René Richter, Managing Director of Remchannel (Pty) Ltd
South African employers expect to award wage increases of 4% to 6% in the next 12-month period, which is substantially below the current 7% inflation rate, denting employee disposable income and placing pressure on companies to find new ways to keep staff engaged and retain critical skills.
According to René Richter, Managing Director of Remchannel, the findings from the bi-annual Salary and Wage Movement Survey Report released today show employees are taking financial strain.
The report is based on the data submitted by 65 organisations. The internet-based survey sample represents a broad cross-section of companies spanning a wide range of economic sectors; 64.6% of the sample is represented by unlisted companies, listed companies represent 27.7% and quasi-government or government sectors represent 7.7%. An analysis of the employee categories under review includes Executive, Management, General Staff and Unionised Staff, totalling 343,097.
Richter said the economic climate had continued its downward trajectory, with the GDP contraction expected to be 0.4% for the first quarter of this year. This situation has been characterised by sustained load-shedding, significantly impacting the economy. Increased downtime and costs associated with alternative energy supply have escalated production costs and adversely affected revenues and profitability.
“Invariably, South African households are under pressure with the vast majority of “blue collar” employees becoming poorer. If households want to climb out of this rut and gain more wealth, their income must increase at least by more than the consumer price inflation (CPI) rate,” she noted.
Organisations inevitably have tightened their belts to curb costs, which has impacted the salary increases granted to employees being substantially below inflation. At the same time, talent and specialist skills are scarce, and previously disadvantaged individual (PDI) categories attract a premium.
‘Great Resignation’ still prevails
Richter believes that while there has been less hype about the great resignation now that the pandemic is considered over, it is most certainly not disappearing. The survey suggests that organisations lose much experience and accumulated knowledge when employees leave.
She noted that according to the survey, labour turnover averaged 16.6% and that one of the salient survey findings is that labour turnover ascribed to resignations was 41.22%. In South Africa, the ‘great resignation’ is ring-fenced in the professional and specialist roles of scarce skills in the market.
Companies can do much more to quantify and contain costs and examine and curtail the high labour turnover.
“It remains a concern that companies are not recording and analysing the reasons for their labour turnover or more dedicated to measuring the costs related to staff terminations and the subsequent replacement and recruitment of staff,” said Richter.
Of the 16.6% turnover rate, the two sectors with the highest resignation rates are Financial Services (65.31%) and Information and Communications Technology (55.81%). This is followed by FMCG/Retail/Consumer Manufacturing (34%) and the Mining/Technical Other/ Manufacturing sector (26.2%). The disciplines with the highest turnover are Sales/Marketing at 34.4%, followed by Human Resources at 19.6%
Richter said this untenable situation would force employers to reconsider their employee value proposition and retention policies to retain their brightest staff. Among the push factors as reasons for resignation include the following breakdown.
- 44% of employees resigned due to better career prospects, higher remuneration and improved employment conditions;
- 20% of employees experience burnout, stress, changing careers or emigrating; and
- 9% experience a toxic workplace.
Traditionally the number one reason for the resignation has been better pay followed by better career opportunities and development. As employees are impacted by the lack of growth and their ability to meet their financial obligations, they are considering alternatives to maintain their standard of living.
Flexibility and mobility as a value proposition
Richter said that another factor employers need to consider is that the pandemic transformed the world of work. Some 66% of employees want increased mobility and 63% more flexibility. Most employees also believe their productivity has increased in the work-from-home environment and enjoy a better work-life balance.
Employees and job seekers are prioritising how they want to structure their professional lives – frequently around their personal lives. When looking for jobs, they value personal success over professional wins.
Offering flexible work arrangements can involve a paradigm shift for organisations, especially smaller ones that may not have the critical mass of technology, budget, management and competitive flexibility necessary to make extensive use of flexible work arrangements.
“Employees want more flexibility and mobility, so employers must adopt a collaborative approach with their current and prospective employees when considering which work model: office-based, remote or hybrid, is an inherent requirement of the job,” she said.
“Whether through a remote or hybrid role, a flexible schedule, benefits that provide greater work-life harmony, or professional opportunities to keep employees engaged and fulfilled, employees quickly realise their work environment’s impact on their overall health and well-being,” Richter concluded.
Download the findings of the 2023 April Bi-annual Salary and Wage Movements Survey