Finance

Good news for salary earners in South Africans

South Africans can expect to receive an average salary increase of around 6% next year, bringing much-needed relief to struggling households.

This is according to Master Reward Specialist and Executive Committee Member of the South African Reward Association (SARA), Dr Mark Bussin.

“There is a glimmer of hope regarding GDP growth, and if we continue on this trajectory, it could mean a brighter future for which we’ve all been praying,” Bussin said.

He explained that while salary increases may not be the only consideration in a robust total rewards programme, they are definitely a cornerstone. For organisations, they’re also a key factor in business sustainability.

“Likewise, they are essential to employees who, due to inflation, become relatively poorer over the course of any given year,” he said. 

“A timely salary increase helps them stay ahead of the cost of living and pursue a lifestyle they’re content with.”

Bussin listed the influences that could impact an employee’s salary increase, including inflation, which is the starting point for many employers.

South Africa’s consumer price index (CPI) has averaged 5.1% so far this year, with signs of this number declining even further as the year progresses.

Aside from inflation, Bussin said employers also need to consider additional factors, including:

  • The projected financial performance of the organisation
  • The affordability of the increases
  • The sustainability of the business
  • The extent of salary increases in the previous year
  • The performance of individual employees
  • Union expectations and demands
  • Current employee remuneration compared to market benchmarks
  • How important the attraction and retention of key roles and critical skills are to the organisation

“Understanding these and other factors unique to their business helps employers take the guesswork out of salary increases,” he said.

SARA’s data indicates that increases for 2024 by staff category will look as follows:

  • Unionised Staff – median of 6.25%
  • General Staff – median of 6.01%
  • Specialists – median of 6.00%
  • Management – median of 5.97%
  • Executives – median of 5.79%
  • CEO – median of 5.70%

Bussin explained that the increase percentage above inflation is the employee’s real salary increase. 

In inflation averages 5% for the rest of the year, an increase of 6.25% would, therefore, result in a real salary increase of 1.25%.

In addition to salary increases and slower inflation, the Reserve Bank’s recent reduction in interest rates will also improve the country’s cost-of-living gap as workers will pay less to service their debt.

At its most recent meeting in September, the Reserve Bank’s Monetary Policy Committee (MPC) cut interest rates for the first time in years.

Prior to this cut, the repo and prime lending rate had been at 15-year highs of 8.25% and 11.75%, respectively, for over a year.

The MPC cut rates by 25 basis points at its September meeting. With one more rate cut expected in November and further cuts in 2025, South Africans are set to experience much-needed relief next year.

Bussin said there is a thin silver lining, as many employees remain over-indebted while others continue to live in what he calls “in-work poverty”. 

“We need to aim for a living wage that allows workers to live with dignity,” he said.

However, while salary increases are a hot topic right now, Bussin warned that remuneration and increases do not live in a silo.

“The country needs growth, and growth needs skills and talent. We have both, but we must unleash them by creating the correct government policy framework and certainty to support it,” he said.

Therefore, he called on lawmakers to implement much-needed policy reforms that will boost organisations’ ability to grow and hire unemployed people urgently.

This is a particular concern for South Africa, where unemployment is well above the world’s average.

South Africa’s expanded unemployment rate, which includes discouraged work seekers, increased further from 41.9% in the first quarter of 2024 to 42.6% in the second quarter.

Several experts have warned that the country’s unemployment crisis – particularly youth unemployment – is a ticking time bomb that could go off if it is not addressed.

Earlier this year, the South African Human Rights Commission (SAHRC) released its report on the 2021 July Riots, outlining the reasons for the widespread social unrest and the government’s failure to prevent or stop it. 

In its report, the SAHRC pointed out that high and rising unemployment was one of the underlying reasons for the unrest. 

“The socio-economic challenges in South Africa, such as high unemployment rates, poverty, and spatial inequality, provided fertile ground for the unrest to escalate,” it said. 

The United Nations Development Programme (UNDP) also warned last year that South Africa’s high unemployment rate, particularly among its youth, is a “ticking time bomb” that could result in social unrest. 

“Youth unemployment in South Africa is a multipronged challenge that limits the earning potential of youth, stymies business growth, threatens social cohesion, and puts pressure on public resources,” the report said. 

“There is no doubt that the high unemployment rate is a ticking time bomb.”

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