Data published by FNB at the start of May shows that middle-class South Africans spend as much as 80% of their salary within five days of payday. The data shows that those earning between R180,000 and R500,000 annually survive on 20% of their salary for more than 20 days in a month.
One possible way of addressing this is changing when people are paid – from monthly to biweekly (every two weeks). However, some fundamental shifts will need to take place first, says the director of the South African Payroll Association Arlene Leggat.
Speaking to CapeTalk, Leggat said South Africans lack a culture of budgeting and saving and that the introduction of a biweekly schedule could potentially assist with these issues. This would mean that South Africans would effectively receive half their pay on the 15th of the month, and then again at the end of the month.
“The problem we have is the amount of debt that people have – and that is not going away. If we go back to the early-2000s is that there was a big push to move people from weekly paid staff to monthly paid staff.”
Leggat noted that this change was made as people were not putting away enough money to pay their bonds at the end of the month or settle debts.
She added that countries such as Australia and the United Kingdom do still have weekly rental and cost models which work well. However, before a similar model is introduced in South Africa she noted that banks and real estate companies will need to shift away from monthly to weekly rents.
“You can’t work on a system where some of your debts are paid monthly and some of them are paid weekly. We don’t have the wherewithal to deal with that – and we just don’t have the culture of saving in this country.”
“From an income tax point of view, it makes no difference whether you are paid weekly, fortnightly or monthly. But what does matter is that your policies such as insurance, medical aid and funeral policies are built around a monthly basis.”
This means that banks and payrolls can make the shift relatively easily, but businesses that are receiving the money monthly would need to be encouraged to make the shift, she said.
“It’s not impossible – and there are a lot of benefits to it – but it does require everyone to be on board going forward. You don’t want Edgars trying to get a fortune at the end of the month when that is your food money.”
Leggat’s suggestions echo research from on-demand wage access provider, Floatpays, which found that South African workers are looking for more flexibility in their work contracts – which includes things like different payment models.
Responses to Floatpays’ research survey showed that three-quarters of South African employees are financially stressed and that this was bleeding into their work life and general well-being.
The biggest impact for employers is decreased productivity at work, absenteeism, presenteeism (the state of being at work but disengaged), and workplace errors among other things.
“In a country where unproductive employees cost us R38 billion annually – around 2% of GDP – and 40% of the population are predicted to be unemployed by 2030, it is critical to improve labour productivity – and employee well-being can play an important role in achieving this,” the group said.
South Africa’s labour laws have not caught up with new workplace trends and stock-standard employment contracts do not offer enough flexibility, a trait that is in demand by younger workers, it said.
Some flexibility trends seen in places like the US that South Africa could mimic are instances where employers give employees the ability to structure their own benefits.
In South Africa, if you work in a big corporate you are often subject to the company’s medical or pension plans, whereas overseas there is a shift and investment in the creation of more holistic employee programs, Floatpays said.
Another way that financial stress can be mitigated is by ensuring that an employee is financially prepared for an emergency.
Floatpays noted that global trends show that paying employees more frequently – biweekly as opposed to monthly, for example – can work.
“Employees paid more frequently reported feeling less anxious, and the employer benefitted from increased productivity, fewer mistakes and higher work quality,” it said.