Does a broad banded organisational structure facilitate compliance as opposed to a single graded structure?
The need for organisations to comply with the Employment Equity Act in terms of its requirement of “equal pay for work of equal value” has raised many opinions and debates. Opinions invariably differ across a spectrum of thought provoking standpoints and it tends to reflect interpretations based on the nature of the organisation, its business, organisational structure and remuneration philosophy.
The hierarchical structure of the organisation has a definite impact on the approach it will adopt to ensuring compliance with the principle of “equal pay for work of equal value”. This raises the question of whether a broad banded organisational structure facilitates compliance, as opposed to a single graded structure.
Before expressing any opinion on this, it might be useful at this point to briefly describe the characteristics of a broad banded structure as typically practiced in South Africa. Local organisations who have introduced broad banded structures, either across the full employee spectrum or only for certain levels of the organisation, have typically collapsed three or more single grades into one broad band. However, their remuneration approach has not typically resulted in a single continuous pay band or scale. There are reasons for this, amongst others:
• There are distinct differences in the levels of market-related remuneration for jobs in different functional areas, albeit that these jobs may be graded at the same level; and
• In a country like ours, where certain skills are in short supply, for example specialists in technical disciplines, a market premium exists and these particular skills attract higher levels of remuneration.
This has resulted in a practice where, regardless of these jobs being structured into a single broad band, the remuneration of jobs in certain functions are pegged at a different level in the broadband. In essence, from a remuneration perspective, the broadband is broken up into a series of mini bands. This then begs the question of why bother with broad-banding in the first place?
When it comes to job evaluation, the commonly accepted methodology for establishing the hierarchical ranking of jobs in an organisation, based on the relative value of contribution of the particular job, the employment equity act code of good practice is very clear on what constitutes fair and equitable criteria for this assessment.
An abridged outline of the basic criteria commonly used to evaluate the value of jobs by an employer, as prescribed by the Code, are:
• The responsibility demanded of the work, including responsibility for people, finances and material;
• The skills, qualifications, including prior learning and experience required to perform the work, whether formal or informal;
• Physical, mental and emotional effort required to perform the work. This refers to the difficulty related to and the fatigue and tension caused by performing job tasks; and
• The assessment of working conditions may include an assessment of the physical environment, psychological conditions, time when and geographic location where the work is
Furthermore, the Code states that “best practice indicates that the four criteria … are generally regarded as being sufficient for evaluating all the tasks performed in an organisation, regardless of the economic sector in which the enterprise operates”.
Most of the points-factor job evaluation systems commonly in use by organisations today are generally compliant with the above requirements. Assuming that the actual job evaluation process, that is the preparation of job profiles, the grading process, appeal and validation processes are in place and are equitably practiced, the results should be justifiable in terms of the Act.
Also, assuming that there are no specific remuneration practices at present that are based on arbitrary or constitutionally unacceptable discriminatory practices, differentiation in pay based on a justifiable ranking of jobs in the organisation should be above scrutiny. This should be the case regardless of whether the organisation is structured on a single grade or broad banded basis.
Against the above backdrop, we are of the opinion that a broad banded structure which is primarily intended to promote cross skilling, multi skilling and a flatter, more agile, structure with horizontal, rather than vertical, career development, will not necessarily facilitate compliance with the principle of “equal pay for jobs of equal value”.
In contrast, it is likely that a broad banded structure would probably create more problems than a single graded structure given that, by its very nature, attracts negative scrutiny on the issue of pay levels by employees who perceive themselves to be at “the same grade” as other employees in the band, albeit that these jobs are of less worth, and therefore expect the same pay.
In this respect, more often than not, employees in the lower pay levels of the band aspire to be remunerated at the top of the pay scale for the band. In large organisations that are very labour intensive, this likelihood would be exacerbated by challenges and demands from organised labour representatives.
Rebone Banda GRP® and Paul Marais GRP® are Remuneration Consultants at Remuneration Consultants, www.remunerationconsultants.co.za.
This article appeared in the October 2016 issue of HR Future magazine.