New data from Old Mutual shows that, while employers are still funding above-inflation salary increases in South Africa, they’re tightening benefits, shifting to performance-based support.
According to the group’s latest Remchannel Bi-Annual Salary and Wage Movements Survey, South African salary increases in 2026 have averaged around 5.43%.
This is far higher than the headline inflation rate of around 3% at the start of the year, and remains above the looming medium-term spike to above 4% due to the fallout from the Iran War.
However, despite the above-inflation hikes, the survey showed that employees remain under financial pressure, with the economic turn in the latter half of 2025 not undoing the strain over the previous years.
Combined with the group’s benefit surveys and Two-Pot withdrawal data, the group said a more complex picture is emerging, including a clear shift from employers.
“Employees remain under financial pressure, while some forms of workplace support are becoming more selective,” it said.
“This comes as employers struggle to balance rising costs with the necessity of staying competitive.”
One of the more significant shifts emerging in the data is that employees are experiencing a trade-off between above-inflation salaries and employer rewards and support.
Companies are still funding increases, Old Mutual said, but benefits are becoming more selective and scaled back.
This means fewer “soft loans”, cash advances, sign-on bonuses, or even cutting back on fully-paid maternity leave.
Instead, employers are opting for more targeted forms of support, with a shift towards more performance-oriented reward design, Old Mutual said.
The impact on employees is also apparent, with the tension seen in continued withdrawals from retirement savings under the two-pot system.
This is happening despite real growth from salary increases.
Old Mutual Corporate’s latest Two-Pot withdrawal survey shows that March 2026 claims returned to near inception-level volumes, with about 100,000 claims recorded by month-end.
The group noted that the reasons for withdrawals underline the strain employees are under.
Among lower-income members, basic living needs alone accounted for 45% of withdrawals, it noted, while across all income bands the leading reasons were essentials, emergencies and debt.
“That pattern shows how deeply financial pressure is embedded in employees’ day-to-day lives,” the group said.
“For employers, the question is whether pay, benefits and wider support are aligned to where employees are feeling the most strain.”
The cost of higher salaries
Old Mutual said that the challenge for employers is to balance the amount they spend (i.e., higher salary increases) with more targeted support (i.e., broader benefits).
“Salary increases remain important, but if support is being reduced in areas where employees are under the most pressure, employers may need to rethink [how rewards work],” it said.
“If valued benefits are replaced with higher cash, that extra cash may not ensure financial well-being, since employees might end up spending more to cover those benefits themselves.”
Old Mutual said that employers risk losing skilled workers or failing to onboard new talent due to disconnected reward decisions.
The group argued that many benefits and support measures don’t require additional spending on the employers’ part.
Examples of this include flexible working arrangements, remote work, staggered hours, and greater control over schedules, which are often valued as much as pay increases by employees.
This is because these measures reduce travel costs and the time it takes to get to work, which results in more disposable income.
“It’s about optimising the total remuneration package for both the business and its people, especially when cost pressures are high and sustainable performance is key,” the group said.
