South Africa’s take-home pay shock – here’s how much money people took home in June

The number of monthly salaries paid in June 2020 showed an annual decline of 20.7%, affecting a fifth of employees’ salaries, new data from the monthly BankservAfrica Take-home Pay Index (BTPI) shows.

“We have seen this massive slide in salaries processed by BankservAfrica and through the National Payment System in recent months,” said Shergeran Naidoo, head of stakeholder engagements at BankservAfrica.

“However, the figure in June is most reflective of the heavy toll that the current Covid-19 crisis has placed on employers and employees who are faced with major financial distress under the current circumstances.”.

The majority of payments recorded in the BTPI feature large corporates and a fair number of medium-sized firms that are served by payroll service providers and firm-owned payroll administrators.

As such, this recent decrease may not reflect the full impact of salary declines on small firms.

However, with the BTPI over representing civil servant and state-owned entity payrolls, it becomes evident that the reduced salary numbers are most likely to be in the private sector.

This is supported by data showing an estimated 30% of the BTPI monthly equivalent payments are paid by the broader government sector compared to 21% shown in Stats SA’s Quarterly Employment Survey.

“We surmise that a fifth of employees in the private sector did not receive a salary in June 2020. The 20.7% decline could be the result of job losses or it could due to a temporary pause in payments,” said Mike Schüssler, chief economist at economists.co.za.

He cautioned that while the BTPI numbers cannot be used as a measure of the unemployment rate, the salary data provides a quick and effective indication of the employment statistics on the ground through the number of salaries paid.

“In June, the actual average take-home pay declined by 0.5% in real terms. This could be the result of instances where salaries may have increased or that the personal income tax provided relief above the current inflation rate,” said Naidoo.

With tax relief of over 5%, a 1.7% nominal increase in actual salaries is extremely low. Moreover usually when inflation declines, as it currently has, real take-home pay increases even with low salary adjustments, said Schüssler.

“As many expected, daily/casual workers (-35.2%) followed by weekly workers (-17.1%) have been hurt the most. We are seeing a decline in monthly salaries of -9.1%,” he said.

BankservAfrica noted that the seasonally adjusted nominal take-home salary in June was R15,869, which was 1.7% higher than in June 2019. The real monthly take-home pay was R14,197.

“The real take-home pay declined by 0.5% on an estimated inflation rate of 2.4% in June 2020,” said Naidoo.

Meanwhile, the BankservAfrica Private Pension Index (BPPI) declined for the second consecutive month with a fall of 0.3% to reach R7,355 in real terms.

“Real pensions could be declining as a result of the interest rate reductions and the pressure that other assets have come under,” said Schüssler.

“The numbers are extremely concerning and will have a profound impact on the South African economy. The knock-on impact is also likely to be larger than many have estimated. Lower confidence levels and growing concerns over job security will have a severe impact on retail sales and consumer spending,” Schüssler said.

Read: A look at South Africa beyond 2020

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