The Net Salary Index increased slightly in June,although inflation continued to outpace salary growth ; this was according to the Payinc Net Salary Index on Wednesday.
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South African salary earners are taking home slightly more money in nominal terms, but rising inflation and escalating administered prices are eroding those gains, leaving households with the weakest purchasing power in almost two years.
This is according to the latest Payinc Net Salary, which tracks the earnings of 2.1 million salary earners across South Africa.
The index showed that the average nominal net salary increased by 0.4% to R21,598 in June from May. However, salaries were only 0.5% higher than a year ago, underscoring the sluggish pace of wage growth.
PayInc said the modest increase in nominal salaries disguises the financial reality confronting many households as inflation continues to outstrip income growth. It said the slight increase in nominal salaries masks the reality facing many South African households.
Elize Kruger, Independent Economist, said that although salary earners are taking home marginally more in rand terms, inflation continues to outpace wage growth, steadily reducing their purchasing power.
PayInc added that the first half of 2026 has proven particularly challenging for salary earners.
“Nominal net salaries increased by just 1.5% over the six-month period, while real net salaries declined by 2.1%, reversing the stronger gains experienced over the previous two years,” it noted.
“In June, the PayInc Net Salary Index declined by 0.3% in real terms compared to May and by 3.6% year-on-year, bringing the average real net salary to R20 198, reaching the lowest level recorded in approximately two years.”
Kruger said that the continued decline in real earnings is likely to place increasing pressure on household budgets and consumer spending during the remainder of the year.
“As disposable income comes under strain, households are becoming more cautious with discretionary spending, which could weigh on broader economic activity,” she said.
PayInc said that while higher fuel prices have contributed to rising inflation in recent months, administered price increases are emerging as an equally significant source of financial pressure.
Kruger added that many salary earners will soon begin to feel the impact of annual increases in electricity, water, and other municipal tariffs.
“These administered prices have consistently increased faster than headline inflation, placing additional pressure on household finances even as salary growth remains subdued.”
PayInc added that items included in the Administered Price Index account for 12.9% of the consumer price basket and include electricity, water supply, refuse collection, sewerage, assessment rates, fuel, vehicle licence fees, and education costs.
“Although administered price inflation accelerated to 13.7% in May, largely due to fuel price increases, administered price inflation excluding fuel also increased to 7.6%, well above headline consumer inflation of 4.5%.”
Kruger said that electricity remains one of the largest contributors to administered price inflation, with many municipalities implementing tariff increases well above the inflation rate.
“These increases not only reduce household purchasing power but also raise operating costs for businesses, affecting economic competitiveness, investment, and employment,” she said.
“With inflation expectations drifting higher, administered prices remaining elevated, and international oil prices once again under pressure from renewed geopolitical tensions, the economic outlook remains uncertain.”
Kruger concluded that after two years of relatively healthy salary growth, 2026 has marked a turning point for salary earners.
“Until wage growth begins to outpace inflation again, many South Africans are likely to remain under financial pressure despite modest increases in nominal salaries.”
Professor Waldo Krugell, an economist at North-West University, said the index was showing a very worrying picture.
“Nominal salaries are increasing only just by the time that you subtract the impact of inflation. South African salary earners are worse off in real terms,” Krugell said.
“The worrying number is the year-on-year change, which shows that net salaries in real terms are 3.6% lower than in the middle of last year. This simply means that people have less buying power.”
Krugell added that they are poorer on average.
“To this, Wednesday’s inflation numbers, with CPI inflation now at 5%, mean that household finances are particularly constrained. That's going to have an impact on household spending as a driver of economic growth as well, linking back to business prospects and confidence, which are already dampened. The probable increase in the repo rate on Thursday afternoon will only make the situation worse.”
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