Adrian du Plessis, an independent consultant, was the chief industrial relations negotiator for the Chamber of Mines and a senior negotiator for employer organisations, has contributed constructively to the debate over the ‘current’ public sector strike - Resolve strikes before they happen appears in the Business Day today.

Here are some extracts from the article which needs to be read in full in Business Day by clicking on the heading.

Broader context

“An analysis of the public sector strike therefore needs to start with the broader context in which it takes place.

First , the conspicuous consumption of the socio-political elites must have inspired a sense of relative deprivation among employees, which, analysis shows, does frequently motivate industrial militancy.

Second , the perception of corruption, nepotism and patronage in public and private office will inevitably encourage claimants to favours, contracts, rentals and annuities to prosecute their claims while they can.   Third , the sense of entitlement apparent in our past and present does offer some justification to a few for taking or getting ‘something for nothing’”.

Performance structures and systems

“‘Good’ industrial relations are usually found in organisations where work and performance structures and systems are established, and supported by human resource interventions”.

Centralised bargaining not the solution

“First , the growing weight of opinion in industrial relations is that centralised bargaining has passed its sell-by date, particularly where it combines diverse sectors such as health, education, security and welfare.   It is difficult to conceive what all, or any, of these sectors have in common, from the perspective of both the employer and employee, and hard to imagine how a meaningful work and pay conversation might be structured”.

“The second thing about industrial relations is that negotiation, or collective bargaining, is a weapon of last resort”.

Build good industrial relations throughout the year

“The final point is that “good” industrial relations are hard won over time, and inevitably precede the conduct of the annual wage review.   Good industrial relations are forged every day, not once a year, at every level in the organisation, through information sharing, consultation, problem solving and joint decision making”.

“The unions need to be involved in this on a continuous basis.   Forums and processes need to be established, separate from the wage review, at all levels, but contiguous in the sense that the outcomes will constructively inform the wage bargaining process”.

“In effect, management and unions in the public sector need to develop a deep and wide set of relationships that forge a common interest around the huge challenges they face.   The consensus has to be strong enough to define not only the kinds of conflict they will face, and when, but also where the solutions will be found”.

“The inability to create unskilled jobs is one of the main barriers to SA’s social and economic viability.   Well-paid pundits’ solutions to this problem are thwarted by their own ideologies, assumptions and politics.

Some entrepreneurs, supported by their workers, have created viable clothing businesses and jobs, yet have been punished by the clothing sector labour council, which has served notice on 400 clothing manufacturers that don’t comply with its minimum wages and working conditions”.

Jonathan Yudelowitz, joint MD of YSA and author of Smart Leadership, has an important article in today’s issue of Business Day - ‘One size fits all’ law robs SA of a future in which he argues that “the inability to create unskilled jobs is one of the main barriers to SA’s social and economic viability”.

Once again the whole article should be read but here are some extracts:

Decent jobs or no jobs ?

“According to the National Bargaining Council for the clothing manufacturing industry, the workers’ jobs are not “decent” and are underpaid.   Defying the bargaining council by choosing to work for the wages offered, the workers have shown that they know what’s best for them - that the dignity of having a job and being able to provide for self and family, is much more important than a sectoral wage agreement or employment regulation in which they have no say”.

Effect of centrally negotiated agreements

“Centrally negotiated agreements ignore specific circumstances and, if properly implemented, destroy the opportunity to earn a living.   They raise the cost of doing business and create artificial barriers to entry by, among other things, forcing rural employers to match wages in urban areas where the cost of living is higher“.

“The assumption by unions that workers’ rights can be protected only by sector-level bargaining is rubbish, especially in the apparel industry, where margins have declined in the face of eastern imports”.

Collusion between employers and trade unions

“Centralised bargaining is a form of collusion, as it removes labour productivity and cost from the mix of manufacturers’ competitive factors - particularly in labour intensive industries such as the clothing sector”.

“What is needed now is a national conversation on public sector pay and national priorities.   And it needs to start as soon as the strike is over, before the battle starts up all over again next year, and before even more advertising is booked in newspapers.

