[South Africa] Questioning the 2025 salaries forecast

South African salaries are forecast to increase by 5.5 per cent in 2025, however, analysis from a leading payroll consultancy firm queries the figure, IOL reports.

Axiomatic announced that the 2025 forecast ignores quantitative factors such as:

• economic growth
• union demands
• trends in compensation and benefits
• the unique financial position of the company.

The starting point of the forecasting process is estimating the projected inflation rate for 2025. Axiomatic reportedly said that salary increases are “implicitly linked” to inflation; where inflation is one of the most essential factors when deciding on the amount of the salary increase.

“Employees want to retain the same purchasing power with their remuneration from one year to the next,” its analysis said.

“Consistent with the Axiomatic methodology, a forward-looking approach must be adopted where inflation is forecasted for 2025, and the proposed salary increase is based on this result.”

According to the payroll consultancy, any increases in salaries will be “forfeited” to inflation.

Axiomatic said their 2025 forecast is closely in line with the South African Reserve Banks (Sarb’s) Monetary Policy Committee of 4.4 per cent which was predicted at the July 2024 meeting.

“Importantly, 4.5% represents the mid-point of the MPC’s 3% to 6% target range and the target percentage they want to anchor in terms of market expectations,” Axiomatic said.

Historically, the method used in South Africa to determine salary increases was to add a 2 per cent real increase to the forecasted inflation figure.

Axiomatic believes that is changing. It said, “However, there has been a discernible trend over the last few years of lower real salary increases being granted.”

This is echoed by the 5-year moving average which has been steadily declining over recent years. 2022 and 2023 were reportedly anomalies as inflation rose to higher levels than envisioned when increases were determined at the beginning of the year, cutting down the 5-year average.

“The conclusion of the analysis is that a 1% real salary increase is the new normal,” Axiomatic said.

Source: IOL

(Quotes via original reporting)

South African salaries are forecast to increase by 5.5 per cent in 2025, however, analysis from a leading payroll consultancy firm queries the figure, IOL reports.

Axiomatic announced that the 2025 forecast ignores quantitative factors such as:

• economic growth
• union demands
• trends in compensation and benefits
• the unique financial position of the company.

The starting point of the forecasting process is estimating the projected inflation rate for 2025. Axiomatic reportedly said that salary increases are “implicitly linked” to inflation; where inflation is one of the most essential factors when deciding on the amount of the salary increase.

“Employees want to retain the same purchasing power with their remuneration from one year to the next,” its analysis said.

“Consistent with the Axiomatic methodology, a forward-looking approach must be adopted where inflation is forecasted for 2025, and the proposed salary increase is based on this result.”

According to the payroll consultancy, any increases in salaries will be “forfeited” to inflation.

Axiomatic said their 2025 forecast is closely in line with the South African Reserve Banks (Sarb’s) Monetary Policy Committee of 4.4 per cent which was predicted at the July 2024 meeting.

“Importantly, 4.5% represents the mid-point of the MPC’s 3% to 6% target range and the target percentage they want to anchor in terms of market expectations,” Axiomatic said.

Historically, the method used in South Africa to determine salary increases was to add a 2 per cent real increase to the forecasted inflation figure.

Axiomatic believes that is changing. It said, “However, there has been a discernible trend over the last few years of lower real salary increases being granted.”

This is echoed by the 5-year moving average which has been steadily declining over recent years. 2022 and 2023 were reportedly anomalies as inflation rose to higher levels than envisioned when increases were determined at the beginning of the year, cutting down the 5-year average.

“The conclusion of the analysis is that a 1% real salary increase is the new normal,” Axiomatic said.

Source: IOL

(Quotes via original reporting)