Drop in take-home pay for June, but pensions improved

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In real terms, take-home pay also tracked slightly lower at R13,634 in June 2024, only 0.7% up on year-ago levels.

Though slightly disappointing, an analysis of the first six months of the year reveals that 2024 is still on track to be the best year for take-home pay since 2020. 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. The trends emerging from the BankservAfrica dataset are in-line with the views expressed by other institutions.

Remchannel, which forms part of Old Mutual's employee remuneration and benefit solutions, indicated in its April 2024 Salary and Wage survey, published biannually, that average pay increases granted so far this year at local companies averaged 6.1%, beating consumer price inflation.

Diverse sectors covered

The Remchannel survey covered 55 participants employing approximately 417,000 people across the unlisted (60%), JSE-listed (25.5%), government and quasi-government (7.25%), and dual- or offshore-listed (7.25%) sectors.

The Remchannel report also noted 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. The report noted that more employers were giving employees early access to their salaries, known as earned wage access, subject to financial education.

This means that employers are now paying workers more frequently than once a month, helping them to manage their needs more effectively. Furthermore, employees were also taking advantage of the flexibility offered by their pension contribution plans, resulting in many opting for the lowest pension contributions offered in their salary structures in order to maximise their take-home pay.

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This trend could have also played a role in the recovery in take-home pay recently observed in BankservAfrica data.

The average household budget in South Africa has been under immense pressure in the last 18 to 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 emerging 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 alleviate the pressure on households with credit exposure somewhat, while stimulating retail expenditure.

Pensions rose in June

The BankservAfrica Private Pensions Index (BPPI), tracking the pension payments to about 700,000 private pensioners, increased in both nominal and real terms in June 2024. The average nominal private pension increased to R11,233 in June 2024 compared to the previous month’s R10,697, 4.6% higher than a year earlier, and the first time above R11,000 again since October 2023.

In real terms the average BankservAfrica 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 Sunday, 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.