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South Africa’s Future of Total Rewards Faces Economic Headwinds

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Where the total rewards profession is headed in South Africa is shaped by the country’s current economic climate.

While the United States unemployment rate is 3.8%, according to the U.S. Department of Labor’s latest jobs report, the situation is vastly different in South Africa, with the latest unemployment figures sitting around 27%. As a result, Melanie Trollip, CEO of PE Corporate Services in Johannesburg, said South African organizations are deploying pay-for-performance compensation models to ensure sustainability.

The unemployment rate is greatly affected by the education shortage in the country, Trollip said. Therefore, organizations are approaching this issue from a couple different angles to improve skill development.

“What companies are really doing, because their budgets are tight, is providing educational and assistance support to employees,” Trollip said. “It hasn’t been used as a recruitment tool, but skills development and career pathing are a part of the employee value proposition.”

Some organizations are also rolling out corporate social advancement initiatives, which are aimed at assisting the undereducated citizens -- many of whom are unemployed -- and arming them with basic life and technological skills so they are more employable.

However, Trollip said it’s a problem that is too big to be solved by the corporate sector and that the government will need to address the issue.

Central to the skills development movement in South Africa is forthcoming automation. Trollip said there is some concern in the country about how prepared some HR practitioners are for the challenges they will face in the “Fourth Industrial Revolution.” One of those challenges is the evolving employment relationship and how it will affect payroll.

“Companies haven’t even started thinking about formula-based pay. If somebody is now fulfilling a number of roles, do you pay for the primary role and then pay in addition for additional skills? Skills development is one of the major challenges the HR fraternity is going to be faced with,” she said. “When you deconstruct jobs, there’s a certain repetitive part that can be automated, but then you’re going to have a demand for specialist skills in that market and it’s going to be at a premium. You’re going to have to revisit your EVP to accommodate how you’re going to reward your talent platform people and your free agents. That’s going to be critical in the future if you want people to work with you.”

Pay Equity
South Africa is ranked 19th out of 149 countries on gender equality, according to the “2018 World Economic Forum Global Gender Report.” However, its ranking plummets to 117th when it comes to equal pay for equal work.

There is a law in place, the Employment Equity Act (1998), which prohibits employers from unfairly discriminating against employees on the usual grounds, including race, gender, ethnicity and marital status. In 2014, a section (27) was added that requires employers with more than 50 employees to report income differentials across both race and gender groups.

Trollip said she feels progress is being made when it comes to pay equity in South Africa.

“In terms of employment equity, it’s forced organizations to actually focus on this issue and it has paid off,” Trollip said. “I’m not saying that there isn’t a gender gap. There definitely is a gender gap and it’s more common in specific industries that are historically male dominated, like construction and mining.”

An emerging trend in the South African rewards spaced is also influenced by the economic downturn. Trollip said organizations are offering what is known as a “total package” concept in which the total cost of employment is negotiated. Once the total cost of employment is set, the employee can set their take-home pay within that package, assuming they belong to a medical-aid scheme and contribute to a retirement fund.

Trollip said as technology’s influence continues to grow, South African employees will begin to bring more to the bargaining table. 

“Because of the fourth industrial revolution, people are going to have to have a totally new approach to rewards. It’s going to be a negotiation going forward more so than this is what the company offers and you either need to accept it or reject it,” Trollip said. “I think it’s going to be an absolute negotiation because of the empowerment of employees.”


The Gig Economy Is Thriving and Here to Stay

Gig economy isn’t a brand-new term in the working world vernacular, but its rise to prominence over the past decade is undeniable. To what extent gig work has taken up the marketplace is up for debate, but everyone agrees that it is influencing the work landscape, not just of today, but of tomorrow as well.

An estimated 57 million workers (about 36% of the workforce) freelance today, according to Upwork’s 2018 survey “Freelancing in America,” and it’s projected that most of the United States workforce will freelance by 2027. Willis Towers Watson’s “2017-2018 Global Future of Work Survey” revealed that employers’ use of free-agent workers is set to rise by 50% in the next three years.

It’s important to note that many of those workers likely have full-time jobs and are supplementing their income with side gigs, which is to say it’s not replacing traditional work.

“We have to understand these numbers in this context and there’s a big debate about how big the gig economy is today, but there’s no question that it has significantly proliferated in the past five to 10 years,” said John Bremen, managing director of human capital and benefits at Willis Towers Watson. “The gig economy is thriving, and we have observed that it’s here to stay.”

