South Africans felt the pinch of the nationwide coronavirus lockdown in May, with the latest BankservAfrica Take Home Pay Index showing a sharp decline in total salaries paid to workers over the month.
BankservAfrica’s latest data showed that total salaries paid declined significantly in May, reflecting the downturn in take-home pay numbers.
Nominal pay was recorded at an average of R15,506 – but in real terms (taking inflation into account) this was only R14,112.
Also, as low-income earners remain under pressure from the Covid-19 lockdown, South Africa’s monthly salaried workers face the same challenges with at least one in five private sector jobs currently at risk, the group said.
The Take-home Pay Index for May decreased by 0.2% in real terms despite the lower inflation and decrease in personal income tax, said Shergeran Naidoo, head of stakeholder engagements: BankservAfrica.
“While take-home pay remains stable, the average hides the big disparities in the employment context. The Covid-19 lockdown has impacted employees taking home less than R6,000 per month far more than those earning more than R40,000 per month,” he said.
However, BankservAfrica’s overall take-home pay data for May reveals the likely growing rate of unemployment.
Take-home pay numbers
BankservAfrica’s data showed that on average, the number of employees taking home more than R40,000 per month over the last three months, increased by 8.1% on last year’s employee numbers.
The number of payments made to employees earning less than R10,000 per month decreased by 13.4% on a three-month moving average.
On the same basis, the number of take-home payments between R10,000 and R39,999 per month increased by 1.8%.
“So, while the average take-home pay, as measured by BankservAfrica, decreased by 0.2% after inflation, the typical or median take-home pay increased by 4.2% after inflation,” said Naidoo.
However, the overall amount paid to all employees via the BankservAfrica system declined by 7.2% in real terms, reflecting the overall impact of the Covid-19 crisis – even with the UIF Covid-19 Temporary Employee Relief Scheme (TERS) pay-outs, tax reductions and pension payment holidays.
“The lockdown has hurt people who take home less than R10,000 per month, which includes most casual and many weekly paid employees. These type of employee numbers have declined radically with some working short time,” said Mike Schüssler, chief economist at economists.co.za.
“We estimate that the number of payments for casual employees has been cut by 26%, and weekly payments, by our estimates, have declined by 9%. Monthly payments numbers decreased by 2%,” he said.
The above is also the reason that the median salary – the middle salary – rose dramatically.
The UIF, lower personal income tax rates, lower interest on company loans and garnishee orders, pension contribution holidays have counteracted impacts such as salary cuts.
“However, with the retrenchment notices being filed, one does suspect that monthly paid employees will also start to feel the impact,” said Schüssler.
BankservAfrica data monitored over 4 million take-home pay transactions in May. This represents about 2.75 million employees in the formal sector in May 2020, down from 3.16 million people in May 2019.
“Counting employee payments made via BankservAfrica’s system, we estimate that about 13% of employee payments have disappeared,” Schüssler said.
“This does not translate into the exact number of additional unemployed individuals in May as some payments have gone from weekly to monthly, as would be the case when a weekly wage earner gets paid UIF. Also, payments on the BankservAfrica Take-home Pay Index are far more likely to represent that of bigger enterprises and government,” the economist noted.
However, Schüssler said that if government employee numbers remained stable, this would indicate that about 17% of the private sector employee payments have disappeared from the system.
“This is nearly one in five private sector wage payments that, according to our data, have vanished into thin air,” he said.
This does not mean that these employees are now all unemployed – but that they did not get their usual weekly or daily income regularly. Some weekly payments are likely to have changed to monthly if the UIF is paying, Schüssler said.
“Taking all of this into account, we can presume that around 20% of all private sector salary payments did not take place in the last month, which is concerning as it indicates a massive spike in unemployment.
“Our take-home pay data tell us that at least one in five private sector jobs are currently at risk. South Africa could see between 1 million and 3 million jobs lost with about 1.8 million as the most likely number,” he said.
“Employment is a lagging indicator and we know, from its economic history, can take over a year to fully reflect the full extent. Many services are still not open and many others are not seeing the same turnover as before. Exports have also dropped. Having said all of this, we also wish to point out that the early signs of ‘normalisation’ are appearing that could turn the tide.”
But for now, the road will be difficult, he said.
The BankservAfrica Take-home Pay Index for May showed the total value paid to employees decreased by 3.8% in nominal terms and 7.2% in real terms in May.
“This does not bode well for consumer spending or confidence that will very likely remain low for the coming months as both salaries and jobs are under pressure,” the economist said.