More bosses give workers early access to their salaries

‘Earned wage access allows employees to access their pay as it’s earned, enabling them to manage their cash flow without resorting to expensive debt,’ says Remchannel.

At a time when many employers cannot necessarily afford high salary increases, more bosses are opting to assist their employees in other ways, such as giving them earlier access to their salaries, granting soft loans, or allowing them to lower contributions to their retirement funds, just so they can make ends meet.

This is according to the latest Remchannel salary survey, which was presented at a media roundtable on Wednesday.

The survey results revealed that employers are sensitive to the fact that their employees need assistance to manage and avoid continuing in a debt-dependent cycle, said Lindiwe Sebesho, managing director of Remchannel.

“We’re seeing more employers giving employees early access to their salaries – known as earned wage access – where workers get paid more frequently than once a month to help them manage their finances more effectively,” she added.

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Sebesho pointed out that there was a difference between earned wage access and a cash advance.

“Earned wage access allows employees to access their pay as it’s earned, enabling them to manage their cash flow without resorting to expensive debt. In contrast, a cash advance involves borrowing against future earnings, which can lead to poorer outcomes if not managed properly.”

Soft loans and pension cuts

Companies are also increasingly considering so-called “soft loans” to employees, which offer more favourable terms than loans from traditional banks, such as lower interest rates and more flexible repayment periods.

Employers also allow their staff members to choose lower retirement contribution rates so that they have a higher take-home salary for their immediate financial needs. The contributions (employer and employee) they could opt for can be as little as 6% or as much as 27.5%.

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Samantha Jagdessi, head of strategy at Old Mutual Corporate Consultants, says however that workers need to be made aware of the impact of a lower contribution to their retirement income.

An employee who selects the minimum pensionable salary option contributes up to 70% less to their retirement funding where basic salary is used as the basis.

Lower salary increases

Meanwhile, South African workers had to make do with lower average salary increases in April 2024 compared to the corresponding period in 2023, according to Remchannel’s survey.

The survey is conducted biannually in April and October and tracks the general market salary movements for the various categories of staff. Fifty-five employers from the government and private sectors, employing more than 400 000 people, participated in the survey.

The salary movements for April 2024 were as follows:

  • Executives had salary increases of an average of 5.66% – slightly below the 5.92% recorded in April 2023;
  • Managements’ salary increases were at 5.87%, also lower than 2023’s 5.94%; and
  • General staff’s increases dropped from 6.13% in 2023 to 6.04% this year.

The same decrease in salary adjustments was noted for unionised staff, whose increases dropped from 6.41% last year to 6.16% in April 2024.

“Adjusting salaries is just one part of the equation,” said Sebesho. “The cost of living, especially for necessities like food, electricity, and transport, is accelerating at a rate higher than both inflation and the salary increases we are seeing.

“This means that the economic challenges that result in high indebtedness will persist, even though salary increases are now more aligned with the core CPI.”

Considerations for increases

Survey participants said they consider a range of factors when granting salary increases, but the top three are inflation (89%), company profitability or affordability (75%), and the individual’s performance (69%).

Employers use different policies when considering raises for their staff. Almost half of the respondents say they use a policy that combines inflationary increases and individual performance across executive, management, and general staff levels.

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However, unionised staff seem to get a better deal – 66.7% of employers say increases are negotiated for unionised staff, regardless of their individual performance.

Flexibility and adaptability

Forty-two percent of survey participants said mobility and flexibility are important factors that impact staff productivity. Employees are looking for more flexibility in their working environment and want to have a choice of where to work.

According to Sebesho, there is an ongoing trend towards a more adaptable work environment, with a significant uptick in hybrid work arrangements. The survey also reflects this, with more than 80% of employers embracing hybrid working models – a significant increase from just 41% in 2019.

This article was republished from Moneyweb. Read the original here.

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