Landmark legal rulings redefine corporate remuneration strategies in South Africa

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No longer a back-office HR task, reward now demands transparency, equity and alignment with business goals — positioning remuneration specialists as critical contributors to organisational performance and reputation.

Lindiwe Sebesho, master reward specialist and executive committee member at the South African Reward Association (Sara) highlights four pieces of regulations that are expected to significantly impact remuneration strategies, policies and practices.

1) Amended Companies Act

First up, reward professionals need to prepare for increased stakeholder scrutiny and to link executive pay to performance and fairness. The Companies Amendment Act 16 of 2024 introduces important remuneration requirements once Sections 30A and 30B come into effect. The Department of Trade, Industry and Competition (DTIC) intends to announce the effective date by end-2025.

Notably, companies with audited financials will be required to disclose the total remuneration package of each director and prescribed officer by name. Section 30A requires public and state-owned companies to submit their remuneration policy for mandatory shareholder approval by ordinary resolution every three years. This is a shift from the current practice of non-binding voting. Any material changes during the interim period must also be approved by shareholders.

Failure to comply with section 30A renders an organisation’s remuneration policy legally ineffective, exposing directors to fiduciary breaches and potential personal liability. It may also trigger regulatory enforcement, shareholder challenges, and reputational damage.

Section 30B stipulates that an annual remuneration report must be presented and approved at the Annual General Meeting. This report should comprise a background statement, the remuneration policy, and an implementation report.

To encourage transparency, the implementation section of the report must disclose various vertical pay ratios on a total remuneration basis, including details on the highest and lowest earners, as well as average and median employee.

It should also present the pay gap between the top 5% and bottom 5%. These disclosures are mandated for all employees as defined by the Labour Relations Act, which includes temporary, seasonal, internship staff etc. As Sebesho notes, since these groups typically receive lower compensation, their inclusion may distort reported outcomes or lead to misinterpretation unless adequately clarified.

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The consequences of failing a binding vote on the implementation report are particularly harsh on Remuneration Committee (Remco) members. At the next AGM following a first failed implementation vote:

The Remco must present an explanation of the way the shareholders’ concerns have been addressed.

Non-Executive Directors (NEDs) who serve on the Remco must stand for re-election by the board as Remco members at this AGM.

If there is a second failed implementation vote at that AGM, NEDs of the company who serve on the Remco may continue to serve as NEDs provided they successfully stand for re-election at that AGM, but they will not be eligible to serve on the Remco for a period of two years thereafter.

The provisions relating to NED Remco re-election and two-year disqualification as Remco members is not applicable to Remco members who have served for a period of less than 12 months in the year under review.

Advice for reward professionals: Rigorously document fair pay principles in your remuneration policy and integrate them into daily practice. Ensure executive incentives are tied to clear value creation metrics reflecting both financial and non-financial goals. Prepare for increased stakeholder scrutiny by establishing transparent reporting and engaging stakeholders regularly through multiple platforms to promote pay transparency. Provide Remco members with targeted training to strengthen their oversight capabilities.

2) Fair Pay Bill

This proposed legislation (which still needs to complete all required parliamentary procedures) could significantly shake up South Africa’s recruitment and remuneration practices. The Fair Pay Bill explicitly bans the practice of requesting candidates’ salary history during recruitment processes, thereby helping to break cycles of historic pay inequality. In addition, the Bill mandates the disclosure of pay ranges in all job postings, enabling more effective salary negotiations for candidates.

According to Sebesho, the Fair Pay Bill will have a much bigger impact from a horizontal pay fairness perspective than the vertical pay gap disclosures mandated in the amended Companies Act, as it will empower people to negotiate salaries more effectively and ensure that pay practices are fairer across similar roles.

Advice for reward and HR professionals: Proactively review and implement structured pay frameworks based on objective job profiles, evaluation outcomes, and pay scales. Train recruiters and managers on bias-free hiring and the importance of not relying on salary history when making offers.

Engage with employees and candidates openly about pay ranges and the organisation’s approach to fair pay, fostering trust and transparency. By taking these steps, HR and reward professionals can ensure not only compliance but also build a more equitable and attractive workplace.

3) Employment Equity Act Amendments

The amended Employment Equity Act (EEA) introduces a series of critical changes for designated employers, requiring strict adherence to mandatory sectoral employment equity targets as determined by the Minister of Employment and Labour. Under the revised EEA, employers must ensure that all pay practices are equitable and free from any form of unfair discrimination, including based on race, gender, disability, and other protected characteristics, thereby reinforcing the Act’s commitment to workplace equality and inclusion.

To comply with the amended EEA, designated employers are obligated to conduct regular reviews and systematic updates of their remuneration structures. This includes performing comprehensive pay audits to uncover and address any unjustified disparities, and establishing transparent policies and reporting mechanisms for monitoring progress toward sectoral equity objectives. These measures are designed to align organisational practices with the EEA’s legislative requirements, promoting a culture of fairness, diversity, and inclusivity.

Additionally, the amendments make it clear that compliance certificates—demonstrating adherence to employment equity targets and fair pay practices—are now a prerequisite for eligibility to secure state contracts. This underscores the necessity for employers to maintain robust employment equity plans and to document progress meticulously.

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The amended EEA also expands the definition of disability and updates psychological testing protocols, further emphasising the importance of inclusive and non-discriminatory HR practices. Non-compliance with these requirements exposes organisations to substantial financial penalties and reputational risk. As a result, there will likely be increased scrutiny of diversity and equity metrics, especially where these influence performance-related incentive schemes.

Advice for reward and HR professionals: Conduct thorough diagnostic reviews of current employment equity plans. Update remuneration structures to ensure alignment with sectoral equity targets, especially within incentive schemes, where applicable. Establish transparent reporting mechanisms to monitor diversity metrics and demonstrate progress. Provide targeted training for HR and reward teams on the updated requirements and inclusive practices.

4) Parental leave ruling

On 3 October 2025, the Constitutional Court delivered a landmark ruling declaring existing parental leave regulations unconstitutional, notably the provision limiting four months’ maternity leave exclusively to birth mothers.

The Court’s decision ushers in a new era of universal parental leave, granting parents a combined entitlement of four months and 10 days. This leave can be flexibly divided between both parents, according to their individual circumstances and preferences. Importantly, parents do not need to work for the same employer to benefit from this arrangement.

Advice for reward and HR professionals: Update leave policies and HR/payroll systems to support shared leave for eligible staff. Use affidavits and cross-reference shared parental leave arrangements between parents working at different companies to ensure proper allocation of the combined leave entitlement.

Evaluate operational and financial impacts, train line managers and teams and communicate clearly, and ensure transparent monitoring and reporting for fair implementation.

Beyond compliance

To drive sustainable organisational excellence, reward professionals and affected organisations must take decisive action. This includes thoroughly redesigning human resources frameworks to reflect emerging legislative requirements and promote fairness.

Comprehensive training should be provided to HR teams and managers, equipping them with knowledge and skills to foster inclusive practices and eliminate bias in decision-making. Transparent communication with employees about HR strategy, remuneration policy and pay structure changes is essential to building trust and reinforcing the organisation’s commitment to fair and responsible pay.

Importantly, even where certain regulations are still pending finalisation and implementation, it is prudent to adopt a forward-thinking approach. As Sebesho emphasises, sustainable reward strategies should be proactively developed to align with the underlying objectives of current and proposed legislation: advancing social equity and ensuring fair pay for all.

By embracing these measures now, organisations can not only ensure compliance, but also position themselves as leaders in promoting an equitable and attractive workplace environment.