As South Africa continues to navigate the third wave of Covid-19 infections against the backdrop of recent protests, all eyes are on regional economic recovery and the national vaccine rollout to re-ignite collective business optimism, as revealed in the bi-annual Remchannel’s Salary and Wage Movements report.
René Richter, managing director of Remchannel, and Malusi Ndlovu, director of Large Enterprise at Old Mutual Corporate, say that while business confidence appears to be on the rise based on wage increase decisions, most businesses are taking a measured approach.
The survey showed that 30% of respondents in April 2021 indicated that they would go ahead with their budgeted salary increases, against only 10% reported in October 2020.
In the 12 months to the end of April, 30% of the respondents indicated that zero percentage increases were granted across various levels. “The majority of these indicated that this was applied mostly at an executive level, emphasising a commitment to good governance and sustainability,” said Richter.
At the time, just over 60% of respondents reported Covid-19 and financial constraints as the reasons for withholding salary increases.
“Driven by the uncertainty created by the pandemic and the anticipation of economic recovery, 44% of companies canvassed in the April survey said they were taking a wait-and-see approach,” Richter said.
Impact of the recent protests
To determine whether the recent protests had reversed renewed business optimism since conducting the survey in April, Remchannel conducted a snap poll at the end of July 2021.
It revealed that 68% of businesses would go ahead with increases as budgeted in April 2021. However, of the remaining 32% of respondents, 80% indicated that salary increases would be reduced, while 5% said that salary increases would be cancelled entirely.
Richter said that the most affected industries in the latest findings were construction, retail, fast-moving consumer goods and manufacturing.
Impact on retirement
According to Richter and Ndlovu, the past 12 months have also impacted employers’ ability to continue contributions to retirement funds.
Remchannel data from June 2020, indicated that 35% of respondents said their business had been offered a payment holiday by their retirement fund service provider. Of the companies that were offered this respite, 48.5% of respondents opted to use this.
“More than a quarter of our clients, namely employers on retirement funds administered by Old Mutual Corporate, chose some form of financial relief during the height of the hard lockdown. However, 90% of these had been unwound by the first quarter of 2021,” said Ndlovu.
Ndlovu said that aviation clients were heavily impacted as were companies providing services related to property and business travel. “At the start of the pandemic, all industries were affected, with essential services like financial services and retail being the least affected.
“Mining and primary resources were significantly impacted initially. However, the subsequent resource price hikes helped them weather the storm.”
He pointed out that contributions to retirement funds formed the backbone of most people’s retirement savings and should be prioritised. “While it is reassuring that companies have by and large resumed employee retirement contributions, it would be prudent for businesses to continue to emphasise the importance of these benefits.
“We believe the pandemic was a Black Swan moment, a once-in-a-lifetime disruption, while the looting and unrest were also unprecedented. It is great news that most businesses have unwound most of their financial relief arrangements, and we encourage all businesses to get back on track with supporting their employee’s retirement savings,” he said.