According to research by global consultancy firm WTW, South African employers are set to increase their salary budgets by an average of 6.2% in 2023 as they grapple with a tough labor market and inflationary staff expectations.
WTW’s latest Payroll Budget Planning Report found that employers are under pressure to do more with pay.
A third (32%) said their salary budget is now higher than they had forecast, and 33% said they have started or will increase the frequency of salary reviews.
A survey of 334 South African organizations identified three main reasons for larger pay budgets:
- 62% expressed concern about inflation;
- 58% expressed concern about a tighter labor market; and
- 40% said their employees have expectations and concerns they need to meet.
“Employers are having to pay more than they expected to cover inflation and remain attractive to existing and potential employees,” said Melanie Trollip, Director of Labor and Rewards at WTW South Africa.
“The difficult economic climate and the emergence of new ways of working force organizations to closely monitor their salary budgets. Those who do not do this will be uncompetitive – they will lose their employees and it will be difficult to replace them.
“In such a dynamic environment, it is vital that organizations have a clear reward strategy and understand what the labor market and their staff expect.”
As the “great resignation” continues, attracting and retaining talent has become a major headache for employers, notes WTW.
The proportion of firms reporting difficulty attracting key talent rose from 24% in 2020 to 90% this year, while those experiencing problems retaining existing staff rose from 16% to 87 over the same period. %.
IT or digital and engineering skills are particularly sought after. 76% of firms said they had trouble filling IT and digital positions, and 70% had trouble retaining IT staff. For engineering positions, 57% had difficulty recruiting and 51% had problems retaining staff.
To improve their appeal to new hires, 70% of employers have increased workplace flexibility; 62% said they have placed more emphasis on diversity and inclusion; and 40% now offer financial incentives such as start-up bonuses.
In addition, organizations are trying to retain more of their talent by increasing their focus on diversity and inclusion (62%); increasing options for remote work (53%); and changing pay structures such as base salary and bonuses (36%).
“A tight labor market, particularly around certain key skills, means that organizations need to be much more creative to address the challenges of attraction and retention. It’s not just about the payment. Employers must understand the dynamics of their diverse workforce and provide the best work experience for all, Trollip said.
Read: Big Resignation Becomes Big Regret
