Salaries seem to be picking up speed despite the sluggish growth of the economy and the official unemployment stuck around 33%.
Salaries increased for the sixth consecutive month in September, suggesting the job market is strengthening in the third quarter of 2025. Almost 200 000 more salaries were paid in the first nine months of the year compared to the same period last year.
According to the PayInc Net Salary Index, which tracks the average nominal net salaries of approximately 2.1 million earners in South Africa, the steady increase in salaries aligns with the gradual improvement in economic activity and reflects the labour market’s resilience over recent months.
“The PayInc Net Salary Index reached R21 428, which was 0.3% up on August’s level and 2.3% higher than a year ago,” Shergeran Naidoo, head of stakeholder engagements at PayInc, says. The average net salary continues to strengthen, showing a 4.3% increase in the first nine months of 2025 compared to the corresponding period in 2024.
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175 000 additional salaries paid in first nine months of 2025
According to a PayInc Net Salary Index analysis of the number of salaries paid, just over 175 000 additional salaries were paid during the first nine months of 2025.
“While it is a welcome development, the official unemployment rate remains stuck at around 33%, as the economy, at current sluggish growth rates, is simply unable to create enough new opportunities to absorb all new entrants into the job market on an annual basis,” says Elize Kruger, an independent economist.
Still, she says, the PayInc Net Salary Index signals an improved labour market in the third quarter. The average net salaries increased on average by 0.4% quarter-on-quarter, while around 48 000 more salaries were paid during the quarter.
“The refreshed PayInc Net Salary Index confirms the narrative that 2025 will, on average, be a good salary year, despite uncertainties and challenges impacting the economic outlook,” Kruger says.
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Second consecutive year of real increase?
In real terms, the PayInc Net Salary Index increased by 0.2% month-on-month to R20 806 in September 2025, marginally up from R20 767 in August, representing the third consecutive month that real net salaries dipped below year-ago levels.
“Still, with consumer inflation on average only 3.1% in the first nine months of 2025, the average real net salary as measured by the PayInc Net Salary Index is up by 1.2% compared to the corresponding period in 2024.
“With average consumer inflation forecast at 3.3% in 2025, lower than the 4.4% in 2024 and industry data suggesting an average salary increase above 5%, 2025 will likely be the second consecutive year of a real increase in earnings.”
Kruger says this is a welcome tailwind for salary earners, supporting consumption expenditure, and could assist in softening the impact of global headwinds on the local economy.
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The effect of inflation
The South African Reserve Bank (Sarb) recently stated its preference to see consumer inflation anchored around the lower end of the current 3-6% target band. There has been an ongoing debate about the appropriateness of a proposed 3% point-target and what would be needed to steer the economy towards such a low inflation environment.
“One aspect that could potentially be a near-term hurdle is the fact that trade unions and the business sector are still believing that inflation would average around 4.3% in the next five years, as reflected in the Bureau of Economic Research’s inflation expectations survey, for the third quarter” Kruger says.
In recent years, many wage agreements were extended to three- or five-year terms, often resulting in higher pay levels than in today’s low-inflation environment, Kruger points out.
“While adjusting to a lower inflation environment will be challenging and take time, recent data show early signs of moderating inflation expectations and salary adjustments becoming more aligned with this trend.”
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Will salary increases be sustainable?
Examples include the recent Motor Industry Bargaining Council’s three-year agreement, granting employees in the component manufacturing sector a 6% increase in the first year between September 2025 and August 2026, followed by 5% in years two and three.
In automotive retail, workers will receive 5% annual increases over three years, while in the fuel retail sector, forecourt attendants will see 6%, 5%, and 4% increases across the three years, plus a 1% annual medical insurance allowance.
Cashiers in this sector will receive 6% in year one and 4% in years two and three, marking the first time in recent years that 4% has featured as an annual increase in collective bargaining.
Kruger says for 2025, industry indications suggest an average salary increase of around 5.3%, compared to a forecast inflation rate of 3.3%. “While this could boost spending, it will only be sustainable if productivity growth keeps pace.”
