South Africa's take-home pay levels declined dramatically in May – and are expected to remain under pressure until July when adjustments to public sector wages are taken into account, according to BankservAfrica's latest Take-home Pay Index.
The take-home pay data suggests employees have to carry the burden of a shrinking economy, while private pensions bolster consumer spending, BankServAfrica said in a statement.
The average gross salary in May 2018 was R14 290 in current terms. Net take-home pay was R10 010.
But when the gross salary is changed to constant 2016 money - to make comparison easier - it decreased to R13 621, some R290 less than in April 2018.
'Pay same as in December 2013'
The current typical wage increased by 2.8%, but after taking inflation into account, declined by 1.5%, said Shergeran Naidoo, the Head of Stakeholder Engagements at BankservAfrica.
"The decline leaves take-home pay in constant terms at the same level as in December 2013," Naidoo said.
Pressure was likely to remain until July, the statement added, which likely signalled a bad month ahead for retailers and other sectors that relied on consumer spending.
BankServAfrica attributed the bleak numbers to the protracted public sector wage dispute. The majority of trade unions signed the public sector wage agreement earlier in June, after unions started tabling demands in September 2017.
"All the small gains that take-home salaries have made have been lost due to the delayed public service wage settlement," the BankServAfrica statement said.
BankServAfrica argued that the public service had not yet been taken into account or reflect payment of wage increases in May.
"The total public service wage bill makes up just over 25% of the total non-farm formal sector wage bill and about 33-35% of the total take-home salaries processed via BankservAfrica," BankServAfrica said.
"This undoubtedly dragged the BTPI down, as the public service is not only the largest employer but also the largest single wage bill in the country.
"With no pay increase in the month of May, average real salaries showed a decline of 1.3% and this decline is likely to increase in June, as public service salaries are expected to be paid with back pay only in July."
Other sectors did increase salaries, however, and with small amounts of tax relief, the nominal value increased by 2.9%, said Mike Schüssler, Chief Economist at Economists.co.za.
Real take-home pay levels are likely to remain under pressure until July, Schüssler added.
This is when "the biggest employer increases the actual salaries and provides the back pay for its employees", BankServAfrica said.
Positive pension trend
BankservAfrica's Private Pensions Index (BPPI) for May, however, continued its 15-month consecutive increase trend, bolstering consumer spending in the economy.
Privately banked pensions increased by 4.5% in real terms, according to the BPPI. The BPPI is the only monthly pension measurement in the world, and records over 670 000 pension payments every month.
"In current prices, private pensions increased by 9.2% on a year-on-year basis," said Naidoo.
He added that in nominal terms, the average pension increased to R7 430 in May 2018.
In real terms, the BPPI was R6 976 for the month of May 2018. Average private pensions payment now represents 52% of the average take-home pay.
"This strong performance, however, is unlikely to be maintained once civil servant salaries are realised, and should return to the 49% average level of take-home pay," Schüssler said.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER