Business Maverick

BUSINESS MAVERICK

Public sector unions accept the government’s below-inflation salary increase offer

Public sector unions accept the government’s below-inflation salary increase offer
Trade unions representing a majority of public servants and affiliated with Cosatu have accepted the government’s salary increase offer. (Photo: EPA / Kim Ludbrook)

Public servants’ trade unions have conceded that the government cannot afford their demands for salary increases in 2021 that amount to more than 8%. They have settled for a 1.5% salary increase and sweetened cash allowance.

The majority of trade unions representing public servants have accepted the government’s offer of a below-inflation salary increase and monthly cash allowance, ending a long-standing impasse between both parties that could have undermined efforts to stabilise SA’s deteriorating public finances. 

About 60% of trade unions have accepted the government’s offer, which includes a “once-off pensionable” salary increase of 1.5% from 1 April 2021 to 31 March 2022 for public servants. This is a blanket salary adjustment because it will be offered to all public servants, regardless of their number of years in service or existing salary level. 

On Monday, the Public Servants Association (PSA), which claims to represent 23,000 public servants, accepted the government’s offer after initially rejecting it and threatening to embark on a general strike that would have shut down public services. At the eleventh hour, the PSA accepted that public finances were under pressure due to the Covid-19 pandemic and the recent social unrest, which will require the government to bankroll income relief measures for finally distressed households and businesses. 

“The PSA and its members have witnessed the country’s deepening economic crisis owing to the Covid-19 pandemic, looting of state coffers through corruption, sharp increases in inflation, the cost of food-related products as well as unrest and looting. 

“The PSA has also noticed the impact of this situation on public servants who are feeling the compounded effects of not receiving a salary increase for two consecutive years. The PSA strives to assist in repairing the damage, trust, and decrease poverty without further damage to the economy,” the trade union said. 

Mugwena Maluleke, the chief negotiator for  trade unions affiliated to Cosatu, said the approval of the government’s compensation offer has passed the mandatory 50% threshold. This was made possible by the PSA’s last-minute backing of the government’s salary increase offer.

A compromise was embraced by trade unions as the government’s 1.5% salary adjustment offer is below their expectations. 

Trade unions have been in talks with the government for more than a year and even threatened to shut down public services through a general strike if they were not awarded inflation-busting salary increases of at least consumer inflation plus 4%. This works out to an increase of more than 8%, as consumer inflation was 4.9% in June 2021. 

The 1.5% salary increase will be implemented from August 2021 by the Department of Public Service and Administration (DPSA), which oversees the terms of employment in the public sector. But the salary increase will be backdated to 1 April, a period in which the government usually adjusts the remuneration of SA’s 1.3 million public servants, including doctors, nurses, teachers and police officers. 

Business Maverick has seen a copy of the salary increase agreement reached between the government and trade unions that was drafted at at the Public Service Co-ordinating Bargaining Council (PSCBC), where both negotiate the terms of employment in the public sector.  

It reads: “The employer [the government] will pay a once-off pensionable salary adjustment of at least 1.5% to all employees employed in the public service on 1 April 2021, who do not receive a pensionable increase derived from pay progression [in other words, a salary increase linked to years of service] in respect of the applicable performance cycle, payable to them in terms of any PSCBC or Sectoral Agreements regulating pay progression, including employees on the maximum notch of their salary levels.” 

This is the agreement that the majority of public service trade unions have accepted.

The 1.5% salary increase is not new as it has already been budgeted for by the National Treasury and is part of its existing pay progression framework for the next three years. 

Trade unions representing a majority of public servants and affiliated with Cosatu have accepted the government’s offer. Trade unions that have accepted the government’s offer include the PSA, Democratic Nursing Organisation of South Africa, Health and Other Services Personnel Trade Union of South Africa, and National Teachers Union. 

A win for the government 

The compromise by trade unions is arguably a win for DPSA Minister Senzo Mchunu and Finance Minister Tito Mboweni because the pair have been firm in their plan to implement a three-year salary freeze for public servants. 

