While it aims to address issues of inequality and enhance transparency, several challenges and unintended consequences must be considered.<\/p>\n\n\n\n
Pay-gap disclosures will put pressure on companies with a high disparity to rectify the situation and reduce the gap.<\/p>\n\n\n\n
These companies are unlikely to cut executive pay. Instead, they will look to report higher pay for the lower-paid employees<\/strong>.<\/p>\n\n\n\n This does not mean that the salaries of these employees will be increased to the detriment of profits. It can take many forms.<\/p>\n\n\n\n It may inadvertently encourage executives to seek opportunities in foreign jurisdictions with more favourable remuneration policies.<\/p>\n\n\n\n They will also consider reducing the pay gap through workforce reduction or outsourcing<\/strong>. This is already happening at many companies.<\/p>\n\n\n\n By outsourcing low-level jobs like cleaning and security, a company can significantly increase the reported salaries of the bottom 5% of workers.<\/p>\n\n\n\n Lower-level employees, who are already struggling with comparatively low wages, may face job losses or reduced opportunities.<\/p>\n\n\n\n So, instead of increasing the salary of lower-level workers, it can result in fewer jobs and less stability for such workers.<\/p>\n\n\n\n Another criticism is that comparing the top 5% of earners to the bottom 5% of earners appears to be an arbitrary selection.<\/p>\n\n\n\n The Palma ratio, which compares the bottom 40% of earners with the top-paid 10%, has been touted as a better alternative.<\/p>\n\n\n\n This is because the Palma ratio is more appropriate for a developing economy with many low-level workers, like South Africa.<\/p>\n\n\n\n The Southern African Clothing and Textile Workers’ Union (SACTWU) national industrial policy officer, Etienne Vlok, said the risks associated with the new laws are not new.<\/p>\n\n\n\n He admitted that there is a risk with \u201cunethical companies\u201d outsourcing lower-paid work or cut entry-level jobs.<\/p>\n\n\n\n However, he said outsourcing and not keeping a workforce in a company created problems for businesses.<\/p>\n\n\n\n \u201cIf directors want to hide their high remuneration to the detriment of a company, shareholders should question their actions,\u201d he said.<\/p>\n\n\n\n Vlok argued that the new pay gap disclosure is beneficial to companies as it can result in higher productivity.<\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/Haafizah-Khota.jpg\")
<\/a>
\n\n\n\n