It’s time to step back, too, and ask more detailed questions about how we should pay our pubic servants and how we should compute their worth.   Some are paid too little (and some are paid too much) for the skills they have, the responsibility they take on and the effort they put in.   But who is overpaid and who is underpaid?   What should be the differential between new and more experienced employees?   How much should depend on performance?   How should public sector pay be pitched relative to the private sector?”

Hillary Joffe, senior associate editor, wrote an important thought-provoking article in Business Day earlier this week - Wage battle masks the real public sector issues.

The entire articles should be read but here are some extracts:

Gap between youth and experience

“That gap between youth and experience may not be nearly wide enough to keep good, experienced teachers or nurses in the public service.   But it is something the government has been trying to address since 2007, with the occupation specific dispensations for teachers, nurses, prosecutors and others”.

Corruption and excessive pay

“And the “fat cat” conduct of some Cabinet ministers and senior officials has hardly helped to smooth relations.   Indeed, this strike may be as much about the unions’ fight against corruption and excessive pay and perks in the government and the ruling party as it is about the cost of living for workers”.

Compounding effect of wages

“The thing about wage increases themselves is they compound, with each year’s percentage coming on top of last year’s higher base.   The government hasn’t made much of the fact that public servants in fact won a 13% increase last year (11,5% plus the 1,5% increment).   Add 8,5% this year and the increase in public servants’ pay packets over two years is nearly 23%”.

]]> http://www.workscienceinstitute.com/collective-bargaining-fair-pay-differential-for-value-of-experience-hillary-joffe/36/feed http://www.workscienceinstitute.com/employers-remuneration-policy/35 http://www.workscienceinstitute.com/employers-remuneration-policy/35#comments Tue, 10 Aug 2010 09:08:13 +0000 grahamgiles http://www.workscienceinstitute.com/?p=35 Employer’s Remuneration Policy

Template drafted by Daan Groeneveldt & Graham Giles

23^rd Annual Labour Law Conference

Sandton Convention Centre - 11-13 August 2010

“Justice on the job”

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

#1        Affordability

• 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.

-oOo-

“THE ultimate worth of any job is the organisation’s ability to pay for it.   No policy, rule or regulation can change this reality and directors who agree to pay increases regardless of the risks to an organisation should be called to account”.

Daan Groeneveldt’s article in Business day today Employment equity: Proper pay-gap analysis the key to workplace harmony is an important contribution to the debate on the so-called ‘wage-gap’ and concern about ‘executive pay’.

Eskom is taken as an example:

“To illustrate the effect of measuring internal equity: last year, the salary of the CEO of Eskom was increased to R4,96m.

This increase drew much criticism from the Congress of South African Trade Unions but the fuss did not amount to much more than the usual emotional outburst.

However, had the unions used this information as a benchmark to calculate the proportional entry pay level (according to the current EEA9 reporting framework), they would have been able to set their starting position for an entry-level job at R109602 — assuming that the R4,96m was the total cost (including bonuses) of the job of CEO.   This would certainly have focused the attention of management, as a starting pay level of R109602 would have been way above the initial demand of the workers, and clearly it is also wrong.

But this pay level is not a thumb suck; it is based on information in the public domain regarding the cost of the job of the CEO and an established human resource measurement process that incorporates the logic and requirements of section 27 of the Employment Equity Act.

The Eskom example shows a measured pay gap in which the highest-paid employee earns 45,26 times more than the lowest-paid.   Meanwhile, research by PricewaterhouseCoopers shows that, in some cases, pay gaps are in the order of 250-300 times.

As the normal pay gap between a CEO and an entry-level worker is about 90, the Eskom illustration raises some questions”.

The article concludes by stating that there are international standards to measure or determine internally equitable pay differentials and suggests that the accuracy of the current framework (EEA 9) needs to be questioned.

Assuming that the reason for termination was based on operational requirements is a settlement of 24 months compensation against public policy ?    Is it ‘just and equitable’ in terms of the Labour Relations Act 66 of 1995 ?

