A RECENT media report stated that government ministers earn less than US$300 per month, far below the poverty datum line estimated at about US$500.
Though innocent, nonetheless this statement is misleading. It sums the widely held misconception concerning remuneration. It is not clear whether the supposedly less-than- US$300 earned by our government ministers refers to the basic, total guaranteed package or total remuneration. Looking at the range of remuneration components enjoyed by our ministers, the quoted remuneration range appears to be the basic salary. This apparent basic salary myopia fuels the misconception that we intend to address.
As our recent survey revealed, many tend to view remuneration as being the basic salary. For many, basic salary contributes the most to the cash component of their pay. By default, non-cash elements of pay tend not to be recognised as part of remuneration per ser, a notion buttressed by the widespread practice of non-inclusion of non-cash pay elements on the pay slip.
Considering current practices in reward, using basic salary as a benchmark for remuneration comparison is not very useful, and can be potentially misleading, giving rise to incorrect pay decisions. As a nation, we are accustomed to the traditional salary-plus-benefits or salary-add-on-benefits approach to pay structuring, where the focus is mainly on basic pay, with add-on benefits calculated as a proportion of the base pay. Referring to the case of South Africa can help give clarity, supplying context to our text.
In the last decade, South Africa saw a fundamental shift towards the more flexible approaches to pay structuring, effectively ditching the salary-plus-benefits approach, a paradigm shift driven by the re-invention and repositioning of reward management as a strategic corporate agenda. The strategic reward management wave is in its embryonic phase in Zimbabwe. In 2009, 70% of senior executives and senior managers in South Africa were on non-traditional remuneration structuring, popularly known as the “my pay my way” structures. Under the non-traditional pay structuring approaches, employees are given a menu of benefits to choose from, in line with their life-cycle stage needs. In the more sophisticated structures, the employee ‘sells’ the remaining benefits to the employer for cash, thus increasing their take-home cash. The default ‘use-it -or-lose-it’ unwritten clause, rather more precisely, ‘take-it-or-leave it’ falls away under the flexible approaches to pay structuring. It is clear from this narrative that basic pay will vary with the individual’s choice. We are destined to conclude that using basic pay as a basis for comparing salaries does not add much value any more.
Using total guaranteed package to compare pay levels provides a more accurate pay snap shot, as it brings together all elements of fixed pay into one figure, whether these appear on the payroll or not. The tax man or lady must surely be smiling, I suppose. We will put to test the claim that our government ministers are earning less than US$300 per month, using the total guaranteed package framework.
Every minister is given a top-of-the range vehicle, the Mercedes Benz traditionally, being the standard minister’s car. We are talking US$65 000 to US$70 000 purchase price for a top-end Benz model. In professional reward management, the vehicle offered by the employee’s organisation is an integral part of the employee’s fixed remuneration. Taking, the lower car value of US$65 000 and applying accepted reward practice yields an annual car benefit of US$9 600, translating to US$800 per month, already 2,6 times higher than the US$300 per month upper limit.
We could as well rest the case. To gauge the extent of the true ministers’ remuneration from a professional reward management angle, other components of pay must be interrogated.
Housing benefit is very significant. Ministers are given largely free accommodation by the state. This is an integral part of their guaranteed remuneration. Our estimate of the annual housing benefit enjoyed by our ministers is at least US$25 000 per annum giving a pro-rated monthly housing benefit of US$2 000. Adding utilities into the minister’s guaranteed package further swells the remuneration beyond the widely reported figures.
Other guaranteed benefits, which from a reward perspective are part of the ministers’ guaranteed pay, include fuel allocation and vehicle maintenance costs. Being not privy to the other guaranteed elements, I cannot speak with confidence, concerning other possible benefits such as educational assistance, medical aid, pension , security, second car, clothing, to mention a few. This list is enough to rescue us from the basic pay myopia.
On the basis of the benefits enjoyed by our ministers that are common knowledge, we come to the conclusion that each government minister earns a total guaranteed package of at least US$3 000 per month. It is as clear as noon-day that the reported minister’s remuneration is in fact at least 10 times understated. Therefore, the assertion that our government ministers live below the estimated US$500 per month poverty datum line is incorrect.
Now, factor tax into that remuneration equation. Ministers enjoy concessionary tax rates, with most of the benefits being tax exempt. Is that earning below the poverty datum line?
Honestly speaking, on an after-tax basis our ministers’ total guaranteed package should be at or above the upper quartile when placed alongside other senior executives in Zimbabwe with equivalent job sizes. I stand to be corrected.
The unfortunate impression created by the untruth that our ministers earn below the poverty datum line is two-fold. First, far from courting sympathy, the below-poverty datum line myth depreciates our brand as a nation in the eyes of the community of nations. Uninformed elements might use the erroneously alleged poor remuneration of our ministers as an excuse to justify the earning-by-clocking-mileage syndrome, seemingly calculated to supplement “poor” income. Second, it creates the unintended notion that ministers earn more or less the same as the rest of the civil servants. On a basic salary basis ministers and other civil servants are in the same league, but looked at from the more accurate, therefore objective total guaranteed package perspective, the two play in different leagues.
When the travel and subsistence allowance exceeds the going-market-rates, the difference is regarded as being part of the employee’s remuneration, although it is not considered part of their guaranteed package. When the market principle is applied to ministers’ travel expenses any market excess should be regarded as part of the minister’s remuneration. Admittedly, travel and subsistence allowance has been used by many smart and powerful employees as a cash cow to increase the size of their wallet.
The ignorance surrounding professional remuneration that appears to be widespread in our nation lies at HR’s doorstep. Human capital practitioners should have both thought
and professional leadership. By
being silent, HR is guilty by complicity.
Who would blame Dave Ulrich, a leading light in HR thought leadership when he candidly advised “HR should give value or give notice”?
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