Regulatory changes poised to transform South Africa’s reward industry

As corporate remuneration practices increasingly step into the limelight, recent regulatory changes and a landmark legal ruling are driving organisations to rethink their compensation strategies.

Traditionally resting primarily within human resources, remuneration is now becoming integral to organisational strategy, reflecting a growing awareness that fair pay practices are crucial for both business success and reputation.

Lindiwe Sebesho, Master Reward Specialist and Executive Committee Member at the South African Reward Association (SARA), sheds light on four significant regulatory changes that are expected to have far-reaching impacts on remuneration policies and practices throughout the country.

Amended Companies Act

The Amended Companies Act promises to drastically reshape how companies disclose executive remuneration, introducing stringent requirements designed to enhance transparency and accountability.

With its planned sections 30A and 30B set to come into effect by the end of 2025, companies will need to provide detailed disclosures of individual director remuneration and receive mandatory shareholder approval for their remuneration policies every three years.

This shift from non-binding voting to a binding framework means that failure to comply could lead to legal ramifications for directors and potential reputational fallout for the company itself.

As Sebesho articulates, these changes mean remuneration professionals must link executive pay to their performance metrics while preparing for increased scrutiny from stakeholders.

Mandatory disclosures will highlight vertical pay ratios and average employee compensation, making it essential for organisations to communicate transparently about pay structures and practices.

Fair Pay Bill

The Fair Pay Bill, which remains pending completion of parliamentary procedures, aims to address historic pay inequities by prohibiting the practice of requesting salary histories from job candidates.

Such changes could empower individuals during salary negotiations, ultimately aiming to promote fairness across similar roles.

According to Sebesho, these measures will significantly impact how recruitment and remuneration practices are conducted, as organisations will need to implement structured pay frameworks based on objective assessments rather than past earnings.

Organisations are advised to reconsider their hiring practices by ensuring that recruiters are trained to engage openly with candidates about salary ranges and the principles underpinning fair pay.

Engaging in transparent dialogue will build trust and authority in hiring practices.

Employment Equity Act Amendments

The amended Employment Equity Act introduces rigorous requirements for designated employers to ensure equitable pay practices and adherence to sectoral targets as set by the Minister of Employment and Labour.

These amendments mandate that employers undertake regular reviews of their remuneration structures, ensuring that any potential pay disparities related to race, gender, or disability are identified and addressed promptly.

Compliance is paramount; failure to adhere to these new equity targets can result in substantial penalties and exclusion from certain government contracts.

Employers are now acutely aware of the importance of transparent reporting mechanisms that track diversity metrics and demonstrate clear progress towards equity goals.

Parental Leave Ruling

Perhaps the most transformative development is the recent ruling from the Constitutional Court, which invalidated existing maternity leave regulations that limited benefits exclusively to birth mothers.

This groundbreaking decision allows parents the flexibility to share up to four months and ten days of leave, irrespective of whether they work for the same employer.

Such legal recognition of shared parental responsibility not only facilitates a more inclusive workplace but also aligns with global movements advocating for equitable parental leave.

As organisations prepare to implement this change, it is crucial that they update their HR policies and systems to accommodate shared parental leave while simultaneously training managers to apply these new provisions consistently across the board.

Beyond compliance

The evolving regulatory landscape necessitates action beyond mere compliance.

To foster sustainable organisational excellence, reward professionals must revise human resource frameworks to reflect these new legislative environments.

Training HR teams and managers on inclusive practices will be essential in promoting fairness and eliminating biases from decision-making processes.

Clear communication regarding changes in remuneration policies can help build trust and convey an organisation’s commitment to equitable pay.

As we await the final adaptations of certain regulations, it is imperative for organisations to begin developing sustainable reward strategies that resonate with the objectives of advancing social equity and ensuring fair compensation for all contributors in the workforce.

According to Sebesho, embracing these proactive measures will not only ensure compliance but also establish organisations as leaders in fostering equitable, attractive workplace environments.

BUSINESS REPORT