Methodology of pay gap calculations

Sources are annual reports and the Quarterly Employment Survey.

Moneyweb and Profile Media have conducted a comprehensive analysis of the annual reports of listed companies in an effort to compile a measure of the pay gap ratio between the companies’ executive directors and their respective average employees.

The latest annual reports were used, although in some isolated cases a particular company may have published a new annual report.

Unfortunately, companies are not compelled to publish the ‘average’ or ‘rank and file’ salaries of their workforce, which makes calculating the pay gap ratio more difficult.

To solve this problem we used salary data from the Quarterly Employment Survey (QES) for the formal employment sector for the second quarter of 2015, as compiled by Statistics South Africa.

Economists.co.za’s Mike Schüssler computed the average salaries for the eight economic sectors from the QES. Then followed an extensive manual process where the salaries of the sectors were paired with individual companies as a guesstimate of what the actual average salary of the company would be. This was done one a sector-by-sector basis. 

Some of the comparisons were easy, whilst others were more difficult, as some diversified companies’ operations cannot be matched with the individual economic sectors defined by the QES. For example, the average salaries in the mining sector as listed by the QES were used as benchmarks for the executive salaries of listed mining companies.

Other sectors were more difficult to match. Such sectors include the JSE’s broad industrial and manufacturing sectors. In such cases average salaries were allocated on a case-by-case basis.

There were some exceptions such as Bidvest and a few other extremely diversified companies, which could not be paired with the salaries in individual economic sectors. In such cases the national average of salaries as suggested by the QES were used.

Although these average salaries would most probably not be 100% accurate, it is more than likely that they would be in the ballpark and would provide a relatively accurate indication of the pay gap between executive directors and their typical employee.

Two page gap ratios

Two pay gaps ratios were calculated.

The first is the ratio between the average employee salary and the executive directors’ guaranteed package. This guaranteed package consists of the basic salary and other benefit payments paid to the director, but excludes the annual discretionary bonus.

The second ratio is based on the executive directors’ total package, which includes any additional bonus payments.

The research excludes long-term incentives. These schemes are too complex and it is virtually impossible to compute the benefit for one financial year.

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