Economist Mike Schüssler certainly didn't mince his words when he spoke at the 9th UASA South African Employment Report held in Johannesburg recently. His message was twofold.
1. The government has failed the country in the employment stakes.
2. Government is the biggest employer in South Africa and is being paid too much, to the detriment of growing employment.
The tragedy, as pointed out in Schüssler's talk, is the anomaly that South Africa is at once Africa's biggest economy and yet has the highest rate of unemployment with some 60% of the population jobless.
"If South Africa was just able to up its employment numbers to the average ratio in Africa of 64%, adult employment in the country would have grown with seven-million jobs," Schüssler said.
Governments has failed on job creation
But wait for the punch line. iAfrica reports that Schüssler said government employees are being paid a premium of 40 percent more than the private sector. This as government continues to fail the country on job creation – an issue vital to the creation of social and economic stability.
Schüssler goes on to say that the government pay roll is costing the country too much and that: “SA can't create jobs but it can give big wage increases to government employees and this leads to the problem that a lot more people become economically inactive."
I've got two words to say to government in response to this and they're not “Schüssler's right”, which of course he is. Those two words are: variable pay.
The concept is very simple. Variable pay is essentially a “pay for performance” system that has become increasingly popular in the corporate world where a recessionary environment has limited salary increases yet demanded that business increases performance without increasing resources.
Recent research by Hewitt Associates showed that as many as 80% of companies surveyed will use variable pay this year. The survey covered 6000 organisations in 46 different countries.
Variable play increasingly popular globally
The reason why variable pay is becoming increasingly popular is that it works to boost productivity and accountability. Blanket salaries hardly incentivise people to go that extra mile. Variable salaries linked to the achievement of clear goals encourage under-performers and non-performers to work harder and get things done.
Then there's the matter of self-determination. On a variable pay structure people feel they have some control over what they could get paid. As long as there is transparency in the measurement of goals and people see that performers are rewarded and non-performers are not rewarded, the variable pay system is both effective and credible.
To extend the accountability established by a variable pay system, politicians who err should be made to pay for their misdemeanours. For example Jacob Modise, CEO of the Road Accident Fund, would be forced to pay back the R693 000 he received for serving on the Blue IQ board because National Treasury forbids employees who work at one government job being paid for work done with another state entity.
Zuma's performance agreements a toothless tiger
Interestingly enough Jacob Zuma has signed performance agreements with all of his ministers that have stated outputs, but there are absolutely no penalties for defaulting. In fact, the person responsible for overseeing the 'efficacy' of this toothless tiger – Collins Chabane – said that the performance agreements would not be used “as a stick”.
If there's no incentive for performance or penalty for non-performance, what's the point?
It's about time government got to work for the people who voted them into power and the tax payers who pay their salaries. Variable pay may just make them do that.
Originally written for ITWeb.