Employer’s Remuneration Policy
Template drafted by Daan Groeneveldt & Graham Giles
11-13 August 2010
Workshop: Remuneration: Executive salaries & pay discrimination
Benefits of remuneration policy and related practices:
- Allows you to achieve the goals of the enterprise.
- Aligns core enterprise values.
- Attracts, retains and rewards you whilst contributing to our goals and values.
- Commits to fairness in our dealings with you.
- Uses the logic and transparency of differential job worth to determine ‘internal equity’.
- Creates an affordable and sustainable enterprise over time.
- Complies with the legal requirement of proportional income differentials across all occupational levels within the enterprise.
- Includes all forms of ‘reward’ as income as required by the Basic Conditions of Employment and Income Tax Act.
Application of remuneration policy and related practices
We will align the main principles of the remuneration policy and develop and implement related programmes and practices to ensure integrity, legitimacy and legal compliance of the total remuneration system of the enterprise.
To meet our operational circumstances, requirements and plans the values of the remuneration policy must remain even though the objectives of our remuneration strategy may change annually.
The remuneration policy will be effective when:
- You understand the remuneration commitments and your own expectations.
- It strengthens the organisational culture and underlying values.
- It guides and assists in implementing the remuneration practices.
- It describe the fairness and consistency of remuneration practices across all occupational levels.
- It serve as the standard for evaluating and implementing the remuneration policy.
Three basic requirements for an effective remuneration policy
- Our ability to pay you is the final deciding factor in determining the value of your job.
- If we cannot pay what you believe is the value of your job then you will not have a job.
- To be fair affordability must include all jobs across all occupational levels, namely the total payroll.
- It would be unfair if the remuneration policy and practices did not include all jobs across all occupational levels in one pay structure.
- This is what section 27 of the Employment Equity Act, 1998 (EEA) actually requires.
- Affordability is determined by using the total measured cost of employment to the enterprise.
- Job values are measured to determine affordability.
- The concept of ‘equal pay for equal work’ is often used.
- But what happens when work is obviously not equal ?
- Job evaluation is generally recognised as a process to determine different job values and ultimately the equivalent pay levels.
- But section 27 of the EEA requires employers to evaluate and correct any disproportionate income differentials across all occupational levels.
- The concepts of ‘#2 internal equity’ and ‘#3 ‘external parity’ need to be understood to comply with this legal requirement.
#2 Internal equity
- There is an increase in job worth from occupational level to level.
- The worth of a job and pay/cost needs to be correlated before we can correct any disproportional income differentials.
- Our remuneration policy will include the criteria and quantum to be used when differentiating job worth.
- We measure ‘internal equity’ with a pay/cost structure showing a constant or proportionate percentage increase from occupational level to level across the whole enterprise, including executives to entry-level employees.
- We use ‘internal equity’ to measure and show the fairness of pay determination for jobs of different worth, namely the vertical comparison.
#3 External parity
- We measure and compare ‘equal pay for equal worth’.
- We compare not only within the enterprise but across different operating divisions and also across organisations, industries, regions, etc.
- We ensure that we compare jobs of equal worth.
- The remuneration policy includes the criteria to be used for such comparison.
- Although many other known criteria are often included in remuneration policies we focus on the requirements of the EEA.
- We have enough operating information and justification to attract and retain a productive and competitive workforce.