If you work in the private sector, you may be looking enviously at government employees who recently negotiated for themselves above-inflation increases. Very few private sector companies pay inflation-linked increases and the trend among employers is away from fixed increases for all and towards performance-related increases.
Martin Wescott, the executive chairman of PE Corporate Services (PECS), says most companies pay a performance-related increase.
"More than 80% of private companies pay some form of performance-based pay based on [employees meeting] key performance indicators or targets, which should be pre-agreed objectives."
PECS is a provider of human resources products and services, including salary surveys that provide current market-related pay and benefits data for over 800 positions across all sectors of the South African economy.
An inflation-linked annual increase is a big issue in trade union negotiations, Wescott says, but in the private sector, inflation is just one of the factors that companies consider when doing pay reviews.
"Employers will look at inflation, what's affordable - in terms of how the company's doing - and how employees have performed against their key performance indicators."
The employer will then decide on a range. For example, if inflation is 4.5% your employer might decide to pay increases of between 3% and 7% with the top performers getting 7% and some getting 3%. Some may get no increase at all.
Sanisha Packirisamy, an economist at Momentum, says the average "real" (or after inflation) wage increase in the public sector since 2008 was 2.4% versus 2.1% in the private sector.
Packirisamy says real wage increases in the private sector should exceed those in the highly unionised public sector to match higher levels of productivity. In the past, private companies have protected their bottom line by shedding workers to keep their overall wage bills under control.
Whether you work in the public sector or the private sector, what's important is that you receive an increase, which is at least equal to inflation every year. An increase of less than inflation means you are effectively poorer than the year before - because most goods and services increase in line with inflation.
To avoid shedding jobs, some employers pay increases of less than inflation. According to the most recent Quarterly Labour Force Survey of Statistics South Africa, over the year to the first quarter of 2018, unemployment declined from 27.7% to 26.7%, partly due to a marked increase in discouraged workers.
Wescott says that, in general terms, low-income earners are better paid by the public sector than the private sector. Employees on the A, B and C Paterson salary grades in the public sector are paid 15-25% more than their counterparts in the private sector, he says. But employees on the E and F grades in the public sector will typically earn less than their counterparts in the private sector.
While the benefits, and range of benefits, offered by employers can differ enormously, Wescott says most employers in the private sector offer a retirement benefit, as does government.
This could be up to 7.5% of your pensionable contributions of salary with an equal contribution from your employer covering retirement fund contributions and group life insurance premiums. This is a valuable benefit because if you leave your employer, the contributions made by both you and your employer to your retirement fund are yours.
Most companies provide group life insurance, which is often linked to the retirement fund, Wescott says. "It's typically three times your annual salary, but can be up to six times your annual salary."
Subsidised Medical scheme contributions is another substantial benefit, Wescott says. The employer will normally pay half your monthly contributions to the medical scheme.
A car allowance is typically a senior level benefit, Wescott says, although it's also paid to sales reps or operations people who need to be on call. "The rationale is they need a car for business. But since it's taxed [in full], it's not such a huge benefit," he says.
Wescott says 13th cheques (or bonuses) are not common these days. "The notion of it is dying, slowly. Firstly, it's not performance related. Some companies offer the option for you to have your package in 13 cheques instead of 12."
Another benefit that is rare in the private sector is a housing subsidy. Wescott says this is because the tax advantage has disappeared. Some employers, however, do pay housing subsidies to their low earners as part of their social responsibility.
Pay increases can leave you poorer than previous year
If you work in the private sector, you may be looking enviously at government employees who recently negotiated for themselves above-inflation increases. Very few private sector companies pay inflation-linked increases and the trend among employers is away from fixed increases for all and towards performance-related increases.
Martin Wescott, the executive chairman of PE Corporate Services (PECS), says most companies pay a performance-related increase.
"More than 80% of private companies pay some form of performance-based pay based on [employees meeting] key performance indicators or targets, which should be pre-agreed objectives."
PECS is a provider of human resources products and services, including salary surveys that provide current market-related pay and benefits data for over 800 positions across all sectors of the South African economy.
An inflation-linked annual increase is a big issue in trade union negotiations, Wescott says, but in the private sector, inflation is just one of the factors that companies consider when doing pay reviews.
"Employers will look at inflation, what's affordable - in terms of how the company's doing - and how employees have performed against their key performance indicators."
The employer will then decide on a range. For example, if inflation is 4.5% your employer might decide to pay increases of between 3% and 7% with the top performers getting 7% and some getting 3%. Some may get no increase at all.
Sanisha Packirisamy, an economist at Momentum, says the average "real" (or after inflation) wage increase in the public sector since 2008 was 2.4% versus 2.1% in the private sector.
Packirisamy says real wage increases in the private sector should exceed those in the highly unionised public sector to match higher levels of productivity. In the past, private companies have protected their bottom line by shedding workers to keep their overall wage bills under control.
Whether you work in the public sector or the private sector, what's important is that you receive an increase, which is at least equal to inflation every year. An increase of less than inflation means you are effectively poorer than the year before - because most goods and services increase in line with inflation.
To avoid shedding jobs, some employers pay increases of less than inflation. According to the most recent Quarterly Labour Force Survey of Statistics South Africa, over the year to the first quarter of 2018, unemployment declined from 27.7% to 26.7%, partly due to a marked increase in discouraged workers.
Wescott says that, in general terms, low-income earners are better paid by the public sector than the private sector. Employees on the A, B and C Paterson salary grades in the public sector are paid 15-25% more than their counterparts in the private sector, he says. But employees on the E and F grades in the public sector will typically earn less than their counterparts in the private sector.
While the benefits, and range of benefits, offered by employers can differ enormously, Wescott says most employers in the private sector offer a retirement benefit, as does government.
This could be up to 7.5% of your pensionable contributions of salary with an equal contribution from your employer covering retirement fund contributions and group life insurance premiums. This is a valuable benefit because if you leave your employer, the contributions made by both you and your employer to your retirement fund are yours.
Most companies provide group life insurance, which is often linked to the retirement fund, Wescott says. "It's typically three times your annual salary, but can be up to six times your annual salary."
Subsidised Medical scheme contributions is another substantial benefit, Wescott says. The employer will normally pay half your monthly contributions to the medical scheme.
A car allowance is typically a senior level benefit, Wescott says, although it's also paid to sales reps or operations people who need to be on call. "The rationale is they need a car for business. But since it's taxed [in full], it's not such a huge benefit," he says.
Wescott says 13th cheques (or bonuses) are not common these days. "The notion of it is dying, slowly. Firstly, it's not performance related. Some companies offer the option for you to have your package in 13 cheques instead of 12."
Another benefit that is rare in the private sector is a housing subsidy. Wescott says this is because the tax advantage has disappeared. Some employers, however, do pay housing subsidies to their low earners as part of their social responsibility.