South Africa’s new company laws cut both ways

Listed companies and State-owned Entities now have to disclose the pay gap between their highest- and lowest-paid workers, which some say will have a positive impact, while others have flagged some major risks.

According to the amendments to the Companies Act, companies must report the earnings gap between the total pay of the top 5% highest-paid employees and the total pay of the bottom 5% lowest-paid workers. Vlok added that the disclosure law would benefit the work environment in several ways and put executives and remuneration committees on edge.

Vlok, this is good because, much like many major industries, executive pay is in the hundreds of millions of rands, which is a remuneration policy that doesn’t always align with performance. Companies are unlikely to reduce executive pay but may outsource lower-level jobs, potentially resulting in fewer job opportunities and less stability for low-wage workers.

The Palma ratio, which compares the bottom 40% to the top 10%, is considered more suitable for economies with many low-wage workers.

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