Salary headache for businesses in South Africa

With Consumer Price Inflation (CPI) figures at 6.5% and wage negotiations taking place in many sectors, both employers and trade unions are facing negotiation headaches in the coming months warn labour law experts.

“I believe, that this is a temporary spike in inflation but many of the agreements last between one and three years. It’s going to be difficult to find the correct level of increase in the next couple of months,” said Jonathan Goldberg at Global Business Solutions.

“It is also predicted that this might not be the last of the increases in inflation and it could top out at 7%. This is going to put a lot of pressure on employer and union negotiations as well as members. It will be necessary to be very mature regarding the long-term effects of the agreements reached during this year.”

Companies will likely want to play it safe and hold back on substantial increases and bonuses to keep the balance sheet stable during these uncertain times, said Advaita Naidoo, Africa managing director at recruitment firm Jack Hammer Global.

But that does not mean employees have no negotiating power, and that companies can’t introduce alternative ways of investing in their people to ensure continued attraction and retention of talent, she said.

“There is no doubt that there isn’t much extra cash on the table right now, and that companies will need to consider creative ways in which to reward employees, and adjust their compensation policies to ensure they keep their teams in healthy shape while also keeping the bottom line resilient.”

Strike season

Another expected impact of the upcoming negotiations is labour action – including both protected and unprotected strikes.

Many workers, especially in the public sector, have had to deal with these rising costs with only the smallest of below-inflation increases over the last three years. The wider economic issues facing businesses and the government in South Africa has left very little room for negotiation, which has been the case with mineworkers and mining companies.

Citizens felt the brunt of the built-up tension in recent weeks, after Eskom was forced to introduce stage 6 load shedding due to illegal strikes at several of its power stations at the start of the month.

South Africa’s mining sector faced a multi-month dispute at the start of the year, while the South African Revenue Service was forced to grapple with labour disputes in May and June, which ultimately led to a full-blown strike this week.

The National Union of Metalworkers of South Africa (Numsa) has also threatened industrial action as it calls for a wage increase of up to 20% in the multibillion-rand automotive industry.

Meanwhile, the private security industry is now also threatening to strike, leaving private and public infrastructure unguarded if its wage demands are not met.

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