Understanding the Fair Pay Bill: A step towards salary equity in South Africa

IOL News

13 hours ago

While the Fair Pay Bill has been described as a step towards ending unequal pay, experts also highlight that it might pose some challenges for AI and technology companies, including start-ups and scale-ups that rely on flexible compensation structures.
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The Fair Pay Bill, recently tabled in Parliament, has been described as setting the groundwork for creating a more equitable starting point for salary negotiations and career advancement by eliminating the consideration of past remuneration in hiring decisions, experts say.
The Bill was tabled in Parliament as an amendment to the Employment Equity Act 55 of 1998 (EEA). It aims to transform recruitment and remuneration practices to promote fairness, transparency, and equal opportunity in the workplace.
However, there are concerns that a critical limitation remains in that the fair pay protections are still embedded within the Employment Equity Act's unfair discrimination framework, which means that, unlike jurisdictions with standalone equal pay legislation, employees must still prove unfair discrimination to successfully claim equal pay violations, rather than having direct equal pay rights.
Dr Louis Koen, senior lecturer and Moot Court coordinator at the University of Johannesburg's Faculty of Law, said historically underpaid individuals, many of whom are black women or youths entering the labour market, will no longer be constrained by prior low earnings when applying for new positions.
'The requirement for employers to disclose the remuneration or remuneration range when advertising a position or recruiting candidates would increase transparency and reduce opportunities for subjective or biased wage-setting. It could empower job applicants to negotiate from an informed position and also create greater parity among employees performing similar work.
'The Bill, if passed, will provide employees with a better understanding of what other employees performing the same role can expect to pay. This may ease the burden of proving discrimination in pay,' Koen said.
Compliance with the Fair Pay Bill is likely to be demanding, especially for small and medium-sized enterprises, which may not have formal job grading or remuneration systems in place, he said.
'These businesses will need to develop internal frameworks to determine and document remuneration ranges, train HR personnel to navigate the new restrictions on pay discussions, and adjust recruitment practices accordingly. One potential unintended consequence is that, to avoid scrutiny or legal risk, some employers may default to offering standardised mid-range pay within bands, thereby limiting flexibility in responding to market signals or recognising merit,' Koen said.
He highlighted that several types of disputes may arise from the implementation of the Bill, where employees or applicants may allege that an employer failed to disclose an appropriate remuneration range or that the disclosed range was misleading.
Others may claim that their past pay was improperly solicited or factored into a hiring decision, in contravention of Section 6B of the Bill.
Professor Marius van Staden, associate professor at the Wits School of Law, said the Bill will significantly affect multinational tech and AI companies operating in South Africa through two key mechanisms.
'Firstly, the new Section 6A requires employers to disclose remuneration ranges when advertising positions and during recruitment, promotion, or transfer processes. This means companies with global pay scales will need to transparently communicate their South African compensation bands, potentially revealing disparities between local and international compensation levels.
'Second, Section 6B prohibits employers from enquiring into candidates' past remuneration information during recruitment. This prevents the common practice of using previous salaries to determine offers, which could be particularly challenging for companies accustomed to benchmarking against international compensation histories when relocating talent,' Van Staden said.
He added that companies in the AI and technology sectors face unique challenges given the rapid evolution of roles and skillsets.
'The Bill's amendment to the definition of 'employment policy or practice' now explicitly includes 'determining the remuneration or remuneration range for a position' during job classification and grading.
'To ensure compliance with 'equal pay for equal work' or 'work of equal value' principles, companies should establish systematic job evaluation frameworks that focus on objective criteria such as required skills, qualifications, experience levels, and job responsibilities rather than subjective assessments. The Bill references the International Labour Organisation Convention No. 100 concerning Equal Remuneration, which emphasises work of equal value rather than just identical work,' Van Staden said.
He stated that for emerging AI roles, companies should develop clear competency frameworks and regularly review job classifications as roles evolve, ensuring that remuneration ranges reflect genuine differences in skill requirements and responsibilities rather than historical biases or arbitrary distinctions.
Several unintended consequences could impact the sector's growth and innovation. The mandatory disclosure of remuneration ranges may reduce companies' salary negotiation flexibility and could lead to wage inflation as employees benchmark against disclosed ranges. This might particularly affect start-ups and scale-ups that rely on flexible compensation structures, Van Staden said.
He added that the prohibition on enquiring into past remuneration could make it more difficult for companies to assess appropriate compensation levels for candidates with unique or highly specialised AI skillsets, potentially leading to either over-compensation or difficulty attracting top talent.
'Most significantly, the continued embedding of fair pay rights within the discrimination framework may create legal uncertainty and compliance costs that disproportionately burden smaller tech companies without extensive HR and legal resources. There's also a risk that companies may become overly conservative in their hiring and promotion practices to avoid potential discrimination claims, which could slow innovation and talent development,' he said.
How can digital law experts and legal advisors assist in ensuring compliance?
Van Staden said digital law experts can assist with developing compliant recruitment processes that avoid prohibited enquiries into past remuneration whilst maintaining competitive hiring practices. This includes crafting job advertisements that include appropriate remuneration range disclosures and training hiring managers on permissible discussion topics.
'Legal experts can also help design remuneration transparency policies that comply with the new Section 6A requirements whilst protecting legitimate business interests. Additionally, they can develop internal audit mechanisms to identify potential equal pay violations before they become discrimination claims.
'Importantly, legal advisors can help companies understand that the fair pay provisions remain part of the unfair discrimination framework, meaning robust documentation of objective job evaluation and remuneration-setting processes will be essential for defending against discrimination claims,' Van Staden said.
He added that while the transparency requirements align with trends in jurisdictions like California, New York, and the EU, South Africa's approach of maintaining fair pay within the discrimination framework (EEA) is increasingly outdated.
Van Staden noted that South Africa's requirement to prove unfair discrimination for equal pay claims creates a higher burden of proof than in many developed jurisdictions, where equal pay violations can be established through statistical analysis without requiring proof of discriminatory intent.
'The Bill's prohibition on salary history enquiries does align with progressive practices, suggesting South Africa is adopting some best practices while maintaining a more conservative overall framework,' he said.
Roger Solomons, spokesperson for Build One South Africa (BOSA), stated that mandatory disclosure will prevent lowballing, as employers will be required to provide a realistic and justifiable pay range, benchmark salaries to industry norms, and comply with non-discrimination provisions in the EEA.
If a company consistently posts abnormally low ranges, it opens itself to reputational risk, public scrutiny, and intervention by the Department of Employment and Labour. More importantly, job seekers will be empowered to walk away from exploitative offers, which they cannot do when pay is hidden, Solomons said.