October 2018

 

Slower but positive increase for take-home pay in September

BankservAfrica's average salary data reveals a struggling economy since 2013

 

Take-home pay in September increased at a slower rate than August due to the majority of backdated government salaries having been paid out. Interestingly, the BankservAfrica data reveals that there have been minimal increases to the average take-home pay since September 2013 – providing a strong indication of the struggling economy in the last five years.  

Take-home pay in September showed a year-on-year increase of 2.2%, a decline from the 4.7% year-on-year increase experienced in August 2018.

 

According to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica, on a month-on-month basis, BankservAfrica’s seasonally adjusted take-home pay declined by 1.4% between September and August due to the backdated salary payments and higher personal tax increases.

In nominal terms, the average banked take-home pay was R15 299 in September. In real terms, the average take-home pay was R14 256.

“Take-home pay increased in real terms for most of 2018 and we expect this to continue until the end of the year. However, 2019 could bring some change as inflation is expected to increase along with the continued poor growth performance of the South African economy,” says Mike Schüssler, Chief Economist at Economistscoza.

Very often higher inflation leads to salary increase lags and it takes a while for the two to catch-up. Although take-home pay does increase slightly above the inflation rate, other factors such as higher personal taxes caused by ‘bracket creep’ has an impact too.

According to Schüssler, the average take-home pay increased by only 2.8% above inflation since September 2013. “As such, the average rate of increase is only around 0.5% year-on-year, and tells the story of an economy struggling to create growth and wealth,” he says.

Interestingly, gross salaries increased by around 4% in the last five years to June 2018 after inflation – approximately 1% faster than inflation for the five years to September 2018, according to BankservAfrica’s estimates.   

“The difference between the two average rates of increase is down due to the rise in personal taxes that did not fully compensate for inflation as government struggles to increase revenue to balance the budget,” says Schüssler. There is a strong possibility that this will be addressed in the upcoming Medium-Term Budget Speech on Wednesday.

The BankservAfrica Take-home Pay Index is a very useful tool for analysing the impact of taxation on employee income. For example, the BankservAfrica Take-home Pay Index shows the overall nominal take-home pay increased by 45.3% while personal tax collections increased by 70.6% since August 2013 to August 2018.

“This clearly demonstrates that personal income tax has increased far faster than salaries,” says Schüssler. While BankservAfrica’s sample size is a third of that of SARS, the large difference shows that personal tax collections in effect show a far higher tax rate mainly via ‘bracket creep’.

BankservAfrica’s Private Pension Index (BPPI),  which tracks about 700 000 pension payments monthly out of an estimated 970 000 actual private pensioners, recorded its 19th consecutive month of positive real increases.

According to Naidoo, private pensions paid into bank accounts averaged R6 906 in real terms. In nominal terms, the actual amounts was R7 415.

The real increase year-on-year increase for private pensions in September was 3.1%.

“Clearly private pensions remain a positive contribution to the economy,” ends Schüssler.

For an expanded explanation please see the full report.


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“Take-home pay increased in real terms for most of 2018 and we expect this to continue until the end of the year. However, 2019 could bring some change as inflation is expected to increase along with the continued poor growth performance of the South African economy,” says Mike Schüssler, Chief Economist at Economistscoza.

Graph 2:  Real change in Take-home pay and Private Pensions

Source: BankservAfrica and Economists dotcoza

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Mike Schüssler
Well-known economist Mike Schüssler has partnered with BankservAfrica and analyses our payment information.  Read his report for further commentary:
 

Every day large companies, salary bureaus, remuneration companies, government and data centers send salary data for processing to BankservAfrica. This happens when the transaction occurs between different banks and not within the same bank.

This results in between 4 million and 5.5 million transactions per month, with an average of more than 4.7 million per month over the last year.  Note this number does not reflect the full picture, as some salaries are paid weekly whilst others may be bonus payments. 

The weekly data is adjusted to come up with one figure of what an individual would earn, had they been paid on a monthly basis.  Once this figure was added to those who were paid monthly, it was clear that the BankservAfrica data represented about 3 million people out of a formal work force of about 8.3 million, excluding agriculture, using the Quarterly Employment Survey (QES) from Statistics South Africa as guide.

All social security payments, representing around 3.8 million payments at about R1 000 per month, have been removed from the data set. 

The BDSI is published every second month.