As pay equity continues to top the agenda of unions, regulators, workers and company shareholders alike, PwC warned on Thursday that focus needed to be drawn to the living wage and unemployment to avoid a knee-jerk reaction that could see an exodus of professionals.

With companies and remuneration committees increasingly monitoring and restraining what company leaders were paid each year, there was a need to shift focus to obtaining the “sweet spot” between mitigating inequality and tackling unemployment and poverty, said PwC compensation and benefits partner Martin Hopkins.

South Africa’s expanded 36.1% unemployment rate, including discouraged work seekers, had widened the national Gini coefficient from 0.63 to 0.65, while the Gini coefficient of the employed contracted from 0.44 in 2014 to 0.43 in 2015.

This indicated that reducing unemployment in the country was potentially a “more compelling” social, economical and ethical move than a reduction of the pay gap between the top- and bottom-earning workers.

This followed the release of PwC’s latest 'Executive directors' remuneration: practices and trends' report, which delved into the pay cheques of 1 180 executive directors at 355 JSE-listed basic resources, finance, industrial and services companies operating in South Africa.

Unpacking the report at a briefing in Johannesburg on Thursday, PwC Southern Africa head of human resource services Gerald Seegers noted that guaranteed pay, excluding bonuses and shares, for executive directors averaged around R3.3-million a year, with yearly average increases remaining in the single-digit below-inflation range of between 4.8% and 6.8% for executive directors, CEOs and CFOs.

The yearly report showed that CEOs in South Africa earned an average of around R4.1-million, CFOs R3.65-million and other executive members of the board around R2.57-million each year.

Seegers noted that 140 of these directors were paid in foreign currency, such as the US dollar, the pound, the euro or the Australian dollar.

“While the average levels of [executive] pay remain high relative to workers, and are viewed as excessive by labour and the general public, increases in total guaranteed pay have generally remained subdued and are below those granted to workers,” said Seegers.

While some of the top 40 companies on the JSE were addressing the internal wage gap in “one way or another”, mitigating average base salary increases for executives and increasing salary percentages for general staff or foregoing leadership increases entirely, Hopkins said there was a need to “be careful” of slashing leadership’s salaries excessively amid a currently high exodus of professionals every month seeking employment elsewhere.

“If we halve or [significantly] cap CEO pay, [South Africa’s] access to business leadership will be at risk,” he said, explaining that attractive packages were key to attracting, engaging and retaining top leadership talent in a competitive environment.

Executive pay should be aligned to market, be fair and equitable and linked to a performance metric; however, greater focus needed to be placed on the country’s “massive” unemployment rate, which was a significant contributor to its higher national Gini coefficient.

The spotlight had now shifted to workers' pay and the establishment of a living wage, which Seegers believed could be one of the solutions to the social tensions surrounding the pay of top management.

South Africa was currently mulling the introduction of a national minimum wage, with its current wage regulation, guided by the Labour Relations Act, No 66 of 1995, and the Basic Conditions of Employment Act, No 75 of 1997, determined through collective bargaining, which placed minimum wages at R2 721 a month, and the direct regulation of pay for vulnerable workers through sectoral determinations, for which the current minimum wage was R2 362.

“Annually, there is much debate around salary increases and pressure for increases is drawn on the issue of living standards and what can be done to improve them,” the report noted.

While it was likely that imposing a national minimum wage could reduce the number of job opportunities available, there was some merit in implementing a voluntary living wage to pay above the normal rate for employers wanting to seem more attractive to employees and potential clients.

“For the private sector to remain competitive and attract the best talent, it also has to compete with global employers that are proud to consider themselves as living wage employers,” Seegers said.

Hopkins added that the enforcement of a national minimum wage and a living wage that could exclude potential workers from entry into the workplace remained a "difficult debate".

“We are between a rock and a hard place in some cases,” he said of an environment where the level of productivity could not support higher wage levels.

However, it was “all about” ensuring security of jobs – and higher paying jobs – while mitigating the potential barriers to the entry of other workers.