2024 remains promising for salaries in SA

2024 remains promising for salaries in South Africa although the average nominal take-home pay slipped in June to R15 492. This was lower than the May salary, but still 6% more than a year ago.

According to the BankservAfrica Take-home Pay Index (BTPI), which tracks about 4 million salary earners in the country, high interest rates and the cost-of-living crisis burdened salaries. “In real terms, salaries adjusted for inflation tracked lower monthly at R13 634 and only 0.7% up on levels a year ago,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

An analysis of the first six months of the year shows that 2024 remains on course to be the first year since 2020 when the increase in average nominal take-home pay beats inflation, Elize Kruger, an independent economist, says. 

“With no load shedding over the past four months and inflation moderating, the business environment has improved meaningfully compared to the previous year, positively influencing companies’ ability to pay better salary increases in 2024.”

When comparing the average nominal BankservAfrica Take-home Pay Index for the first half of 2024 to the corresponding period in 2023, a 6.7% increase is revealed. A similar comparison in real terms shows a 1.3% increase.

ALSO READ: SA salaries recovered slightly in May 2024

Salary trends

Kruger says the trends emerging from the BankservAfrica dataset are in line with the views expressed by other institutions. Remchannel, which forms part of Old Mutual’s employee remuneration and benefits solutions, indicated in its April 2024 Salary and Wage survey that average pay increases granted so far this year at local companies averaged 6.1%, beating consumer price inflation.

The Remchannel report noted that the cost-of-living crisis in South Africa has forced businesses to reassess their strategies for attracting and retaining talent by re-evaluating their employee benefits.  More employers were giving employees early access to their salaries, ‘earned wage access’, subject to financial education.

Kruger says this means that employers are now paying workers more frequently than once a month, helping them to manage their needs more effectively. Employees are also taking advantage of the flexibility offered by their pension contribution plans, resulting in many opting for the lowest level offered in their salary structures to maximise their take-home pay.

This trend could also have played a role in the recovery in take-home pay recently observed in BankservAfrica data, Kruger says.

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Now for repo rate cuts to help salary earners

“The average household budget in South Africa has been under immense pressure over the past 18 to 24 months, with escalating inflation and a sharp upward trend in interest rates, coinciding with nominal wage increases not keeping up with average inflation.

“While the consumer inflation rate has moderated, soon to be around the mid-point of the South African Reserve Bank’s 3-6% target band in the fourth quarter and on average in 2025 and positive trends have emerged on wages, interest rates are still at a 15-year high. It is hoped that the Sarb will cut interest rates at the Monetary Policy Committee meeting in September,” Kruger says.

She believes two 25 basis points cuts in interest rates are possible by year-end and that could alleviate the pressure on households with credit exposure somewhat while stimulating retail expenditure.

ALSO READ: Average salary increases suggest better year for take-home pay – BTPI

Pensions increased

The BankservAfrica Private Pensions Index (BPPI), which tracks the pension payments to about 700,000 private pensioners, improved in June 2024. The average nominal private pension increased to R11 233 in June 2024 compared to the previous month’s R10 697, 4.6% higher than a year earlier and the first time above R11 000 since October 2023.

Naidoo says in real terms, the average BankservAfrica BPPI for June 2024 increased on a monthly basis but remained 0.6% lower than a year earlier.

The pension industry is currently in sharp focus given that the two-pot retirement system has been signed into law and will be implemented on 1 September 2024. The new dispensation will likely create a greater awareness among members about their retirement savings, which is welcomed and helpful, he says.