2020 Salary Increases and 2021 Salary Projections

Willis Towers Watson’s  Lionel van Schalkwijk (Associate Director: Talent and Reward) recently hosted an online presentation where he discussed 2020 Salary increases and 2021 Salary Projections. Topics included: 

  • Actual and predicted salary/wage increase trends for 2020/2021.
  • Factors impacting salary/wage increases in South Africa.
  • Restoring stability on the back of COVID 19 

Click below to get your copy of the presentation for insights and trends. 

Our salary surveys provide current market related pay and benefits data for over 800 positions at all organisational levels across virtually every sector of the South African economy. Data is collected under conditions of strict confidentiality and managed in one of the largest remuneration databases on the continent. 

Willis Towers Watson Surveys are particularly relevant data sources for Multi-National Organisations reporting pay and benefits data based on the WTW Global Grading Methodology.

South African workers set for more optimistic 5% wage rise in 2021 amid thawing of pay freezes

2020 has been a horror show for many businesses and their people, but there are signs of resilience and cautious optimism for next year. Companies are planning to expand their pay budgets and offer slightly more generous rises to staff. The widespread pay freeze that has covered swathes of companies will start to thaw. 

South African private sector workers are set to receive an average pay rise of 5% in 2021, which is a cautious improvement over the 4.2% given this year, according to salary research from Willis Towers Watson, a leading global advisory, broking, and solutions company.

The global pandemic forced many companies to revise their planned pay rises downwards earlier this year, and also to implement pay freezes and other financial controls in order to survive.

In a further sign of some optimism for next year, the survey found that the number of South African companies freezing their pay rates is also expected to fall sharply in 2021. This year almost four in ten (38%) businesses froze their pay increases, but this is forecast to fall to one in eight (12%) firms in 2021.

Whether all the planned 2021 pay rises go ahead remains to be seen, and there may be some downward pressure on them, especially in the hardest-hit sectors. But even during a pandemic, companies must fight to retain the best talent, and many have multi-year wage agreements to honour.

Next year’s rise of 5% will be welcomed by many workers, but with inflation forecast at 4.1% the real terms increase that is left over will be more marginal. The jobs market is still in a very fragile state, with some sectors suffering more than others. The energy industry is budgeting for the weakest salary rises, while pharma and manufacturing are set to pay more generously.

Willis Towers Watson’s latest Salary Budget Planning Report, which studies the size of pay budgets at firms, showed that pay rises in 2021 will vary greatly between industries, reflecting their different pandemic experiences and their recovery plans.

In South Africa, the weakest employers in terms of salary expectations are in the Energy and Natural Resources sector, where an average pay rise in 2021 of 3.5% is predicted, followed by Business and Technical Consulting (4.2%), and Energy Services and Utilities (4.3%). The top three industries expecting more generous rises are: Pharmaceutical and Health Sciences (6.4%), Manufacturing (5.2%), and High Tech (5.0%).

A similar overall average pay picture is emerging across Africa and the globe, with most organisations in major economies anticipating higher pay rises in 2021 than 2020.

Regional salary increases (average)

Country

2020 (awarded)

2021 (budgets)

South Africa

4.2

5.0

Kenya

4.1

5.6

Nigeria

6.0

8.6

Mauritius

2.2

3.4

 

Global salary increases (average)

Country

2020 (awarded)

2021 (budgets)

United States

2.3

2.7

China

4.7

5.4

Japan

1.7

2.0

UK

2.2

2.4

Germany

2.1

2.4

France

1.8

2.0

India

5.9

6.4

About the Survey

The Salary Budget Planning Report is compiled by Willis Towers Watson’s Data Services Practice. The survey was conducted online in October/November 2020, receiving over 18,000 sets of responses covering over 130 countries worldwide. In South Africa 243 businesses took part.

The report summarises the findings of Willis Towers Watson’s annual survey on salary movement and reviews practices as a means of helping companies with their compensation planning for 2020 and beyond.

 

Increases and income up 6.2% over the last year

P E Corporate Services’ Executive Chairman Martin Westcott was recently interviewed on Cape Talk’s Breakfast with Refilwe Moloto, discussing our latest Salary Survey Trends Report.

[Listen to the full interview here]

Traditionally over many years we have seen a gap between salary increases and inflation. Increase shave tended to lead inflation by a couple of percentage points. That position has reversed itself over the last 5 to 10 years, and we find the increases at the bottom end of the organisation – particularly with unionised staff – people will receive increases much closer to 7% than the average 6 we are reporting.

How have we been able to see increases this high?

The real reason is the storage of skills in our economy (notwithstanding the fact that we had extremely low growth) we still have a shortage of certain key skills, especially experienced people and people in professions such a IT, qualified engineers, artisans, certain financial skills and so on. And that’s what drives up your pay rates from year to year.

What about unionised employees?

Unions have been very successful in negotiating relatively high rates of increase for their members. We’ve seen this with mining, parastatals and state-owned enterprises – we’ve seen some substantial increases (up to 7%) and this has been a function of strong union activity. Case in point: the recent SAA strike which resulted in an 8% increase. There’s been a strong push from unions, and state-owned entities experience difficulties in trying to contain that type of cost.

Have we done enough to stave off a drop in ratings?

When you have strikes – regardless of whether they are legal or illegal ones – at key industries such as power generation and air transport, eventually you have to settle. If one looks at the rate of wage settlements over the years, it’s typically around 8%. This is inevitably going to drive up VAT increases. It’s not the entire organisation in each case, but it’s a significant component of it.

What should organisations be paying?

Our latest Salary Surveys provide your company with Salary Trends for 2020 and other valuable Cash and Non-Cash benefits detailing best practise. Our technology provides automated projections for salaries by position and salary by grade for all locations and various industries. If you’re looking to learn more about the latest Salary Trends, get your complimentary trends report by clicking here.

Speak to a consultant

If you would like to speak to a P E Corporate Services consultant about Salary Surveys within your organisation or industry, click here.