Executive Insights

SA companies slash salary increases – but the average pay hike is still above inflation

Business Insider SA
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  • A survey among South African companies shows that salaries will increase by an average of 5.5% this year - which is sharply lower than planned hikes earlier this year. 
  • The planned pay hike for next year is, on average, 5.7%.
  • Most companies have plans to cut jobs, or have already started. 
  • For more articles, go to www.BusinessInsider.co.za.

South African businesses cut salary increases by 20% in reaction to the coronavirus crisis – and most have plans to cut jobs, or have already started. 

The pandemic has wreaked havoc on local businesses amid a stringent local lockdown, with economists expecting that second quarter GDP shrank by between 45% and 55%.

A survey among more than 210 local companies by the UK insurance and advisory firm Willis Towers Watson show that at the start of 2020, employers in South Africa were planning to give their staff an average annual pay rise of 6.8%. But following the start of the pandemic they have cut that figure by almost 20% to 5.5%.

With inflation over 2020 set to be 4%, that leaves a real-terms ‘take home’ average pay rise for workers of 1.5%, the company said.

Almost one in five (21%) companies froze their pay increases for 2020 because of Covid-19, and a further 15% decided to postpone their pay rise to later in the year. Some 19% cut the size of bonuses, while 22% are delaying bonus pay-outs.

The survey found that 15% of companies already cut staff due to the pandemic, and 44% are planning or considering doing so. Some 73% of the companies surveyed said they have now frozen or cut recruitment, while 21% are making plans to do so.

Willis Towers Watson’s Salary Budget Planning Report, which studies the size of pay budgets at firms, also shows that in 2021 South African companies expect to offer average pay rises of 5.7%.

“It may seem surprising that businesses are talking of average pay rises of 5.7% in 2021, but many companies have multi-year wage agreements to honour, and are also worried about keeping the best staff,” said Melanie Trollip, director of the talent and reward team at Willis Towers Watson South Africa. “Whether the planned 2021 pay rises are cut remains to be seen, but we expect heavy downward pressure on them, especially in the hardest-hit sectors.

“The jobs market is in near lockdown, with almost three quarters of firms having frozen or cut recruitment, and a further fifth planning to do so. Almost a half of businesses are planning to cut staff numbers. It is not an environment where companies are able to be generous with pay rises.”

The company’s survey among European companies found a similar trend:

All figures given as a percentage. Source: Willis Towers Watson

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