Ina Opperman
Business Journalist
3 minute read
27 Jan 2021
3:09 pm

The heartbreaking reason behind an increase in take-home pay in 2020

Ina Opperman

Total take-home pay in real terms declined by 2% year-on-year, says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

Picture: iStock

The real average take-home pay increased by 2.1% year-on-year in 2020, but the reason behind this increase is not positive. The average salary rose because there were less lower-paid earners that led to a 5.4% nominal increase.

This sad news comes from the BankservAfrica Take-home Pay Index (BTPI) for December 2020. The steep decline in the number of take-home payments has adjusted the average South African salary by a few percentage points.

Total take-home pay in real terms declined by 2% year-on-year, said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

Mike Schüssler, chief economist at economists.co.za, said in response to these figures, the aggregate take-home pay decline proved to be not as excessive.

“However, this has come off a very low annual base. In December 2019, the number amounted to 4% less than December 2018.”

UIF TERS payments

According to BankservAfrica, the BTPI – which measures monthly salaries processed by BankservAfrica through the national payment system – also took into account the ongoing shifts in the Covid-19 UIF TERS payments. These movements, as seen in previous BTPIs, have led to the index’s salaries not indicated at normal levels.

Schüssler points out that although TERS payment applications closed in September, it re-opened in November for October applications to assist industries and these payments were still being paid in December.

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Some TERS payments from March were only paid in May and June, which Schüssler says made practical payments via the normal payment systems difficult because tax was treated differently. “In some months, employees were not paid via the normal payments system, while in other months it resumed when catch-up payments were made.”

Delays in June and July were caught up between August and October along with the steadier TERS payments to financially distressed businesses. The decision to pay TERS for a few categories in November for the September to 15 October period also resulted in extra, but late, payments in November and December.

“Therefore, along with tax relief and suspended pension fund contributions, the total take-home pay in the BTPI does not yet reflect the reality of the overall employment situation,” says Schüssler.

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However, early estimations show that about 5%-10% of employees in the BankservAfrica payment universe were affected by the lockdown. Therefore this may not be the full picture as the BTPI salary data under-represents smaller firms such as restaurant chains, smaller hotel groups and vehicle rental agencies.

According to Schüssler the BTPI will reflect a more normal situation in the next months for the average and median salaries in the formal sector that are paid via BankservAfrica.

Private pensions

South Africa’s private pensions averaged R7483 in real terms and R8879 in nominal terms.

“The real term increase represents the highest annual growth since February 2018 based on BankservAfrica’s monthly private pensions index ,” says Naidoo. However, only 625,163 private pensions were made in December, which represents a 2.5% annual decline.

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