have been taken into consideration. “Such an approach has the advantage of being based on market realities and is thus sustainable. And because it is scientific and evidence-based, it can be shown to be fair, with a positive impact on employee morale and engagement,” Mr Mullins concludes. “Just giving everybody a blanket increase each year based on inflation sets unrealistic expectations; this method forces employees and employers to confront the reality that the market dictates business profitability, and thus job security.” 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  South African companies implicated in the Guptagate scandal find themselves facing a bleak future. With their reputations in tatters they risk losing the vital human resources they will need to recover, and one of their most pressing challenges is to restore employee morale and engagement.
“People do not go to work just to earn money,” says Morag Phillips, Director of 21st Century and Exco member of the South African Rewards Association (SARA), a professional body focused on promoting transparent, fair, and responsible pay practices. “Their deeper motivations derive from the impact their work has on their feelings of self-worth and their desire to be part of something that makes a positive impact on the world –this is what drives employee engagement and energy, and builds successful companies.” “During times of crisis, employees begin to worry about the organisation’s continued existence, their own reputation due to association risk and, of course, become targets for competitors on the lookout for talent.” Ms Phillips advises that companies finding themselves in this situation have to undertake a rigorous process of restoring the internal organisational culture in tandem with efforts to repair the corporate brand externally. If there is a lack of internal focus – displayed through staff dialogues, support programmes, and evidence of continued job security – they might find themselves in the short to medium terms without their most important intellectual capital. Start with understanding the true culture Chances are that a crisis such as Guptagate would deepen any cracks that might exist in the corporate culture. It is therefore critical that corporate leaders should begin the process of consolidation and healing first by analysing the status quo honestly. That means, she says, looking behind the façade to see what employees are genuinely feeling. “Corporate culture is driven and influenced by the leaders in an organisation, and management must play a guiding role in making it a day to day reality,” she says. “They need to find out what employees love about what they are doing, and build from there.” Companies should undertake an active process to get input from employees about what motivates them about their jobs and what they do, along with what they love – or loved – about the organisation. If employees are involved in the process of defining the current culture, they will sign up more readily to keeping it healthy. “We often ask ‘what are our shared values’, but a better way to frame this question might be ‘what do you want your every day to feel like’,” says Ms Phillips. Involve more than appointed leaders Another important action point is to identify those individuals who are influencers within the company, and make them part of the process. “Management needs to listen to and understand what employees are thinking and saying around the proverbial water cooler, and get influencers on board to change conversations that do not fit the desired ‘flavour’ of the company.” View company culture as strategic imperative Ms Phillips believes that the campaign to regenerate the corporate culture should at all times be seen as a business imperative driven from the top, not a reactive feel-good campaign run by HR. “It’s all baby steps,” says Ms Phillips. “Generate a little bit more positivity, and it could turn into renewed confidence, which could turn into a few more deals, a few more months of employment. These small steps then turn into a whole new chapter that grows into a whole new story.” “The mistake that prompted the crisis has to be seen by everybody as an event that occurred, and not necessarily a signifier of the company’s culture,” she concludes. “That can only be done by understanding what the culture actually is, and how it needs to change if the same mistake is not to be made again.” 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 At the 4 November 2017 Reward Awards ceremony hosted by the South African Reward Association (SARA), AngloGold Ashanti won both the Reward Project and Remuneration Report categories. Peet Kruger received the prestigious President’s Award.
“To be a top reward professional in South Africa, individuals need to have a mix of innovation, business acumen and technical expertise in the financial and non-financial aspects of pay,” explains Morag Phillips, Exco member of SARA, a professional body focused on promoting, developing, and empowering reward professionals and practices in South Africa. “The design of an effective reward structure is crucial for organisations that want to attract, retain, motivate, and engage the employees that are best suited to helping the organisation achieve its goals.” Remuneration Report Award The Remuneration Report Award recognises organisations for how well they have demonstrated compliance with the King III principles through clear and concise disclosure of the company’s remuneration philosophy and its application. The King IV™ Report was published on 1 November 2016 and effective in respect of financial years commencing on or after 1 April 2017, and therefore not applicable to the submissions received for this year’s awards. A panel of judges evaluated nominations against the principles of King III and considered how organisations are demonstrating the broad principles of transparency, fairness and responsible pay decisions. Specific focus was given to how organisations report on the remuneration detail, including fixed and variable pay. “As well as adhering to the requirements of legislation and corporate governance principles, the winners displayed evidence of a commitment to best practice in reward principles,” says Phillips. “Submissions were also evaluated based on the communication of how the company’s approach to remuneration supports its business strategy, and aligns the interests of its executives with those of its shareholders.” Special commendations were made to Sasol and Aveng for their submissions, with the winner of the Remuneration Report announced as AngloGold Ashanti for striking a balance of sharing details in an interesting and informative way, and creating a very clear impression of the AngloGold Ashanti remuneration strategy. There is a very clear link across business strategy, reward strategy, performance targets and performance payments. Reward Project Award The SARA award for the Reward Project of the year recognised a team who have been responsible and actively involved in the development and implementation of a new reward project. The winning nominees of the 2017 Reward Project of the Year Award was Anglogold Ashanti in first place, Avbob in second, and Gautrain Management Services in third. AngloGold Ashanti was congratulated for their new share plan as a profound new approach to incentive remuneration. The approach follows feedback from shareholders to better align the interests of the company management with those of shareholders. President’s Award A special President's Award that honours outstanding achievement in the field of reward was awarded to Peet Kruger for his outstanding contribution to the profession over many years. Kruger was one of the founding members of SARA in 1997 and has been instrumental in many of its activities, including starting the Reward Awards. “By continuing to host the Reward Awards, SARA hopes to highlight pay practices that adhere to good governance and industry best practice,” says Phillips. “We hope to inspire reward professionals to always aim for transparency, fairness, and responsibility in determining how employees and executives are rewarded for their effort.” 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  Interview with Lindiwe Sebesho, past president and current EXCO member of the South African Reward Association (SARA), a professional association that develops and advances ethical total reward practices in South Africa.
