Although high earners drove March’s take-home pay average to new highs, the average salary was actually the lowest in a year.
The average take-home pay of employees paid into the National Payments System showed the highest annual increase since the start of BankservAfrica’s Take-home Pay Index in 2012 while the typical banked salary was at its lowest since April 2018.
This disparity is owed to the bonuses paid to high income earners in March, which resulted in the typical salary being disproportionate to the average.
“The average take-home pay increased in real terms by 4.4% year-on-year to reach R14 500 – the highest inflation adjusted average take-home pay in the near seven-year history of the index,” says Shergeran Naidoo, head: stakeholder engagements at BankservAfrica. The average take-home pay not adjusted for inflation also reached a new high of R15 812 and recorded an 8,7% year-on-year increase.
While these are significant, it is interesting that the typical employee did not feel this increase (the ‘typical’, ‘median’ or ‘ordinary’ employee is the person earning a take-home pay where 50% earns less and 50% earns more).
According to Naidoo, the typical take-home pay was just over R10 043 in March – the lowest since April 2018. On a year-on-year basis, this was 1,3% less after adjusting for inflation.
“Based on BankservAfrica’s March take-home pay data, it appears that there were more bonus payouts than usual to higher earners. This is especially as companies reward their senior and middle level staff based on the company’s overall performance,” explains Mike Schüssler, chief economist at Economistscoza.
The increase is also attributed to the number of people who banked more than R40 000 in March growing by 15% on a year-on-year basis while the number earning less than R12 000 but more than R6 000 per month declined by about 6%, says Naidoo.
Meanwhile, the number of take-home pay employees earning between R4 000 to R6 000 increased by 6,5% on a year-on-year basis.
“The number of ‘high earners’ with monthly incomes between R40 000 – R100 000 increased substantially between 2017 and 2018, which augmented the value of the average take-home pay in March,” explains Schüssler. In March, the median employee took home just 69,3% of the average take-home pay salary.
Since March 2012 to March 2019, the real average take-home pay increased by 5.3% and the median or typical take home pay increased by 3.7% in real terms, making the case that the average rises faster due to those earning more getting higher increases.
“But March 2019 is a very big outlier and if we did the same calculation for the six years to February 2019, the median would have increased by 6,3% in real terms and the average would have increased by only 3,9%. In January, the median increased by 12,9% in real terms from January 2012 while the average only increased by 6,3%,” explains Schüssler.
“Therefore, in some months like March, the average employee is doing better than the typical employee in the middle of the income spectrum. But in most months, the typical employee’s actual take-home pay is 0,2% better than the average employee’s.”
“This small difference tells us that the typical employee does a little better with take-home pay increases. One should expect this as the personal income tax rates have not been adjusted for inflation, particularly for higher income earners,” says Schüssler. “It tells us that the value add in the South African economy is spread more fairly than we think to employees and filters down to the normal working person. This is, of course, beneficial for those employed in the formal sector.”
Meanwhile, banked private pensions showed its 25th consecutive real increase and rose by 2,2% in March on a year-on-year basis, according to the BankservAfrica Private Pensions Index (BPPI).
“Although March’s R6 962 is slightly down on February value of R7 020, it is still the fourth highest ever recorded real average banked pension in the BPPI,” says Naidoo.
In nominal terms, the average pension was R7 527 for March 2019. Interestingly, the average pension is 48,9% of the average take-home salary.
The estimated number of pensioners paid via the payment system was 693 689 in March.
The BPPI represents about 70% of all banked private pensions in South Africa.