SME recruitment - how much should I pay my staff?

So how should employers determine how much to pay staff?

Giraffe has created a salary benchmark based on actual candidate data from a base of around one million candidates, with data no older than 2018. This analysis largely excludes high-skilled individuals and senior executives so it represents the majority of working South Africans.

Minimum wage and living wage in South Africa

As of 1 January 2019, South Africa's first-ever national minimum wage came into effect. This legislation stipulates a minimum national rate of R20 per hour, or R3,500 per month, depending on the number of hours worked.

Despite the introduction of a minimum wage, approximately 5.5 million workers across South Africa work in jobs that cannot keep them and their dependents out of poverty; these people are the “working poor” and have household incomes of less than R4,125 per month, according to the NMWRI.

The Living Wage is based on the concept that work should provide an adequate income to cover the necessary living costs of a family. Living Wage computations are based on the cost of living for a predefined basket of goods. The Living Wage for an Individual in South Africa for is R6,570 (Last updated in June 2018, code4sa.org). At this wage, employees can move out of poverty and live with dignity.

Our analysis shows that average monthly salary in South Africa is R6,400, 29% of employees earn below minimum wage, 45% are living poor and 70% earn below the living wage.

29% of employees earn below minimum wage, 45% are living poor and 70% earn below the living wage.

Employers who fail to pay employees in line with the national minimum wage may be subject to a fine. The fine is calculated per employee as the greater amount of double the value of the underpayment or double the employee’s monthly wage. Employers should further bear in mind that paying at least a living wage will result in increased employee satisfaction and lower staff attrition, which combined will provide a better return on investment than short term attempts to increasing margins by reducing staff costs.

How much should you pay your staff?

Whilst our salary benchmark does not cover all roles and industries in South Africa, there are some clear guidelines for HR teams and recruiters of entry level and medium-skilled staff.

Specifically, we believe employers should:

• Not pay below minimum wage. Businesses may still be adjusting to the new regulations and so may not be in the habit of ensuring all staff are paid at least minimum wage. However there is an increasing likelihood that violators will be identified and fined, so businesses should avoid both the financial and reputational damage associated with this.
  
• Try to pay at least the living wage of R6,570 where possible. Whilst it is tempting for employers to pay the least amount possible, paying at or above the living wage will increase employee satisfaction, reduce attrition and increase employer brand - all of which provide a better return on investment than the short-term margin gain from paying employees as little as possible.
  
• Use the average salaries in our salary benchmark report - based on seniority, industry and function - as a guide for the minimum salary to attract the right talent for specific roles.

Download the giraffe salary benchmark here.