salary trends for 2017

1

SALARY TRENDS IN SOUTH AFRICA Presentation to Durban Chamber

9 February 2017

Presented by: Lionel van Schalkwijk

Regional Manager KZN

PE Corporate Services [email protected]

031 700 1597

mailto:[email protected]

2

P E CORPORATE SERVICES

3

Discussion Points

1. Factors impacting salary increases

2. Actual & Predicted increase trends in SA

3. Possible impact of proposed Minimum Wage

Salary Trends

4

Ec

ono

mic

G

row

th

In

flatio

n

Exch

an

ge

R

ate

F

lu

ctu

atio

ns

Bu

sin

ess C

on

fid

en

ce

Pa

y D

iffe

re

ntia

ls /

In

co

me

In

eq

ua

lity

La

bo

ur L

eg

islatio

n

Un

io

nisatio

n

Me

rit (P

erfo

rm

an

ce

)

Bu

sin

ess S

trate

gie

s a

nd

grow

th

Economic Environment

Factors impacting salary increases

5

0.0%

2.0%

4.0%

6.0%

2010 2011 2012 2013 2014 2015

Gross Domestic Product in South Africa

GDP Growth in 2016 • First Quarter = -1.2% • Second Quarter = 3.5% • Third Quarter = 0.2%

IMF Economic Growth Forecast for SA: 2016 = 0.1%, 2017 = 0.8%

Economic Growth

6

Inflation Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave

2011 3.7 3.7 4.1 4.2 4.5 5 5.3 5.3 5.7 6 6.1 6.1 5

2012 6.3 6.1 6 6.1 5.7 5.5 4.9 5 5.5 5.6 5.6 5.7 5.6

2013 5.4 5.9 5.9 5.9 5.6 5.5 6.3 6.4 6 5.5 5.3 5.4 5.7

2014 5.8 5.9 6 6.1 6.6 6.6 6.3 6.4 5.9 5.9 5.8 5.3 6.1

2015 4.4 3.9 4.0 4.5 4.6 4.7 5.0 4.6 4.6 4.7 4.8 5.2 4.6

2016 6.2 7.0 6.3 6.2 6.1 6.3 6.0 5.9 6.1 6.4 6.6 6.8 6.4

Inflation to remain outside the target range of 3% to 6% for 2017?

• Current petrol price in 2017 to R13.14 (unleaded 95, coastal) – upward trend?

• Repo rate increased by 50 basis points (28 Jan 16) and 25 basis points (17 Mar 2016) to 7 percent pushing prime rate to 10.5 percent (possibility of more increases in 2017?)

• Drought - Expected increases in food prices • Volatility in the value of the Rand

7

Relationship between Increases in Basic Salaries and the Consumer Price Index

Inflation

8

5.00

7.00

9.00

11.00

13.00

15.00

17.00

19.00

03/01/2010 03/01/2011 03/01/2012 03/01/2013 03/01/2014 03/01/2015 03/01/2016 03/01/2017

USD vs ZAR

Exchange Rate Fluctuations

Jan 13 Jun 13 Jan 14 Jun 14 Jan 15 Jun 15 Jan 16 Mar 16 Jun 16 Sep 16 Dec 16

8.71 9.97 10.74 10.61 11.61 12.30 16.15 15.42 15.11 13.99 13.84

.

The average Rand values against the US Dollar for selected months is depicted in the table below

South Africa (Global Grade 13, Paterson D2 / D3)

Rands pa Comparative ratio

Basic Salary Singapore USA Australia

2011 491 523 99 73 59

2012 525 214 78 65 56

2013 561 901 64 53 48

2014 602 177 60 50 48

2015 643 582 50 43 47

2016 685 049 56 48 53

9

Business Confidence Index

Generated and Published by South African Chamber of Commerce and Industry (SACCI)

Measures the level of business confidence within the South African economy • Pessimistic view of business climate • Currently up to 97.7 for January 2017

10 10 February 2017 P-E Corporate Services SA

Pay Differentials

A pay differential can be defined as the ratio reflecting the difference between total remuneration or earnings between different individual employees or groups of employees within an organisation.

• Company Wage Gap

• Equal pay for Work of Equal Value

11

Salary increase Trends

10 February 2017 Copyright held P-E Corporate Services SA 11

EMPLOYEE CATEGORY

Annual Percentage

Increase in Basic Salary

Annual Percentage Increase in

Guaranteed Pay

Weighted Average Increase

per Category

Executives / Top Management 6.2 (6.3) 6.1 (6.5) 6.1 (6.5)

Management 6.2 (6.5) 6.0 (6.8) 6.1 (6.6)

Professional / Junior Management 6.4 (7.0) 6.2 (6.9) 6.3 (7.0)

Client Services / Sales 6.2 (6.8) 6.1 (6.8) 6.1 (6.9)

General Admin / Support Staff 6.4 (7.3) 6.3 (6.9) 6.4 (7.1)

Lower Level Staff 6.8 (7.5) 6.5 (7.1) 6.6 (7.2)

ALL STAFF 6.4 (7.0) 6.2 (6.9) 6.3 (6.9)

