The wage increases South African workers can expect in 2021

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 global advisory Willis Towers Watson.

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.

“2020 has been a horror show for many businesses and their people, but there are signs of resilience and cautious optimism for next year,” said Melanie Trollip, director of Talent and Reward at Willis Towers Watson South Africa.

Trollip said that 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.

“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.”

Trollip said that 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,” she said.

Sector comparisons

Willis Towers Watson’s 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%);
• 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.