Johannesburg - Pay differentials between the highest and lowest paid corporate employees in South Africa have stabilised after retreating from all-time highs set in 2008, but the gaps are still amongst the highest in the world.
This is based on annual research by remuneration and human resources consultancy, P-E Corporate Services.
This research reveals the pay differential between the guaranteed pay of the CEO of a very large company (turnover of more than R15 billion and more than 25 000 employees) and workers on basic skill level packages is 60:1 in 2015, matching the levels of 2013 and 2014, but down from 62:1 in 2008. However, the gap was 39:1 in 1994.
This means that the average head honcho of a very large company will earn 60 times as much as a basically-skilled employee.
CEOs of large, intermediate, medium and small companies are respectively earning 47, 40, 30 and 23 times more in guaranteed pay than employees on basic skill level packages.
According to P-E Corporate Services, which has been analysing remuneration in South Africa for more than four decades, the ratios jump sharply when short-term incentives are included, leading up to total employment cost.
In this measure, CEOs of very large companies are earning 84 times more than workers on basic skills level packages. This is down from 87 times in 2008, but is still sharply higher than 55 times in 1994.
Large, intermediate, medium and small company CEOs are respectively earning 66, 56, 42 and 32 times more.
Real picture
But the real pay differential disparity comes when long term incentives are included in the picture.
P-E Corporate Services' research shows that, in 2014, CEOs of the top 20 percent of JSE-listed companies earned 221 times more than basic skill level workers.
While this sounds high, it is well down from the peak of 342 times in 2008, before the global meltdown in economies and financial markets.
Significantly, when it comes to international comparisons, South Africa has the fourth highest pay differential when comparing executives' guaranteed pay with that of basic skill level workers.
Brazil is at the top of this ladder, followed by India and the UK, with South Africa and China in joint fourth place and the US next.
Commenting on the pay differential situation in South Africa, Martin Westcott, chairman of P-E Corporate Services, said, at a score of 65 South Africa has the second highest Gini co-efficient in the world, beaten only by Brazil. This measures how unequally income is distributed in a country, with zero meaning that income is equally distributed.
"Wealth disparity is often attributed to pay differentials, but it is actually much more complex and complicated than that," said Westcott.
"It should be common cause that either increasing wages at worker level and/or decreasing or capping executive pay levels in isolation are potentially destructive strategies. Cleverer and more integrated approaches to this issue need to be considered."
Wescott said, in South Africa, reconciling values at both ends of the organisational hierarchy represents a challenging objective, but that the potential spin-off to businesses and the economy in general "must be massive."
He said current interactions between working and managing executive groups in business is all too often dominated by the need to achieve a negotiated social compact around salaries, benefits and working conditions.
"We need to move beyond this and achieve more of a social covenant - perhaps most conveniently defined as a merging of values and development of far greater levels of mutual trust," said Westcott.
"As with all step change initiatives, this is likely to lead us into uncharted territory both for business and labour."
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