Take-home pay eases after blistering increase in September

There was a short-lived growth in take-home pay after the fastest increase in September, with a 13.5% increase in the normalised average salary.

Salary increases will also not make a big difference, as these are expected to be around only 5.5%.

Although the BankservAfrica Take-home Pay Index (BTPI) for September 2021 reflected an increase in the nominalised average salary, this growth is based on three factors that played a role in the fastest real take-home pay increase on record; public servant cash allowance increases, overtime for the police and army and the low base for take-home pay in September 2020.

Bankserv’s latest salary data reflected 800,000 extra payments, mostly from government departments due to the delayed implementation of the Public Service Co-ordinating Bargaining Council’s salary adjustment for a cash allowance backdated from 1 April 2021 to 31 March 2022.

“We believe the extra payments represent two payments, one for backdated payments and one for the most recent month’s increase. Civil servants receive a cash allowance of at least R1,000 per month on a sliding scale and seen that these were backdated to April, our data showed 400,000 payments were made for April to August and another 400,000 in September, contributing 80% of the increase in September’s data,” a spokesperson said.

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Overtime and a low base in take-home pay

The second factor was overtime pay for the police and defence force for extended duty during the unrest in July, that added almost R1 billion and pushed up the average take-home pay. It is unlikely that overtime will occur again on this scale.

The third factor was the low base for take-home pay in September 2020 when casual employees started returning to work as the economy began recovering and caused the average take-home pay to dip from time to time during 2020.

Due to these factors, the nominal average BankservAfrica take-home pay reached R15,794 in September 2021. In real terms, the average salary was R13,047, 8.3% higher on a year-on-year basis. These factors show that the average take-home pay will not increase at September’s rate in the next month or more.

The worldwide supply chain issues and the shock of July’s unrest are likely to slow down economic growth and affect salary increases and Bankserv expects a downward adjustment in salaries in the coming months.

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Private pensions

Bankserv has also noted that private pensioners at the lower end of the income spectrum have withdrawn their funds and left the system once the capital amount is under R270,000 according to the new rule. In September 2021, the average private pension in real terms was R7,877, representing a new record and it was also 4.6% higher year-on-year.

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Salary increases in 2022

According to new research by Willis Towers Watson, South African businesses also plan pay increases of 5.5% for 2022, an improvement on the 4.7% average increase paid this year. With inflation forecast at 4.2% to 4.5% in 2022, it is a real term increase of up to 1%.

The proportion of businesses expecting to freeze pay altogether is set to fall from 12% this year to 5% in 2022. Some industries plan to be more generous, such as medical technology (7.1% rise), pharmaceutical (6.1%) and consumer products (6%). Workers in business consulting (3.7%), energy and natural resources (4.1%) and construction (4.2%) will receive smaller increases.

Despite the pandemic, businesses are still vying for talent, with South African businesses trying to motivate and retain top performers with pay rises 2.5 times greater than average.

“Although Covid wreaked havoc on our economy, firms still had to compete to attract and retain the top performers and higher pay rises were part of that strategy. Now that we may be entering a recovery phase, these high performers are especially important for driving business growth,” Melanie Trollip, director of talent and reward at Willis Towers Watson South Africa, says.