The number of monthly salaries paid in June decreased by 20.7% year-on-year, affecting a fifth of employees’ salaries, the monthly automated clearing and payment company 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.

"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,” says BankservAfrica head of stakeholder engagements Shergeran Naidoo.

The majority of payments recorded in the BTPI feature large corporate companies and several medium-sized firms that are served by payroll service providers and firm-owned payroll administrators. As such, the recent decrease may not reflect the full impact of salary declines on small firms, BankservAfrica notes.

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 with the 21% shown in Statistics South Africa’s Quarterly Employment Survey, BankservAfrica says.

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, says Naidoo.

BankservAfrica and economic research organisation economists.co.za have created an estimate of the number of payments for each salary category and their annual movements. This estimate is based on the amount of salaries paid and BankservAfrica’s numbers of how often these payments took place.

The total value of take-home salaries paid in June declined by 25.6%, while overall pension pay dropped by 4.6%, both in nominal terms. The combined decline of 23.5% for total take-home pay and pensions was by far the biggest on record, says economists.co.za chief economist Mike Schüssler.

“We surmise that a fifth of employees in the private sector did not receive a salary in June. The 20.7% decline could be the result of job losses or it could be due to a temporary pause in payments."

“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 says.

"We caution that while the BTPI numbers cannot be used as a measure of the unemployment rate, we do believe that our salary data provides a quick and effective indication of the employment statistics on the ground through the number of salaries paid.”

“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,” explains Schüssler.

“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,” adds 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,” says Schüssler.

“The take-home pay and private pension 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,” he concludes.