Salaries increase, but households still struggle to afford more

South African salaries improved slightly in July, but households are still feeling the pressure as rising living costs continue to limit what they can afford.

While easing inflation has given workers some relief, household purchasing power remains under pressure.

This was revealed by the latest PayInc Net Salary Index released on Wednesday.

Shergeran Naidoo, head of stakeholder engagement at PayInc, said: “Average nominal net salary increased further to R21 642 in July, 0.2% higher than in June, and up by 2.2% compared to a year ago.”

Salaries gain power

Elize Kruger, an independent economist, noted that nominal net salaries increased by only 1.6% during the first seven months of 2026, compared with a 3.7% increase for the full year in 2025, reflecting the ongoing strain in the labour market.

“While the continued increase in nominal net salaries is encouraging, the broader picture shows that salary growth remains subdued. South African households continue to navigate a challenging economic environment, making the recovery in purchasing power particularly important for consumer confidence and spending.”

Inflation increased steadily during the first half of the year, but declined for the first time in July to 4.3% from 5.0% in June. Notable reductions in fuel prices during July contributed to the improvement and provided some relief to South Africans.

Easing inflation gives salaries strength

Kruger noted that the lower inflation reading also positively influenced real net salaries. The PayInc Net Salary Index increased by 0.4% month-on-month in real terms in July, its first monthly increase in nine months.

However, at R20 269 in July, the index remained 2.2% below the levels a year ago, while year-to-date statistics suggest that net salaries are down by 2.1% in real terms.

“The moderating inflation provided some breathing room for salary earners in July and contributed to the first monthly improvement in real net salaries in nine months,” said Kruger.

“However, purchasing power remains weaker than a year ago, and this continued erosion has implications for household spending and consumer confidence.”

Wage growth reflects a strained labour market

The salary index revealed that trends continue to reflect the challenging operating environment facing South African businesses. The impact of weaker economic conditions, higher input costs and pressure on company profitability has constrained salary expectations.

Kruger said that wage growth also varied considerably between industries. In the fourth quarter of 2025, nominal remuneration growth per worker ranged from 4.6% in manufacturing to 8.8% in gold mining, reflecting the uneven salary environment across the economy.

“Salary growth cannot be viewed separately from the health of the broader economy and labour market. Businesses facing pressure on profitability, tend to postpone investment decisions, while there is less scope for meaningful salary increases in a strained environment, which is increasingly reflected in the subdued growth in private sector remuneration.”

Public vs private sector

She noted that the experience of public sector employees has differed markedly from that of private sector workers. Average public sector remuneration increased by 8.6% in 2025 and 9.1% in 2024, translating into real increases of more than 5% in both years.

By comparison, private-sector remuneration growth has been considerably more modest.

“Across the economy, the South African Reserve Bank (Sarb) recorded average nominal remuneration growth of 5.0% in 2025, marginally below the 5.2% recorded in 2024,” said Kruger.

“In real terms, average remuneration increased by 1.9% in 2025 and 1.5% in 2024, supporting consumer spending during these periods.

“Unionised employees have also typically secured higher wage increases than their non-unionised counterparts.”