Calls for income transparency in recruitment ads

A growing number of countries have implemented legislation that forces companies to be transparent about how much they pay their employees – the aim being to expose and eliminate salary disparities between different race and gender groups.

Some US cities, including New York, Philadelphia and California, have also passed laws designed to tackle wage discrimination at recruitment stage by making it illegal for employers to ask potential candidates about their salary history.

When the New York law was instituted, Carmelyn Malalis of the NYC Commission on Human Rights was quoted as saying that the legislation would enable women and people of colour to negotiate based on their skills and to not be “held back by their current or previous salaries”.

The World Economic Forum’s 2018 Global Gender Report looked at gender equality across four dimensions: economic participation and opportunity, educational attainment, health and survival, and political empowerment. South Africa was ranked 19th out of 149 countries in terms of gender equality. However, when it comes to equal pay for equal work, the country came in at 117.  

Read: Not just the pay gap – women experience ‘punishment gap’ too

The 2018/2019 Global Wage Report produced by the International Labour Organisation (ILO) found that women continue to be paid, on average, approximately 20% less than men. When the ILO looked specifically at low- and middle-income countries, it named South Africa, Namibia, Tanzania and Malawi as “the countries with the highest levels of wage inequality among the 64 countries considered”.

It is this inequality that PayslipBanSA is seeking to tackle through its campaign. The advocacy body ultimately aims to legally challenge the lack of remuneration transparency and the demand for payslips and pay history during recruitment as constitutionally unfair and anti-competitive.

No to obscure ads and payslip requests

“Income inequality is something that is negotiated … we might as well call inequality a labour market function because right now it is being propped up by the labour market,” Leonie Hall, founder of the advocacy group, told Moneyweb.

PayslipBanSA wants to take its fight to the Constitutional Court and has partnered up with JustLaw, a crowdfunding and legal rights advocacy platform that assists people who want to take legal action but cannot afford to.

Hall says the group believes that the law provides space to question this labour market conduct – particularly Section 23 of the Constitution, which states that “everybody is entitled to fair labour practice”.

“No transparency means problems,” says Hall, adding that if an employer has more information than an applicant, it has more power, which allows it to create an opportunity to prevent job seekers from fairly negotiating pay.

“If they were upfront, they would not need to ask for your payslip,” she says.

Government leading the way

Maphutha Diaz, head of human resource standards and projects at the SA Board for People Practices, says that the practice of asking for payslips is influenced by particular companies’ policies or procedures, adding that the public service is known for its transparency.

Diaz says employers use payslips to place potential employees within specific remuneration pay scales relative to others in the same jobs or job categories.

“If new employees are placed incorrectly relative to existing employees, you could end up creating anomalies which are a source of employee grievances,” says Diaz.  

He adds that there are other risks associated with the recruitment and placement process. “It is said by some that out of every 10 job applicants you get, up to four of those could be inflating their profile or being dishonest.”

There is no law that requires job seekers to disclose their payslip or permits employers to request them.

Context

Hall says recruiters don’t have context around an employee’s previous salary, which could include being underpaid in a previous position. “These recruiters are operating as gatekeepers because they are preselecting candidates based on financial criteria and limiting the talent pool to employers,” she says.

On the issue of employees lying about their profiles, Hall argues that recruiters can easily remedy this by contacting the company or the job applicant’s references. “Since when did payslips offer a narrative on my competency?” she asks.

Hall points out that the lack of transparency also reduces competition between employers in the labour market, saying that if the employment patterns and salary offers of an ‘ethical’ company were made public this would force any company that “cheats” its employees to increase salaries or benefits in order to retain its workers.

However, Diaz says this is not necessarily true because companies benchmark themselves against their competition through extensive salary surveys conducted by remuneration consulting firms.

“Companies are mostly guided by their remuneration policies and related processes. If there are companies that still pay their existing and potential employees below their established pay scales, they could be violating the Employment Equity Act.”

Read: Real-life gender pay gap far bigger than thought, US economists say

The Act requires employers to uphold the code of ‘Equal pay for equal work of equal value’. Employers with more than 50 employees are required to submit, among other reports, an income differential statement to the Department of Labour. Should an employee believe they are not being paid fairly, they can challenge the employer.

In a statement, Anita Bosch, associate professor in organisational behaviour and leadership at the University of Stellenbosch Business School, says research indicates that the gender pay gap shifts when public reporting is required by legislation and when there is proactive effort to close it.

“When trade unions place specific emphasis on pay equality, the gender wage gap reduces,” says Bosch. “For instance, the standardised manner in which positions in government service are advertised — with wage transparency — has resulted in a low gender pay gap.”