‘Tough times not impacting take-home pay raises, yet…’

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

Unexpectedly, salary payments still beating inflation despite inflation rises, says BankservAfrica.

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

The BankservAfrica Disposable Salary Index (BDSI) shows that take-home pay increased last month to the highest level since February 2015. Take-home pay rose by 9.1% maintaining the upward trend of the last four months.

“This increase on a year ago is quite surprising as one would have expected that salary increases would be slowing in these tough economic times,” says Mike Schüssler, Chief Economist at Economists dotcoza.

“Usually we would see January, February and March disposable salaries drop as year-end bonuses no longer form part of the equation. However, despite taking this into account, the average disposable income was still well over the rate of consumer price inflation on a year ago basis.”

The CPI in February 2016 was 7%, higher than a year ago, and which was itself the highest increase since 2009.

Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica, says, “Even after inflation is taken into account, there was still a 2% real increase in take-home pay. This was the fourth month in a row that the increase in disposable income was higher than the inflation rate.”

Belrose explains that the median or typical disposable salary, which is 74% of the value of the average salary, increased 9.2% on a year ago to R9 809. At the current rate of increase the typical salary will take about three and a half years to catch-up to the average salary. Average salaries tend to be higher as only a few employees earning high wages lift the average whereas the typical salary is the amount paid to the employee in the middle of all the salary groups.

Only 17.3% of the total income group now receive less than R4000 per month – the lowest income category – down from 20.1% in February last year as people move up into the higher categories.

“The largest single category in the BDSI is the category that includes all the employees who get between R10 000 and R25 000 paid into their bank accounts. They currently account for 37.7% of these salary disbursements, up from 35% of all salary payments in February 2015,” says Belrose.

The BDSI indicates that there have only been two months in the last 18 months where salary increases have not outperformed inflation, and one of those was due to delayed agreements in public wage negotiations.

Pensions start to lag salaries again

Regarding pension payments, the February pension payments into bank accounts increased by a lower percentage than salaries after nine consecutive months of pension increases outperforming salaries. This has also remained the case for the previous two months.

It is unlikely that pensions will continue to outperform inflation, particularly considering the general equity market returns are barely outperforming inflation and interest rates are also just above inflation. This means that private sector pensions are unlikely to have high pension increases as they are a function of total returns as well as of percentage draw downs.

Average bankable pensions paid via the South African payment system increased 7.8% in February, down on the average increase in 2015 which was 9.1%. “While still above the rate of consumer price inflation by 0.8% it is clear that bankable pension increases are starting to lag take-home pay increases,” says Schüssler.

The average pension rose to R5 992 in February 2016. However a similar data story to the disposable salary data shows that the average pension drops from the year-end levels in the early part of the next year.

“We have also noted that many pensioners receive an end of the year bonus payment that drops out of the smoothed BankservAfrica Private Pension Index (BPPI) calculation between January and March, as the payments were most likely issued in November 2015 according to the BankservAfrica payment system data,” says Schüssler.

“The average pension paid is exactly 45% of the average take home salary in February 2016. The typical private pension that is paid via the banking system in South Africa was R4 234 which was only 71% of the average pension,” explains Belrose.

The BPPI has outperformed inflation by an average of 3% over the last two years with only one month showing an increase below the rate of inflation.