Benefits and Compensation

Private Sector can’t compete with inflated public sector packages

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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. 


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

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

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.


ISSUED BY:                          Lange 360 


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

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
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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.

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