Take home salaries increasing at a slower rate

Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

The growth of the average disposable salary in South Africa is 1% after inflation – which is positive real growth thanks to civil servant salary increases and backdated payments in June.

The average BankservAfrica Disposable Salary Index (BDSI) is R12 849 for June - 5.8% higher than a year ago. This compares to civil servant gross salary increases of 6.4% and private sector increases, which averaged about 7% over the last year.

“The BDSI is showing slightly lower increases than gross salary increases due to a number of factors like lower salary increases, higher deductions from personal tax as well as higher medical insurance payments,” says Mike Schüssler, Chief Economist at Economists dotcoza.

Other statistical data shows fewer cases of civil debt judgements meaning there should be fewer garnishee orders deducted from formal sector salaries.

While take home pay is certainly still increasing, it is at a lower rate than a year ago, and therefore the trend overall is slowing.

“The average BankservAfrica Disposable Salary increase in the first six months of 2015 is 6.3% compared to 8.3% for the first six months of 2014 in nominal terms. This slowdown is partly because of a lower inflation rate, as most salary adjustments are linked to the consumer price index,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

These slower nominal increases are expected to continue as lower inflation impacts on wage increases which will ironically lead to low real wage increases as inflation picks up again. Wage increases are also low as they factor on the lower inflation rate. The BDSI trend is expected to continue with low to negative real increases for the next few months.

In contrast to salaries, the average take home private pension has been increasing at a much faster rate. The South African take home pension averaged out at R5 766 per month - an increase of 3.9% in real terms.

Pension payments are believed to be benefitting from higher equity markets and the weaker Rand, as many pension funds have foreign exposure. This could also indicate that while pensions are still under 45% of the disposable salary level, the growth in pensions could become more important to retailers and others if salary growth or employment levels come under pressure.

Overall however, both salaries and pensions increased in real terms in June with slower real increases apparent than the average over the last six months.