Productivity Based Wage System: Now Is The Time for Government, Employers and Labour To Work Together

Productivity Based Wage System: Now Is The Time for Government, Employers and Labour To Work Together

The general feeling is that the above social partners are not working together for the good of the country. The obvious reason is that they have competing interests. However there is more that can unite these partners than divide them. Each social partner can contribute to the success of the country if they work together.

The government can play a crucial role in assisting the other two social partners. The major area of conflict between labour and business has been the issue of salaries. Labour wants better remuneration while employers are saying they cannot afford the salaries requested. The bottom line is while labour would want employers to peg salaries to the PDL that model is suicidal. If you pay salaries beyond your means it is a sure way to bankruptcy. No normal business is able to pay more than what they are producing. The assumption being made by labour is that employers are making a lot of money therefore they should pay. If this is not the assumption, I find no reason why they would push for higher pay when employers are struggling. Its common knowledge that the majority of businesses are struggling and they are doing everything possible to ensure employees do not lose their jobs.

The government can assist labour and business to deal with the salary issues. The government can seriously look at maybe reducing taxes on employee remuneration. This will ensure that the little that employees are receiving can go towards meeting their basic needs. In other countries for example productivity based remuneration or incentives are taxed at half the normal tax on remuneration. This will greatly assist employees to benefit from productivity gains. This will create a win –win situation where the employer benefits and the employees benefit. The government can come up with the legal framework with the assistance of the social partners to enable the effective implementation of such an initiative. Government in the long run will benefit from increased revenue inflows as a result of such an initiative. On the other hand the government will have assisted the other two social partners reduce conflict related to remuneration.

The social partners should desist from setting minimum wages as some people are pushing for. Already we have the mechanism for negotiating for salaries at NEC level and at organisational level. Our economic situation demands that we focus on negotiations taking place at organisational level. These negotiations are closer to reality than those taking place at NEC level. Deliberations at NEC level are not helping both employees and employers. They are abstract negotiations which are far removed from reality.  How do you negotiate at NEC level when the specific industries do not have a single credible statistic on sector specific productivity? Until and unless the social partners come together and start collecting data on productivity NEC negotiations will be killing industries.  How do you prescribe a uniform salary increase to companies with different levels of productivity? Individual companies face different challenges and these must be considered when setting salaries. Until there is credible productivity data the NEC negotiations should just be stopped as they are not helping any of the protagonists.

It is in the interest of labour to support productivity initiatives. What should be at the top of the agenda for trade unions should be productivity improvement and employment preservation. These are issues that are alien to most trade unions. In order to protect jobs, trade unions should be working together with employers to formulate policies and initiatives that will promote employment creation. Some of the labour unions activists have never been retrenched from their jobs and they do not know the pain that retrenched employees go through. The agenda for trade unions going forward should be employment creation and promoting productivity. With such an agenda both labour and employers will benefit.  Clamouring for a PDL wage when they know that is not possible is a waste of time because no sane employer will ever pay a PDL linked minimum salary with the current level of productivity. When all the social partners promote productivity, time will come when even the stingy employer will find it hard to pay below the PDL. Its total madness to want a PDL linked minimum wage for a country slowly recovering from years of economic decline. Employee representatives must understand one basic negotiation rule; you negotiate for something you know exists. If you are sure your employers has loads of money yes go ahead and demand or negotiate. If you know you employer is broke it’s a waste of time to demand the money that you know is not there. As it is now, the average minimum wage of USD189 is already too high compared to regional economies. How do we expect an economy at the bottom of the pile to afford such a minimum wage? Since dollarisation a lot of employees have lost their jobs through retrenchments. These retrenchments will continue as long as we continue to demand wages above productivity level. The rate at which wages are moving compared to productivity will eventually choke the whole economy resulting in massive job losses. Government, labour and business be warned.  We need to return to the basics.

The above analysis does not absolve employers who are deliberately underpaying their employees when they are doing well. Employers still need to pay a decent wage especially when they are doing well. The other reason why employers are accused by employees of underpaying is that they do not want to disclose their financial performance to employees. As a result employees are suspicious of every move employers take. Full disclosure of the company’s performance will assist employers deal with 90% of the misconceptions employees have about making money.  Business must also make a deliberate effort to educate their employees on how the business makes money. Most employees believe that every customer who comes through the company door is bringing loads of money. They also look at units sold and believe the company has made huge profits. Most employees do not understand that sometimes business are overburdened by loans that need to be repaid and also by costs (staff costs and other operating costs).  The majority of staff do not know that margins have shrinked compared to the pre –dollarisation period.   I believe that the majority of employees are reasonable people who will understand if they are provided with timely information on how the company is performing. Interacting with most workers, the impression I get is that they are in the dark regarding company performance. Critical information on company performance is only released when the company is not doing well, they allege, in order not to reward employees. Employers have the power and obligation to correct this perception and in the process enhance trust between the company and employees.

The only viable remuneration option available for our country is for the social partners to put productivity at the centre of our remuneration policies in both the civil service and in the private sector. The theme for the next 5 years should be “productivity based remuneration”. The modalities of how this can be done will be, subject to discussion by the social partners.

Memory Nguwi. Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. He is the president of the Zimbabwe Psychology Association. He hosts a radio program HR Perspective every Thursday at 1900hrs on Capitalk 100.4FM. Phone 481946-48/481950/2900276/2900966 or cell number 077 2356 361 or email:  or visit our website at

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