The dynamic interrelationship between productivity and remuneration practices at a tertiary institution with specific reference to the value added concept

ENGLISH ABSTRACT: Value added links a company’s financial statements to the national income and performs a useful function in macro-economic measurement. At the national level, productivity is a major determinant of economic growth and progress and of vital importance to the survival and wellbeing of all South Africans.The presentation of information in added value terms can provide an effective communication tool that enables all personnel at all levels to understand where the business stands, what their roles in it are and what can be done to improve certain ratios. The concept of value added does not only act as a communication medium in showing how a company is performing, but also demonstrates the need for increased wealth to ensure higher distribution to all the stakeholders.This research report aims to establish, amongst other matters, the future use of value added as a proxy for productivity as a basis (a new mindset) for determining salary increases at tertiary institutions. Because this could be regarded as a leap into the unknown, this study used the results of the industrial sector for benchmarking.As tertiary institutions never previously published a value added statement it was decided to follow the practice of the Value Added Scoreboard since 2002; that is, to compile a value added statement for tertiary institutions using the audited annual reports and, specifically, the income statement.The handling of part-time, casual or seasonal employees can cause measurement problems in the value added per employee ratio. The matter is also further complicated by the fact that there is a lack of full description of employee data in the financial statements as to whether or not the published employee numbers refer to either full-time equivalent, average number of employees over the period or number of employees at year end. If one is to use employee numbers to do an analysis of certain ratios there needs to be clarity in future on how these numbers must be reported. In conclusion it was found that the low increase or decrease in salaries, together with the increase in employee numbers resulted in a negative growth rate in salaries per employee. The conclusion can thus be made that the tertiary institutions did not take productivity into account when granting salary increases.Finally, though this research report was only exploratory, the recommendation can be made that the concept of value added should be implemented at tertiary institutions, preferably by firstly taking the research staff of the entire institution and from there the distribution per department into account, and lastly to reflect the value added for the institution as a whole.