Take-home pay in South Africa right now

The gradual re-opening of the South African economy and its changes to the job market, as well as the movements in the UIF TERS funds, are leading to the slow return of take-home pay numbers, says BankservAfrica.

According to Shergeran Naidoo, head of stakeholder engagements: BankservAfrica, the last few months have seen massive disruptions to the country’s average take-home pay, as a number of payments were either suspended, terminated or adjusted.

“But we’re now reaching a point of more normalcy with the most recent monthly data for August in the BankservAfrica Take-home Pay Index (BTPI) indicating a monthly increase of 1.7%,” he said.

This slight increase is off the low salary base in August 2019, but it also follows recent movements, such as the change to lockdown level 2 in mid-August 2020 where more businesses were allowed to operate.

There were fewer job casualties as restaurants resumed trade, while gyms and fitness centres and domestic travel re-opened as interprovincial travel for all purposes resumed.

“While the BTPI is not a reflection of employment, the indication that casual payments picked up for the first time in six months suggests a small number of employed temporary and daily casual workers are growing again,” said Mike Schüssler, chief economist at economists.co.za.

“This is unlike the number of weekly and monthly payments in August, which were down year-on-year. Overall, the number of payments was just over 6% lower than that in August 2019.”

Another influencing factor for August 2020’s BTPI were the Covid-19 UIF TERS payments that were being paid into a different system owing to the fund’s tax exemptions.

“With these payments being temporarily suspended in August 2020, the number of payments done via the normal payment system was probably closer to the usual amount as many employers resumed to paying staff as they would have ordinarily done so – but with a few industries as an exception,” said Schüssler.

“The total BankservAfrica take-home salaries paid into employee accounts via the National Payments System was 1.4% down in nominal terms. In real terms, it is estimated to have declined by 4.7%, which is the smallest drop since April 2020,” said Naidoo.

The total take-home pay, naturally, has improved since June and July.

The average take-home pay in August was R14,008 in nominal terms and R11,893 in real terms. However, it is unlikely that the real average take-home pay will continue on this positive trend as the next two months had a relatively high average real take-home pay in 2019.

“A more meaningful indication of the real salary trend in South Africa at present is the average real take-home pay for the first eight months of 2019, which was R12,200 per month, indicating that the August 2020 number is nearly 2.5% lower than the same reporting period in 2019,” said Schüssler.

With many firms paying pension contributions into pension funds again while other private sector employees have had salary reductions to help firms survive, the salary trend is more likely to remain slightly negative in real terms. This may also be for nominal terms as casual workers return to employment, bringing the average down slightly.

“The BankservAfrica Private Pension Index (BPPI) was strongly positive in August 2020 with a year-on-year increase of 3.7%,” said Naidoo. But, for the third consecutive month, the number of private pension payments was closer to 600 000 payments, which is below the norm of the past year of about 660,000 payments.

“It seems that those with payments of less than R4,000 per month have been exiting the system for the last few months for various reasons, such as withdrawing funds – where this is possible – to compensate for salary reductions or losses,” said Schüssler.

“Nonetheless, most private pensioners are keeping up with inflation which brings some good news for the income side of the economy.”

Read: 2.2 million South Africans lost their jobs under lockdown