South African employers expect average wage increases of 5.4% to be awarded in the next rolling 12-month period. This will be below the inflation rate and will put pressure on companies to find new ways to keep their staff happy in the face of record staff turnover.

That average wage increase figure is based on RemChannel’s April 2022 Salary and Wage Survey, which clearly indicates that salary budgets are potentially no longer sufficient to meet evolving employee demands.

Rising costs linked to escalating inflation – exacerbated by increasing fuel prices and food shortages due to the Russia-Ukraine war – have created a perfect storm for employers as workers return to the office. The South African Reserve Bank increased the repo rate by 50 basis points in May, the steepest increase since 2016, taking the bank’s key rate to 4.75%.

The prediction for an overall average lift to payroll is 5.24% on a total guaranteed package basis across industry sectors for the next 12 months. By comparison, South Africa’s benchmark consumer price index (CPI) held steady at 6.5% in May according to Stats SA.

The historical average CPI for 2021 of 4.5% presented a more positive view in terms of the differential, but reward professionals need to be guided by the current information, which shows a worsening of the gap between increases and CPI. 

The Great Resignation continues

The pressure on salaries presents a new challenge to employers as they look to retain and attract talent while remaining competitive. This comes amid the continuing effects of the Covid-19 pandemic that has prompted millions of workers around the world to rethink work and its role in their lives.

The Great Resignation is a global phenomenon and refers to a US-led trend of workers quitting during the height of the Covid-19 pandemic, opting instead for stimulus packages. It has sparked similar movements worldwide – including in South Africa – as workers seek better opportunities and flexibility.

According to the survey, 36.4% of labour turnover was a result of resignations over the past 12 months. Resignations continue to be at the highest level of all the termination categories that we have seen over the past 10 years, despite the pandemic and economic uncertainty. The total sample of employees numbered more than 618 000 people. This means that, at an average turnover rate of 17.7%, just under 40 000 employees resigned from 82 companies.

Reasons for these resignation include the following:

• 53% – a better working environment, to improve career opportunities, or to avoid a toxic environment (citing bullying or harassment)
• 20% – a greater work-life balance, or to avoid burnout and/or stress
• 19% – better pay
• 8% – emigrating

The situation is untenable, and it will force employers to reconsider their employee value proposition (EVP) and retention policies if they are to keep their brightest staff.

While more than half of participant companies did not measure the replacement cost of labour staff turnover, the figure was staggering. Assuming that most are professional staff at an annual salary of R600 000, and that it conservatively costs one annual salary to replace these workers, it would have cost these companies a staggering R23.9 billion.

The attraction and retention of critical skills are the most difficult challenges facing businesses. The survey found that human-resource professionals have experienced the highest turnover. The impact on this crucial business function could be why the resignations are at a high percentage. Sales and marketing professionals were second in line, which could be attributed to the greater focus on marketing to ensure organisational growth.

Flexibility is the new employee benefit

However, the survey clearly indicated that 35% of employees are not happy to be back at the office and 28% resist returning to the office – even if it is under a hybrid model. The survey found that organisational culture and key elements such as improved communication, trust and empowering workers have quickly become a prerequisite for employees.

Staff are no longer thinking about the consequences of terminating employment, especially if their skills are in demand. Most employees also believe that their productivity has improved while working from home. This is the second-highest selection made by the participants in this survey and is directly influenced by the number one reason: less time spent travelling to/from work.

Fear of contracting Covid-19 is relatively low on the list of concerns around returning to the office. On the other hand, employers believe that while the pandemic forced a flexible model, that model is not sustainable. The single biggest reason cited by employers in this survey is the loss of culture and working relationships between team members, followed by challenges onboarding new staff.

While these are certainly valid concerns, perhaps the question should be how the flexible work model can be adapted to overcome these challenges. Businesses should invest in exploring what critical competencies employees will need to collaborate digitally, and they should be prepared to alter and improve employee- experience strategies to remain competitive.