Private Sector can’t compete with inflated public sector packages
Prior to the 2008/9 global crisis the private sector largely offered competitive remuneration packages for top talent. However this changed due to private sector budget cuts and salary freezes coupled with government's ever growing wage bill. Now the average top executive in a state owned enterprise earns, on average, 35% more than their private sector counterpart. While government does need top talent in order to execute plans such as the R845bn infrastructure plan which was committed to in last week's budget, the pressure on the private sector is now even greater. Not only are private sector organisations now failing to be competitive in the battle for top talent, they are also now falling back on government EE targets as a result. The result is a less effective and competitive private sector which has wider implications for the SA economy.
NEWS RELEASE FEBRUARY 2012 Private Sector can't compete with inflated public sector packages The continually escalating remuneration packages of senior employees in many government agencies and state-owned enterprises is diminishing the private sector's appetite for appointing executives with government sector experience, according to a leading executive head-hunter. "We have noticed a hesitance on the part of private sector to consider senior appointments from the government and parastatal sectors, as the salaries of many executives are inflated way beyond the market average. Few companies in the private sector are able to match government packages, let alone offer a little more to entice someone to come on-board," says Madge Gibson, partner at Jack Hammer Executive Head-hunters. Until about the mid-2000s, private sector salaries outstripped their public sector counterparts, making the private sector a more attractive option for senior managers. But this has changed over the last few years. And although there are strict salary bands for positions in many government structures, this is not applicable across the board. To put this into perspective, Gibson says that certain senior public sector jobs pay a premium of more than 35% over the same position in the private sector. "Someone earning a third more than his equal in the private sector - that is, about R3 million as opposed to R1.8 million or R2 million per year - has resulted in several government agency and SOE execs being priced out of the (private sector) market. And this salary discrepancy comes into play even before government-related perks are taken into consideration." According to the latest statistics, government's wage bill currently encompasses 40% of all money paid to government by the taxpayer, which is evident in the large salary packages, golden handshakes and excessive extras that regularly make the news. Gibson says that while the private sector generally runs a tight ship in order to manage costs and make a profit, which in terms of employment translates to the application of strict salary bands, the same economic restraint does not seem to be happening in all taxpayer-funded entities. "Initially, when the balance between private and public sector salaries started to shift, it was explained that the increase in public sector salaries was necessary to make working in the public sector more competitive and attractive. But this has been pushed to the extreme when you look at the large earning discrepancies between the two. Yes the public sector probably has to pay a little more to draw top talent to them, but once this imbalance starts affecting market competitiveness and has wider implications for the economy as a whole - someone has to put the handbrake on. ENDS ISSUED BY: Lange 360 ON BEHALF OF: JACK HAMMER EXECUTIVE HEADHUNTERS For more information contact Madge Gibson at Jack Hammer Executive Headhunters on: 021 425 6677, Mervyn Dziva at Lange 360 on 021 448 7407 or go to www.jhammer.co.za. About Jack Hammer Executive Headhunters Jack Hammer provides a fresh approach to executive headhunting by cutting through the ordinary. They have achieved this over the last five years by using strategic research to drill down and expand their market intelligence beyond the obvious and source the real gems of talent. The knowledge gained in the process enables them to give clients a competitive edge by ensuring they find the right executive talent - in a manner that is both responsible and ethical. Visit www.jhammer.co.za <http://www.jhammer.co.za/> . Madge Gibson: Partner BA (Hons), MDP Madge originally trained as a reporter in the Business Information sector and spent several years in London working within Financial Services, Corporate Finance and M&A. She maintains a broad network and has been responsible for the successful placement of several senior executives in South Africa. In addition to this, Madge also studied Business Management at the University of Stellenbosch, and holds qualifications in Marketing.