The impact of employee remuneration inequalities on employee productivity in the South African workplace

Gerhardus Van Zyl

doi:10.4102/jef.v14i1.633

Abstract

Orientation: This article is part of an ongoing research project on various aspects of employee productivity in the South African workplace.Research purpose: The aim of this article is to determine firm-based employee productivity impacts as a result of employee remuneration inequalities (excess-remuneration and under-remuneration) in the South African workplace.Motivation for the study: The study focuses on understanding the impact and magnitude of employee remuneration inequalities on employee productivity in a unionised South African workplace.Research design: The article adopts two distinct estimation models. The aim of the additive multivariate linear estimation model is to determine the sign and the significance of the impact of both under- and excess-remuneration levels on employee productivity when employee characteristics such as levels of training, work experience and managerial involvement are considered. The second model is a fixed-effect panel data estimation where the full sample set of the relevant firm-based data is used. The aim of the panel data estimations is to estimate the robustness of the additive multivariate linear estimates. The manufacturing industry of Gauteng has been chosen as the case study, given the importance of this industry, in the gross geographical product of Gauteng province and the availability of firm-based data.Main findings: Estimation results indicate a strong and significant negative impact of under-remuneration on employee productivity levels. Excess-remuneration levels have a small positive impact on employee productivity levels.Practical/managerial implications: The estimations indicate the necessity to eliminate remuneration inequalities and opt for equalised remuneration structures for similar occupations in the market to enhance employee productivity levels.Contribution/value-added: The study contributes to our understanding of the impact of remuneration inequalities for similar occupations on employee productivity.

Highlights

The aim of this article is to determine the impact of employee remuneration inequalities on employee productivity when firm-based data are used.The South African workplace is highly unionised and it is hypothesised that remuneration inequalities, which are derived from comparable average industry remuneration levels for particular job levels, would have a strong impact on employee productivity in the workplace
The article is a follow-up on a study that was conducted on the relationship between remuneration gaps and employee productivity in which employee remuneration gap–employee productivity https://www.jefjournal.org.za
There are low positive correlations between the Sen index for under-remuneration and the coefficient of variation for employee remuneration (0.28 for digit 71 and 0.38 for digit 72) and the Sen index for excess-remuneration and the coefficient of variation for employee remuneration (0.13 for digit 71 and 0.38 for digit 72). These results indicate that the levels of remuneration inequality will react slowly to changes in the variation of employee remuneration

Summary

Introduction

The aim of this article is to determine the impact of employee remuneration inequalities (under-remuneration and excess-remuneration) on employee productivity when firm-based data are used. Coefficients were estimated to determine the existence of diminishing marginal employee productivity after some optimal employee remuneration gap level (Van Zyl 2010). It is part of an on-going research project on various aspects of employee productivity in the South African workplace.

Literature study

Findings

Conclusion