South African workers are expected to see meaningful improvements in their real earnings during 2026, supported by a combination of favourable domestic and global economic conditions. These include elevated commodity prices, a firmer rand and a prolonged period of relatively subdued inflation, all of which create a more supportive backdrop for income growth.
Key Takeaways
- Real Pay Growth Likely In 2026: Low inflation and improving economic conditions point to another year where salary increases outpace rising prices.
- Pay Rises Expected To Be Moderate: Most employers anticipate increases in the 4% to 5.9% range, reflecting steady but cautious wage growth.
- Skills Are Driving Higher Increases: Companies are increasingly linking salary adjustments to skills retention, favouring scarce and specialised roles.
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Salary Trends Based On PayInc’s Net Salary Index
This positive outlook is reinforced by data from PayInc, which publishes the Net Salary Index. The index tracks the after tax earnings of approximately 2.15 million salaried individuals across South Africa and provides a broad view of income trends in the formal sector. The index recorded a slight moderation in December 2025, though the underlying trend remained constructive.
During December 2025, the average nominal salary levelled off at R21 397. Despite this monthly pause, average pay was still 1.8% higher than in the same period a year earlier, reflecting continued year-on-year income growth.
The longer-term trajectory remains encouraging. The upward momentum in net salaries that began in 2024 carried through into 2025, with the average nominal salary rising by 3.7% over the year. This followed an even stronger increase of 4.6% in the previous year, indicating some moderation but still healthy growth.
Nominal And Real Salary Developments
While nominal pay continued to advance, real earnings showed some short-term softness toward the end of 2025. In real terms, the PayInc Net Salary Index slipped by 0.3% month on month to R20,641 in December. This marked the sixth consecutive month in which real salaries were below their levels from a year earlier.
However, this short term decline should be viewed in context. Average consumer inflation stood at just 3.2% in 2025, which meant that over the full year, real net salaries still increased. On an annual basis, real salaries as measured by the index were 0.5% higher than in 2024, confirming that purchasing power continued to improve overall.
Economic commentators believe that the resilience seen in income trends reflects a gradual strengthening in economic activity, despite persistent challenges such as infrastructure constraints and global uncertainty.
Economic Outlook Supporting Salary Growth In 2026
Looking ahead, the broader economic environment is expected to remain supportive of further wage gains. Low inflation and a stronger currency provide the South African Reserve Bank with greater flexibility to adjust monetary policy in a way that supports growth.
There is increasing scope for interest rate reductions, which could ease borrowing costs for households and businesses alike, further underpinning economic activity.
Carpe Diem Research forecasts real gross domestic product growth of 1.6% in 2026, an improvement on the estimated 1.3% growth recorded in 2025. Although this pace of expansion remains modest by historical standards, it represents steady progress in an economy that has faced multiple structural headwinds.
Inflation And Wage Expectations
Consumer inflation is projected to edge slightly higher to around 3.4% in 2026, rising from a 21 year low of 3.2% in 2025. This increase is expected to be gradual and driven by factors such as moderate global oil prices, a resilient rand and easing inflation expectations among consumers and businesses.
Over the medium term, wage settlements are anticipated to trend lower as firms increasingly factor in the new environment of reduced inflation expectations. Nonetheless, existing multi year wage agreements, many of which were negotiated under a higher inflation target regime, are expected to continue supporting average salary increases for some time.
Employer Expectations And Salary Increases
Insights from an Andrew Levy Employment Publication survey provide further context on remuneration expectations. The poll, which captured views from stakeholders and companies, indicated that most employers expect salary increases to remain broadly in line with recent settlements.
When focusing specifically on salaried employees, the survey revealed the following expectations:
- 67% of respondents anticipated annual increases between 4% and 5.9%.
- A smaller share is expected to increase below 4%, reflecting cautious budget planning.
- Very few employers anticipated increases above 6%, highlighting ongoing cost discipline.
These findings suggest that while salary growth is expected to continue, it is likely to remain measured rather than excessive.
Employees negotiating pay in 2026 may benefit from understanding sector specific trends, as increases can vary significantly across industries.
Skills Retention Becoming A Key Driver Of Pay
Another important factor shaping remuneration decisions is the growing emphasis on retaining critical skills. According to the latest Remchannel Quarterly report, skills retention now accounts for 25.8% of the criteria companies use when determining salary increases.
This marks a clear shift toward more skills-based pay structures, where scarce or high-value capabilities are rewarded more aggressively than across-the-board increases.
Factors Influencing Salary Adjustments
The following considerations are increasingly influencing pay decisions:
- Skills scarcity and retention priorities.
- Company profitability and balance sheet strength.
- Inflation expectations and cost pressures.
- Long-term workforce planning strategies.
Skills-based pay models are often associated with faster wage growth for specialised roles, even during periods of slower overall economic growth.
Positive Momentum Likely To Continue
With real incomes having grown for a second consecutive year in 2025, household spending showed signs of recovery, supported by firmer retail sales figures. This improvement in consumption underscores the importance of sustained real wage growth for broader economic performance.
Given the favourable combination of moderate inflation, improving growth prospects, and a more stable policy environment, many analysts expect a similar outcome in 2026. While risks remain, particularly from global developments, the balance of evidence points to another year in which South African workers are likely to see their purchasing power strengthen.
For households, periods of real income growth can be an opportunity to reduce debt or build savings, rather than increasing discretionary spending too quickly.
Key Economic Indicators At A Glance
| Indicator | 2025 Estimate | 2026 Forecast |
|---|---|---|
| Real GDP Growth | 1.3% | 1.6% |
| Average Consumer Inflation | 3.2% | 3.4% |
| Average Nominal Salary Growth | 3.7% | 4% to 5.9% expected |
| Real Salary Growth | 0.5% | Positive, expected |
Overall, the outlook for salaries in South Africa during 2026 remains cautiously optimistic, supported by improving fundamentals and a growing emphasis on sustainable income growth.
Conclusion
The outlook for South African earners in 2026 appears cautiously positive, with improving economic conditions, contained inflation and a firmer currency creating room for real salary growth. While pay increases are expected to remain moderate rather than exceptional, they should be sufficient to support purchasing power and household stability. At the same time, the growing emphasis on skills retention means outcomes will differ across sectors, with in-demand roles better positioned to benefit. Taken together, these trends suggest a continuation of gradual income recovery rather than a sharp acceleration, reinforcing a more sustainable path for wage growth and consumer spending.
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