Q: Why are year end performance appraisals still a popular tool? A: Although many companies have moved away from traditional once-a-year appraisals in favour of more regular performance engagements throughout the year, the year-end performance appraisal is still a key focus in many organisations as it summarises the full year’s performance and guides various talent decisions. There is an appreciation of the need to focus on the quality of appraisal conversations to improve the motivation impact thereof. One way in which the quality can be improved is through forward-looking conversations where past performance is referenced mainly for the purpose of acknowledging great outcomes and guiding actions to sustain or improve performance in the future. This enables both managers and employees to focus on how they can optimally contribute towards business success and achieve career growth. Q: Why are performance review conversations a source of worry for managers? A: Some managers do not set clear expectations or regularly give honest and constructive feedback. This leads to difficulty in addressing common performance challenges during year end appraisals when the stakes are high with regards to the post appraisal talent decisions e.g. reward. This becomes the source of stress as they don’t feel confident that they can deal with the robust interactions that are part of the performance management process. Q: Should performance appraisals be left to HR professionals, or can line managers be trained to conduct performance conversations with confidence? A: Anyone can be guided or trained to manage performance discussions with confidence. SARA is offering a free webinar on 24 October, 9:30-11:00, for anyone that wants to prepare themselves for great performance appraisals. Register in advance for this webinar at https://zoom.us/webinar/register/89e5e8e648899e2c4ac87b605f06faf5 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  The underlying causes and current barriers of the gender pay gap are often misunderstood, says Dr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA) and Chair of 21st Century. The gender pay gap in South Africa has been between 15 – 18% for 50 years and while South African legislation and company policies have been put in place to address the issue, the statistics aren’t changing.
“Section 6 of South Africa’s Employment Equity Act was implemented two 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. The power of prejudice “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, 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. “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 higher 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: Carla Coetzee, 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  Recent reports have highlighted the disparity in remuneration between CEOs and workers. Consequently, many commentators have questioned the fairness of executive packages, calling for greater regulation of those salaries and benefits. According to Dr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA), this is a problem domain ideally suited to the Reward Specialist.
“First,” says Dr Bussin, “one must understand how remuneration is determined at various levels.” General workers For general workers, a fair wage is decided through collective bargaining, striking a balance between what employers can afford and trade union negotiators are willing to accept. “It’s notable that recent increases have been in the 7% to 8% range - higher than CEOs,” reports Dr Bussin. “Companies, aware of the pay gap, it seems, are trying to close it.” Salaried staff For salaried staff, various factors are considered, including salary surveys, inflation, education, personal performance, and the scarcity of an employee’s skills. “Ultimately,” says Dr Bussin, “the finance department budgets for an overall payroll increase in line with inflation, currently around 6%.” CEOs and directors Executive salaries are more complex. Dr Bussin explains that CEOs and directors face much higher pressure than other employees. “Their track record for leading companies successfully in the face of overwhelming personal risk is why they’re engaged. As such, they command commensurate reward.” They’re usually compensated in two ways. Fixed pay Executive officers get a fixed salary that is mainly determined by benchmarking. This includes salary surveys and comparative studies of companies of similar size and complexity. Their pay in relation to these measurements will depend on the organisation’s remuneration policies. Variable pay Executive officers also receive short-term and long-term incentives. Short-term incentives are based on performance targets that, if achieved, usually result in a reward of between 50% to 100% of fixed annual salary. Long-term incentives, linked to company performance, are full shares and share appreciation - the value of the increase in share price. Pay discrepancies However, an ill-conceived remuneration package can reward even an underperforming executive officer. “These are the cases we see highlighted in the media,” observes Dr Bussin. “The perception that executives are overpaid is then generalised when, most often, their salaries are carefully formulated against industry norms.” Real or imagined, companies want to avoid any notion of biased remuneration. Dr Bussin says the King IV Report offers greater transparency by requiring executive remuneration reporting as a single total figure. “Businesses can leverage this opportunity to show that their executive officers are indeed compensated fairly.” The Reward Specialist A Reward Specialist should be engaged to ensure executive pay does not overstep the boundaries of sanity. At times, shareholders or the board may be desperate to turn a company’s fortunes around, making them bullish about a maverick hire. Here, the Reward Specialist offers an impartial perspective based on in-depth analysis. “Lastly,” concludes Dr Bussin, “Reward Specialists can create a communication plan that educates employees, shareholders and the public on company remuneration policies and executive compensation, avoiding both the reality and perception of their executives being overpaid.” ENDS MEDIA CONTACT: Carla Coetzee, 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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