On 18 May 2010 in Lind v KwaZulu-Natal Department of Health [2010] JOL 25836 (LC) Judge Pillay allowed the settlement agreement to be made an order of court but directed the employer to answer 15 questions, relating to the decision to settle the claim, before 30 June 2010.

The questions were the following:

(a)     Did Ms Findlay notify the employee of his retrenchment?

(b)     Who supervised Ms Findlay or any other person who was the employee’s immediate supervisor who notified him of his retrenchment?

(c)     When did Ms Findlay leave the department?

(d)     Who supplied the legal representatives with information to plead that the department had complied with the LRA?

(e)     Whoever provided such information to the legal representatives to prepare the statement of defence was untruthful, negligent, careless or perhaps even corrupt.   What steps has the department taken to call such officials to account for the incorrect information they supplied the department’s representatives?

(f)      Who mandated the settlement that is made an order of this Court?

(g)     On what basis did the department agree to pay 24 months’ compensation?

(h)     Why did the department’s officials fear that the Labour Court might reinstate the employee when:

(i)      the unit had closed down,

(ii)     the employee was employed on sessional contracts of not more than a year each time,

(iii)    the employee was 80 years old,

(iv)    the hospital continued to hold patients for only 72 hours observation before transferring them to Town Hill Hospital?

(i)      Why did the department not terminate employment by paying the employee for the balance of the duration of his sessional contract?

(j)      Why did the department renew his sessional contract for a year when it had decided in December 2006 to close down the unit which it did in April 2007?

(k)     Why was the employee’s sessional contract renewed orally?

(l)      Is it lawful for the department to renew contracts of employment of public employees orally?

(m)    What steps has the department taken to improve its efficiency and accountability to eliminate the kind of waste of public resources evidenced in this case?

(n)     Can the department recover its losses from any individuals and, if not, why not?

(o)     Why did the department not tender with prejudice to pay the employee a lesser amount when it was instructed to defend the matter or soon thereafter when it commenced settlement negotiations?

“South African companies need to revisit their risk management policies in the wake of the global recession, say corporate governance experts”.

“More focus has also been placed on the role of risk management due to the report of the King Committee on Corporate Governance in SA, in which its chairman, Mervyn King, points out that accountability and transparency (of the board) are paramount”.

Sanchia Temkin writes in today’s issue of Business Day Companies need to review risk management policies, plans and observes that there is a new focus on the overall responsibility of the board of directors.

Here are some extracts from the article:

“The King 3 report takes a process-driven approach to risk management that emphasises the overall responsibility of a company’s board, which should have a risk management policy and plan in place.

However, Tom Wixley, a corporate governance analyst and co-author of the book Corporate Governance, says the King 3 report has gone ‘overboard in engineering risk management’.   It tends to make risk management bureaucratic rather than part of the day-to-day business of the company.

One of the dangers of implementing a complex risk management system is that the process of identifying and managing risk can become unwieldy, Mr Wixley says”.

Tom Wixley stresses the need for management to retain responsibility.

“Care should be taken to ensure that line management retains responsibility and that risk management does not become a parallel system of management.   If an organisation does appoint a chief risk officer, this should be done to assist the CEO and line management, not to usurp management’s role.

Mr Wixley says every company needs to think about risk and identify risks early and their consequences.   ‘Companies need to establish internal controls to mitigate the risks’.”

Management blame employees for the wave of threatened strikes during the world’s premier sporting event, but they need to be made accountable and share the blame if South Africa is crippled by strike action as early as next week.

There is an unfortunate false perception that the ‘bargaining unit’ and ‘management’ are two separate and different entities within the same organisation.   The individuals in those entities cannot be treated differently, particularly with regard to pay determination.

Irrespective of the Labour Relations Act, in terms of section 27 of the Employment Equity Act (EEA) pay differentials must be proportional across the whole organisation and where they are disproportionate employers must correct the problem.   In other words one measuring device, like a thermometer, must be used across the entire organisation.

Collective bargaining is but one of the means used to correct disproportionate pay differentials.   If management refuse to discuss the process and the determination of their own increases and bonuses there would appear to be a serious breach of the legitimate requirements of the EEA.

