Employers in South Africa are planning to increase their budgets for pay by 6.1% in 2024 as they try to attract and retain staff amidst ongoing inflation and a competitive labour market, according to HR consultancy group WTW.<\/p>\n\n\n\n
This would place expected salary hikes for next year above current projections for headline inflation (CPI) which is expected to average around 4.5% year-on-year in 2024 – meaning salaried employees can expect salary growth in real terms.<\/p>\n\n\n\n
According to WTW, the increased budgets for pay are lower than the hikes in 2023 (6.6%); however, average inflation in 2023 is tracking much higher for the year.<\/p>\n\n\n\n
Inflation in South Africa has been steadily declining over the last few months, with CPI dropping from 6.3% in May to 5.4% in June. The Reserve Bank and economists anticipate inflation for 2023 averaging around 6.0%.<\/p>\n\n\n\n
In real terms, the salary increases delivered in 2023 would average around only 0.6%. However, if no inflation shocks hit in 2024, the real increase in 2024 could be around 1.6% if not more.<\/p>\n\n\n\n
WTW said that its research has pointed to organisations increasing their pay budgets in 2024 for two main reasons.<\/p>\n\n\n\n
Inflationary pressure was a factor cited by seven in ten firms (70%), while almost half (44%) said they are responding to a more challenging labour market and trying to attract and retain staff.<\/p>\n\n\n\n
\u201cBusinesses are still grappling with inflationary pressures and a tight labour market, and these factors are pushing up salaries,” said Melanie Trollip, Director of Work and Rewards, WTW South Africa.<\/p>\n\n\n\n
“The forecast rises for next year are slightly lower than what we have seen this year, but overall they are still at a relatively high rate. Inflation seems to be cooling and that may leave people with an improvement in what they earn in real terms,” she said.<\/p>\n\n\n\n
\u201cEmployers are trying to adapt to an evolving environment in which yesterday\u2019s certainties no longer apply. Those companies that have a clear strategy on how they reward their workforce will be more successful at attracting and retaining the best people.\u201d<\/p>\n\n\n\n
Business Optimism and Hiring<\/strong><\/p>\n\n\n\n While industry indices like the purchasing managers index (PMI) and business sentiment index point to muted if not depressed views on the South African economy, WTW’s survey points to a more upbeat sentiment emanating from businesses.<\/p>\n\n\n\n The group said that South African firms are fairly upbeat about the economy, with a third (34%) saying that the outlook for their business is better than they had forecast, while 57% said it was in line with their expectations.<\/p>\n\n\n\n “Reflecting this optimism, 16% plan to increase their total headcount over the next 12 months. Six in ten (59%) employers plan to recruit engineers in the next 12 months, while 56% are hiring in IT roles, and 48% want more salespeople,” the group said.<\/p>\n\n\n\n It noted that technical skills like engineering and IT remain hotspots in the labour market, while interest in sales staff often reflects an ambition to expand. <\/p>\n\n\n\n However, it warned that it takes more than higher pay to attract and keep great talent, and the past few years have pressed companies to be more resourceful. <\/p>\n\n\n\n “As workforces become more diverse, demanding and dynamic, the key is understanding their specific needs and preferences, and matching that to an overall reward programme,” it said.<\/p>\n\n\n\n
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