Within South Africa, if you are a business that employs more than 50 employees or you have an annual turnover higher than the threshold provided for your sector in the Employment Equity Act, you are a “designated employer”.
At the end of each calendar year, these designated employers are required to report to the Department of Labour about their workforce in order to show proof of transformation of the races and genders represented in the workplace.
One thing that designated employers have to report on is the income differentials between the various occupational levels. The designated employer would report their total salary bill for each occupational level, as well as the number of employees employed at that level. The salary bills are distributed across races and genders in a table as well. Therefore, salary bills for each gender and race at each occupational level can be compared. All of this is reported under a standard form called the “EEA4”.
While the above is still required, the Minister of Employment and Labour released a new EEA4 form at the beginning of August 2019 and this new EEA4 goes a bit further. There are now two additional sections which need to be completed.
One of the new sections requires you to provide the fixed, variable and total annual remuneration for your lowest earning employee in the least skilled occupational level. Further to this, you must provide the same remuneration information for your highest paid employee in all other occupational levels. These must also be disclosed under which race or gender the relevant employees fall under. Rendering this EEA4 even more confidential than it already was. In most workplaces, staff would know who has been identified from the disclosed information.
The second new section requires disclosure of the average earnings for the top 10% of earners and the average earnings for the bottom 10% of earners. The section goes on to ask whether the relevant designated employer has a policy in place in order to close this vertical gap between the highest and lowest earners. In addition, the section asks whether affirmative action measures to close the same gap are included in the designated employer’s employment equity plan.
While it is still brand new and we don’t yet have too much guidance, the implication seems clear. Designated employers are required to attempt to close the gap between highest and lowest paid employees. In terms of fair and equal remuneration, we currently only have regulations which pertain to “equal pay for work of equal value”. This latter concept appears to be in contradiction with all employees of all levels being paid the same remuneration (the assumed end-goal of a policy trying to close the vertical income gap).
We will likely acquire more guidance as to the Department of Labour’s intentions as time progresses, and after the next reporting period. However, designated employers would be strongly encouraged to start discussing these issues during their employment equity meetings and beginning to put together a policy in line with this new EEA4.