Management must also be held accountable for refusing or failing to disclose information requested by the unions during the negotiating process.

Daan Groeneveldt

MICHEL PIREU: (pireum@bdfm.co.za) has contributed the following words of wisdom in his StreetDogs column in BusinessDay today, being extracts from Planning for Freedom: Let the Market System Work, A Collection of Essays & Addresses by Ludwig von Mises:

“The only means to increase a nation’s welfare is to increase and improve the output of products …   the only means to raise wage rates is to raise the productivity of labour … there are those who believe that government has the power to improve the masses’ standard of living partly at the expense of the capitalists and entrepreneurs, partly at no expense at all.

(There is no denying) some of these measures can, in the short run, improve the lot of some groups of the population.   But, in the long run they must produce effects which …   are less desirable than the previous state of affairs.

It is true, many people believe that economic policy should not bother at all about long-run consequences.   They quote a dictum of Lord Keynes: “In the long run we are all dead”.   I do not question the truth of this statement …   but the conclusions drawn from it are entirely fallacious.

The exact diagnosis of the economic evils of our age is: we have outlived the short-run and are suffering from the long-run consequences of policies which did not take them into consideration … depression is the aftermath of credit expansion; mass unemployment prolonged year after year is the inextricable effect of attempts to keep wage rates above the level which the unhampered market would have fixed.

All those evils which the progressives interpret as evidence of the failure of capitalism are the necessary outcome of social interference with the market.

It is true that many authors who advocated these measures and many statesmen and politicians who executed them were impelled by good intentions and wanted to make people more prosperous.

But the means chosen for the attainment of the ends aimed at were inappropriate.

However good intentions may be, they can never render unsuitable means any more suitable.   It is beside the mark to confuse the debate by referring to accidental and irrelevant matters.   It is useless to divert attention from the main problem by vilifying capitalists and entrepreneurs and by glorifying the virtues of the common man.

Precisely because the common man is worthy of all consideration, it is necessary to avoid policies detrimental to his welfare.

The market economy is an integrated system of intertwined factors that mutually condition and determine one another.   The social apparatus of coercion and compulsion, the state, certainly has the might to interfere with the market …   but such measures … only render conditions more unsatisfactory ….

If one considers the working of the market system as unsatisfactory, one must try to substitute another system for it.   (Whereas) measures designed to improve the operation of the market system, not to abolish it altogether …   must needs bring about results which from the point of view of their supporters are more undesirable than the previous state of affairs they wanted to alter”.

While at Edinburgh he gained an Honours BSc in Chemistry, Physics and Mathematics, a similar degree in Geology and Zoology, and was the Vans Dunlop Scholar, Shaw-Macfie Lang Fellow, and Falconer memorial Fellow.   He entered the medical faculty and gained his 2nd MB in Anatomy, Physiology and Histology.   In 1933 he earned the Anthony Wilkins Studentship in Anthropology and 1851 Exhibition Research Fellowship to go to Trinity College, Cambridge, eventually being elected to a Fellowship in that college.   His studies earned him an MA, and later, a PhD, and involved many expeditions - to East Africa, India, Greenland and the Canadian Arctic.   A major inlet on the coast of northeast Baffin Island bears his name.   By the time the 1930s drew to an end he had been appointed the Curator of the Museum of

Archaeology and Ethnology at Cambridge, a position which gave him the status of full Professor.   In 1937 he was elected to Fellowship of the Royal Society of Edinburgh.  In 1938 he married Elna Johanne Hygen of Høyanger, Norway, niece of Otto Fleischer, Commander-in-Chief of the Norwegian Forces in exile during World War II.   Their honeymoon coincided with the Munich Crisis.   Since much of the iron ore upon which Germany depended came from Kiruna in northern Sweden and down the coast of Norway from Narvick, Paterson explored the possibility of sabotaging them.   The Norwegian authorities suggested forcefully that it might be better if he left the country with his new wife.   The same year he gave a demonstration of Eskimo string figures on television.   The following year, with the outbreak of World War II, he joined Royal Naval Intelligence, was transferred to the Army Staff College to lecture on European Anthropology and the causes of war, and was further transferred to Operations Research for the Royal Air Force on a variety of projects under Sir Henry Tizard.   In Combined Operations he was severely wounded early on D-Day on the Normandy beachhead.   The remainder of the war for him was spent directing the air defences of northern England on a semi-invalid basis.