So, how are employers responding to this evolving work landscape? Bremen said organizations should approach the gig economy in a few ways. From a talent-acquisition perspective, employers should analyze and identify roles that might be better suited for a freelancer, as it could benefit them from a cost perspective, he said.

Organizations also need to figure out how to then integrate gig economy workers, so they can mitigate risk.

“We’ve seen boards lately really being concerned about standards for gig workers, because a lot of the corporate scandals over the years have been brought about by contractors or subcontractors, so companies have to have ways to ensure cultural fit as well as quality and process controls as well,” Bremen said.

Lastly, organizations should create a talent value proposition (TVP) to supplement their employee value propositions (EVP). By doing this, organizations can align their contingent workforce with the mission, values and culture without unintentionally exposing the organization to co-employment and misclassification risk, Bremen said.

A key part of the TVP is providing fair pay arrangements and access to retirement and health-care benefits, the latter of which isn’t currently possible in the U.S. This has fueled a national debate around companies such as Lyft and Uber, which are wholly dependent on gig workers, yet unable to provide benefits that adequately support that workforce.

Bremen said he anticipates that part of the equation will change, but how quickly is anyone’s guess.

“I am surprised at the slow pace of change on the legislative side in this regard, given the large percentage of workers in the U.S. that are in the gig economy” Bremen said. “I would’ve thought that some of these rules would evolve, but my sense of it is, the pressure is not going to come from the companies, it’s going to come from the voters. So as the percentage of gig workers increases in the U.S., I think they will be putting pressure on their elected officials to update the laws. But until then, I think it’s going to be a little clunky.”

Though gig workers lag behind the traditional workforce in those particular categories, they appear to have a leg up in an area that could prove vital in the future, Bremen said. 

“Reskilling is playing a significant role in the economy today and we’ve seen studies that show gig workers reskill at a much faster rate than traditional workers,” Bremen said. “I think as we see studies about work being impacted by technology, robotics and AI, that workers need to reskill. It’s fascinating that the gig workers are reskilling at a much faster rate.”


The Future Benefits World Is Diverse and Inclusive 

Organizations implementing diversity and inclusion initiatives is an emerging trend in the HR space. Some of these initiatives are in response to the heightened awareness the #MeToo movement has brought, lawsuits and all. But organizations are also becoming increasingly aware of the effect a more diverse and inclusive workplace can have on the bottom line.

A McKinsey report revealed that ethnically diverse companies are 33% more likely to outperform non-ethnically diverse companies.

“Employers shouldn’t underestimate the importance of inclusion and diversity and how it aligns with the broader business strategy,” said Rachael McCann, senior director of health and benefits at Willis Towers Watson. “Where I think employers have an opportunity to move past great objectives, employer resource groups, is when they evaluate and focus on inclusion and diversity as a business imperative than as just being a component.” 

Research from Willis Towers Watson’s “2019 Emerging Trends in Heath Care Survey” found that employers view diversity and inclusion efforts as a way to attract and retain talent while also driving employee engagement. In that vein, it stands to reason that organizations will continue to ramp up diversity and inclusion initiatives going forward, given the tight labor market. 

“The need to recruit, retain and engage diverse talent in a highly competitive labor market will only accelerate activity over the coming years,” said Rachael McCann, senior director of health and benefits at Willis Towers Watson. “Simply put, inclusion and diversity has become a top focus of the C-suite, given the clear link between diverse talent and improved business results.”

The Willis Towers Watson survey of 535 employers found that 73% intend to communicate their inclusion and diversity initiatives as they pertain to workplace culture and policies over the next three years. And 68% said they are aiming to align diversity and inclusion endeavors with their benefit programs.

McCann said that five years from now she anticipates diversity and inclusion to be integrated into every aspect of an employers’ benefits or rewards strategy. McCann likened the affect diversity and inclusion is having on the benefits world to that of when the Affordable Care Act (ACA) was introduced by the Obama administration in 2010.

“When ACA was passed, employers were really forced to think about their strategy and where health care played a role, unlike any other time I think we’ve had,” McCann said. “The focus on inclusion and diversity has really pushed employers to think about who their workforce is today, who it’s going to be in the future and evaluate if the programs they have are really meeting those needs.”

About the Author

Brett Christie is a staff writer at WorldatWork.


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