The end of 2020 marked the first full year that business across the world had to deal with the fallout of the Covid-19 pandemic, and South African businesses were not spared the difficult decisions involving staff and their salaries in their attempts to remain afloat.

Writing in Remchannel’s HR Quarterly in October 2020, Managing Director René Richter noted that most of corporate South Africa was following a cautionary approach as they tried to undo the new and unexpected business challenges wrought by Covid-19, knowing that the decisions taken during the pandemic would have long-lasting impacts on their businesses.

‘The majority of our clients have implemented cost-cutting initiatives, which is totally understandable given the impact of the pandemic on the cash reserves of organisations,’ Richter wrote.

‘As the salary and wage bill is probably the highest cost item for most organisations, the expenditure is being scrutinised by all stakeholders and in particular by their boards and remuneration committees.’

Managing their salary and wage bill, however, gave rise to another challenge, putting employers in an all but impossible position. On the one hand they were still feeling the economic crunch; on the other, many were facing a talent war, especially in industries where there were skills shortages even before the pandemic, and struggling to offer the salaries required to attract and retain talent.

Back to business

Six months later, has the situation changed? In short, yes. ‘With the roll-out of Covid-19 vaccinations, South Africa is looking to get back to business,’ Richter says, pointing to some of the key take-outs from Remchannel’s April 2021 Salary and Wage Movement Survey, the first for 2021.

‘Business optimism has improved since October 2020 and 30% of respondents indicated that they will go ahead with their budgeted salary increases. At the same time last year, this number was only 10%,’ Richter adds.

Furthermore, in October 2020, 31.9% of respondents deferred or froze salary increases to preserve jobs. By April, this number had dropped to 7%.

However, like South Africa’s Bureau for Economic Research, Remchannel warns that South Africa’s 12- to 18-month outlook remains deeply uncertain. It cautions that ‘the impact of continued load-shedding and the pandemic will most probably continue to suppress consumer and business confidence’.

Sought-after talent remains mobile

For employers, then, the pressure is mounting from both sides. Like last year, the salary and wage bill remains the largest expense in the organisation, and it is more important than ever that the return on investment in human capital is optimised. Yet the talent war also continues, and attracting new talent while retaining good employees becomes more and more challenging.

‘The war for exceptional, high-performing talent is continuing and the focus on increasing the productivity of existing talent has become a business imperative,’ says Richter. ‘Many organisations are reviewing their organisational structure to increase efficiencies, but in the process employee morale is affected negatively.

‘Some 44% of respondents have indicated that they still are unsure about how they will manage increases this year,’ she adds. ‘In many cases, 2021 will be the second year in a row where no or very small increases will be granted in cases where the organisation’s survival is under threat.

‘Invariably, the lack of salary increases and bonuses will make it difficult to retain key and high-performing employees. Sought-after top talent remains mobile, and while they are aware of the risk of changing employers, the reward offered and its impact on their disposable income will ultimately drive their decision-making.’

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