After the war he returned to his former position at Cambridge, but, disliking working with dead things, he resigned in 1947.   Much of the summer of that year he spent stationed at Baker Lake, Canada, surveying for the DEW Line.  Some months later he was awarded a grant to study industrial relations in the Scottish coal fields, on the lines perfected in the RAF, and he carried out much of this work at the Glenrothes coal pit, not far from Buckhaven.   Three years later, after the grant was terminated due to post-war austerity, he was appointed Senior Lecturer in the Department of Social and Economic Research of Glasgow University.

With the formation of Strathclyde University in the same city, he was appointed Professor in charge of the Department of Administration, building it up to be the largest of its kind in Europe, second only to the Harvard School of Business Administration, and establishing the first MBA programme in Europe.   He finished his career at Strathclyde as a Research Professor.

In his years in Glasgow and Strathclyde Universities, he undertook many consultancy positions such as studying the administrative aspects of the medical care of patients, including the psychiatricly ill, developing the constitution of Southern Rhodesia (with the unfortunate side effect of enabling it to declare independence unilaterally), revitalising the Technion University in Haifa, Israel, reorganising the civil services of Denmark and Finland, reorganising the sugar industries of Nigeria and Kenya, reorganising the coal, gold and tea industries of South Africa on non-racial lines, and reorganising the nursing profession in the United Kingdom (ill-fated because those charged with implementing his recommendations did not take the trouble to understand how they ought to be applied).   He wrote 15 books and published more than 90 papers on a wide variety of subjects.

He spent his final years, after his official retirement in 1974, in North Vancouver, BC, Canada, partially as a visiting professor at Simon Fraser University, Vancouver, but also continuing to carry out various consultancy jobs.

Throughout his career he was friend and colleague to many people such as T C Lethbridge, J M Wordie, L S B and Mary Leakey, R Fortune, G Bateson, Margaret Mead, H de Terra, P Teilhard de Chardin (S J), Ethel J Lindgren, M Utsi, A Cairncross, A Hoffer, and H Osmond.   His students from Glasgow and Strathclyde Universities often came to occupy senior positions in industry or Chairs of Administration world-wide.

He was an excellent and popular speaker, both to small groups in seminars and to larger audiences, tending to focus upon the fundamental meanings of the topics about which he spoke, never presuming that his listeners had the same
understanding of meanings as he did.   His writings were equally devoted to clarity of meaning rather than jargon and woolly phraseology.   His approaches to the concepts that he dealt with, he stated/claimed, were metaphysical, and yet, like some of the most esoteric mathematics, of very practical application.

For much of his early life he was involved, with his brother, with the Free Masons, enjoying their egalitarianism, but was put off by the snobbishness he encountered in the English lodges.   Until the advent of modern communications he would boast that he could tell, within ten miles, the home town of a Scot on hearing how that person spoke.   He loved travel, circling the world twice during his retirement.  His final trip was in a chartered boat, fishing up the coast of British Columbia, barely two years before he died.   He loved good food and had an almost unerring instinct for exceptional places to eat.   Dinner with him was never boring, being an almost unending-seeming succession of interesting anecdotes.   He was a connoisseur of fine malt whiskies.   He adored small children and the feeling was mutual.

He is predeceased by his father, Matthew, mother, Janet, five sisters and one brother, and his first wife, Elna.   He is survived by his second wife, Marion, his son, Dr Erik T Paterson - myself - of Creston, BC, Canada, his daughter, Kirsty
Groen of Bowen Island, BC, his two grand-daughters, Tara Duncan of Glasgow, and Fiona Paterson of Creston, grandson, Daniel Groen, and great grand-daughter, Ashley Roxanne Duncan.