Positive turn for take-home pay in South Africa

Take-home pay in South Africa has ticked upwards, with 2024 set to be the best year for take-home pay since 2020.

The BankservAfrica Take-home Pay Index (BTPI), which tracks the average nominal take-home pay among about 4 million salary earners in South Africa, moderated slightly in June 2024 to reach R15,492.

However, this was still 6.0% up on a year ago.

In real terms, take-home pay was slightly lower at R13,634 in June 2024 – only up 0.7% year over year.

“With no load shedding in 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 one year earlier, a 6.7% increase was revealed. A similar comparison in real terms showed a 1.3% increase.”

“If this trend could be sustained throughout the year, 2024 will be the first year in which the increase in average nominal take-home pay beats inflation since 2020.”

BankservAfrica’s data aligns with the views of other institutions.

Remchannel’s 2024 Salary and Wage survey showed that the average pay increase granted for this year so far at local companies has been 6.1%, beating CPI.

The Remchannel report also showed that the recent 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.

Employers said that they were giving employees early access to their salaries, known as earned wage access, subject to financial education.

Thus, employers are now paying workers more frequently than once a month.

In addition, employees were also taking advantage of the flexibility offered by their pension contribution plans, with many choosing the lowest pension contributions provided to maximise their take-home pay.

BankservAfrica said that this trend could have played a role in the recovery in take-home pay seen in its data.

“The average household budget in South Africa has been under immense pressure in the last 18 -24 months, with escalating inflation and a sharp upward trend in interest rates, coinciding with nominal wage increases not keeping up with average inflation (2021-2023).”

“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 Q4 and on average in 2025), and positive trends have emerged on wages, interest rates are still stuck at a 15-year high.”

“The SARB will likely run out of excuses not to cut interest rates by the time of the Monetary Policy Committee meeting in September.”

“Two 25bps cuts in interest rates are possible by year-end and could somewhat alleviate the pressure on households with credit exposure while stimulating retail expenditure.”

Boost for pensions

In addition, the BankservAfrica Private Pensions Index (BPPI), which tracks the pension payments to about 700,000 private pensioners, also increased in June 2024 in nominal and real terms.

The average nominal private pension increased to R11,233 in June 2024 from May’s R10,697.

This was 4.6% higher than June 2023 and the first time that it was above R11,000 since October 2023.

In real terms, the average BPPI for June 2024 also increased on a monthly basis but remained 0.6% below a year earlier.

“The pension industry is currently still 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, but a widespread campaign is needed to educate members about the details.”

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