South African pay set to rise by 6.1% this year as firms compete for staff and struggle with inflation

South African employers are planning to increase their budgets for pay rises by 6.1% in 2023 as they try to attract and retain staff amidst high inflation and a challenging labour market, according to research by WTW, a leading global advisory, broking, and solutions company.

WTW’s latest Salary Budget Planning Report, which got 423 responses in South Africa, found that the 6.1% increase for 2023 is slightly higher than the 5.9% average boost in pay budgets given in 2022. Nearly four in ten (38%) businesses said their pay budget for 2023 is higher than they thought it would be.

Employers are increasing pay budgets for three key reasons: 78% said they are concerned about inflation, 37% said they are responding to a challenging labour market, and 30% said they want to improve the retention of existing staff.

Melanie Trollip, Director of Work and Rewards, WTW South Africa, said: “The pressure of inflation and a competitive labour market are forcing many to increase their pay budgets so that they can both retain and attract the best staff.
The forecast pay increases for this year are however slightly below inflation, which is common in more challenging economic times.

“Employers are facing tough choices as they try to control costs during a testing business climate, but also strive to keep their pay levels attractive. Those organizations that succeed will have a clear reward strategy and an understanding of what employees are looking for.”

Despite challenges to the economy, many South African firms are upbeat about the business outlook and are in hiring mode. Almost a third (31%) said that the outlook for their business is better than they had forecast, while 49% said it was in line with their expectations. A quarter (25%) plan to increase their total headcount over the next 12 months. Half (51%) of employers plan to recruit into engineering roles in the next 12 months, while 44% are hiring in IT roles, and 44% also want more workers in sales.

Melanie Trollip added: “There are signs of optimism around business sentiment and hiring plans, particularly for certain roles like engineering, sales, and IT. While pay is important, there are many other factors involved in workplace engagement and success, and employers need to deliver an attractive overall employee experience.”

About the Survey
The Salary Budget Planning Report is an authoritative global study about salary budgets and recruitment compiled by WTW’s Reward Data Intelligence practice. The survey was conducted in November 2022. Approximately 32,908 sets of responses were received from companies across 159 countries worldwide. In South Africa, 423 organizations responded.