Mboweni set the cat among the pigeons in early 2020 when he announced a review of the 2018 salary agreement in the public sector. This would involve reducing the government’s expenditure on remunerating public servants by R300-billion over the next three years.  

At R650.4-billion in the 2021/22 financial year, expenditure on paying public servants is the largest component of the government’s overall expenditure, accounting for around 35% of government expenditure. 

Credit rating agencies have closely watched the public sector remuneration talks after issuing warnings for the government to rein in expenditure and ballooning debt. 

Over and above the 1.5% salary adjustment offer, the government proposed that public servants be awarded a “monthly non-pensionable cash allowance” of between R1,220 and R1,695 – depending on their salary level (see below).

The cash allowance will be subjected to tax and public servants can expect, on average, to each receive about R1,000 per month.  

This is an improved offer as the government initially offered public servants a monthly cash allowance of R978. The sweetened cash allowance helped convince trade unions to accept the government’s remuneration offer.

According to Business Day, the improved cash allowance will cost the government about R18-billion, which the Treasury will fund through the pooling of existing benefits for workers and possibly cutting departmental budgets. 

The DPSA told Business Maverick that the 1.5% salary adjustment and cash allowance offer had been approved by the Treasury. 

“The Treasury and DPSA have been working together on the proposal. Whatever has been presented as the government’s offer has the approval of the Treasury.” DM/BM

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  • Sydney Kaye says:

    I don’t understand how this is a below inflation increase. R1000 on top of say R20000 per month is already 5%. Then add the 1.5% and whatever the “pay progression” is. It seems it is at least 10% which is a big win for the unions.

    • Irene Fish says:

      Because it is only a cash benefit and not a salary increase it does not count towards pension growth, so employees pension contributions will not grow with inflation in same manner as salary increase would have made pensions increase.

    • Johan Buys says:

      I am with you! The average salaries (seemingly secret) must be enormous!!!

      If (1.5% plus 1500 pm is <= 4.9% then the salary must be over R500,000. Government brags it got away with less than 4.9%. How on earth can our average government salary be over R500,000 per year?

      If it is, we are well and truly fracked. It does not matter whether we get away with 2% increases, the R500,000 average is grossly unaffordable and doubly so given the output we receive.

      Government debt will spiral to default levels within 6 years.

    • Louis Potgieter says:

      You are not wrong, but an increase now forms a base for future years. A smaller base represents future savings every year going forward.

  • mob says:

    What nonsense…call it what you want..the increase is way bigger than 1.5%

  • Bruce Kokkinn says:

    Increases and cash allowances bull baffles brains. Give us the real figure and impact. As stated below this is closer to 5% while the rest of the business sector lags far behind. The government plays free and easy with taxpayers money. You don’t need to be an economic genius to know that these decision makers are mathematically challenged.

  • Anthony Katakuzinos says:

    Smoke and mirrors as the extra R18 billion for the cash payout is a total of 2.77% on the total government salary bill, so in effect, the increase is 4.27% . So they did not manage to keep the increase below inflation. Another budget failure. Lower-income people earning say R15000pm will get an increase of 8%. I think this cash offer should have been limited to those earning less than R300000pa . Just remember that all these people sat at home for 9 months, teachers have not taught for more than 9 months. Police ran away from riots. The only ones that should be rewarded that worked there but of was the nurses and Dr’s. Its a general comment but you get the angle.

    • Charles Parr says:

      Agreed, only health workers should get anything and their salaries should be aligned to the skill that they require and the responsibility that they take.

  • Tim Parsons says:

    Such a shame that the Govt reward the bloated public service sector by a significant sums of money, per month, yet have to be brow beaten in to continuing the R350 pm grant, to those without work, hope, food, warmth…
    That the Govt is beholden to unions, but not to economical prudence, is further evidence, were it needed, that the ANC in Govt is compromised in all that it does. The Tripartite Alliance has to come to an end. We need Govt for the majority of South Africans, not for a minority who already enjoy huge employment benefits and job protection. Ironically, the majority of South Africans that they studiously ignore are the very constituency that votes for them!

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