AVERAGE ANNUAL INCREASES IN REMUNERATION LEVELS BY EMPLOYEE CATEGORY (AUGUST 2015 - JULY 2016) GREEN FIGURES = PREVIOUS YEAR

12

Salary increase Trends


EMPLOYEE CATEGORY

Annual Percentage

Increase in Basic Salary

Annual Percentage Increase in

Guaranteed Pay

Weighted Average Increase

per Category

Executives / Top Management 6.2 (6.4) 6.1 (6.6) 6.1

Management 6.2 (6.7) 6.0 (6.6) 6.1

Professional / Junior Management 6.4 (6.5) 6.2 (6.5) 6.3

Client Services / Sales 6.2 (6.3) 6.1 (6.6) 6.1

General Admin / Support Staff 6.4 (6.8) 6.3 (6.9) 6.4

Lower Level Staff 6.8 (7.2) 6.5 (7.7) 6.6

ALL STAFF 6.4 6.2 6.3

AVERAGE ANNUAL INCREASES IN REMUNERATION LEVELS BY EMPLOYEE CATEGORY (AUGUST 2015 - JULY 2016) RED FIGURES = SNAP SHOT SURVEY FOR KZN (NOV 2016)

13

Market Trends

10 February 2017 P-E Corporate Services SA

Factor % of

Organisations

National salary surveys 46

Industry-based or regional salary surveys 28

Own (in-house) estimates of market rates 13

Skill, track-record and performance, etc. of individual concerned

24

Existing internal pay structure 28

FACTORS TAKEN INTO ACCOUNT IN ESTABLISHING PAY RATES

14

Predicted Increases

SALARY INCREASE RANGE

Employee Category

Executives / Top

Management Management

Professionals / Junior

Management

Client Services /

Sales

General Admin / Support

Staff

Lower Level Staff

All Staff

Under 4 8 8 6 7 6 6 7

4.1 to 6% 41 38 39 38 37 33 38

6.1 to 7% 32 35 35 34 34 32 34

7.1 to 8% 15 14 15 17 18 19 16

8.1 to 9% 3 4 3 3 4 6 4

9.1 to 10% 1 1 1 1 1 4 1

Over 10% - - 1 - - - -

PERCENTAGE OF COMPANIES INTENDING TO AWARD INCREASES WITHIN

CERTAIN RANGES FOR THE PERIOD AUGUST 2016 TO JULY 2017

EMPLOYEE CATEGORY Basic Salary Guaranteed Pay Overall Average

Projected Increase

ALL STAFF 5.9 5.7 5.8

15

SALARY INCREASE

RANGE

Employee Category

Executives / Top

Management Management

Professionals / Junior

Management

Client Services / Sales

General Admin /

Support Staff

Lower Level Staff

All Staff

Under 4 8 (3) 8 (3) 6 (3) 7 6 6 7

4.1 to 6% 41 (54) 38 (52) 39 (45) 38 (45) 37 (39) 33 (28) 38

6.1 to 7% 32 (43)

35 (45)

35 (52)

34 (52)

34 (58)

32 (41)

34

7.1 to 8% 15 14 15 17 18 19 16

8.1 to 9% 3 4 3 3 4 6 (28)

4

9.1 to 10% 1 1 1 1 1 4 1

Over 10% - - 1 - - - (3) -

PERCENTAGE OF COMPANIES INTENDING TO AWARD INCREASES WITHIN

CERTAIN RANGES FOR THE PERIOD AUGUST 2016 TO JULY 2017 (KZN FIGURES)

Predicted Increases

16

AS PUBLISHED IN SURVEY Projected Increase

Actual Increase Variance

April 2013 6.8 6.7 -0.1

September 2013 6.7 6.9 +0.2

April 2014 6.7 6.9 +0.2

September 2014 6.7 7.3 +0.6

April 2015 7.1 7.0 -0.1

September 2015 6.8 6.9 +0.1

April 2016 6.6 6.9 +0.3

September 2016 6.6 6.3 -0.3

Actual vs. Overall Average Projected Increases in Salary All Staff Categories

Predicted Increases

17

Actual vs. Projected Increases in Basic Salary

18

Minimum Wage

Initial levels • R 20 per hour, or • R 800 per week (40 hour week) • R 3 500

- Clear number rather than range - Phase in for Vulnerable sectors - Exemptions

19

Minimum Wage Timeline

• December 2016 (Publication of basic details)

• 1 July 2017 (Legislation enacted)

• 1 July 2017 (Decent Work Commission & NMW established)

• 1 July 2017 – 30 June 2019 (Transitional arrangements)

• 1 July 2019 (Universal coverage)

Corporate minimum wages

37 per cent of participants note that they have a minimum wage rate as a lower level guideline pay limit

Minimum Wage Rates: 2004 to 2016


Concluding remarks on Salary increases

Staff Categories *Average PREDICTED %

increase – 2017

Executives 4.0 – 6.5%

Management 4.5 - 7.0%

Specialists 5.0 - 7.0%

General Staff 4.5 – 6.5%

Lower Skilled Employees 5.5 - 9.0%

*It is important to note that more than 78% of organisations are predicting increases below 7% for 2017

Approach to merit increases

Cash bonuses

Top Performers = larger increases

Addressing the pay gap

Simplification

2017 Reward Trends