South Africans are expected to see a modest improvement in earnings in 2026, with remuneration and benefits consulting firm Axiomatic forecasting an average salary increase of about 5% for the financial year. The firm says the projection reflects a structured and evidence-based approach that balances inflation expectations, real wage growth, and broader economic realities.
According to Axiomatic, salary forecasting follows a phased process that begins with an initial estimate and is refined as economic data becomes clearer. The methodology combines quantitative analysis with qualitative considerations to arrive at a sustainable recommendation that takes into account the interests of both employers and employees.
Inflation remains the central reference point for salary planning, as employees seek to maintain their purchasing power from one year to the next. When wage increases fail to keep pace with rising prices, workers experience a decline in real income, even if nominal salaries rise. In line with its approach, Axiomatic bases its projections on forward-looking inflation expectations rather than the previous year’s inflation rate, which no longer affects future purchasing power.
The inflation outlook for 2026 is expected to be lower than many South Africans anticipate, largely due to a significant policy shift by the South African Reserve Bank. At the Monetary Policy Committee meeting in November 2025, SARB Governor Lesetja Kganyago announced a move away from the long-standing inflation target range of 3% to 6%, replacing it with a 3% target and a tolerance band of one percentage point on either side.
The central bank has emphasised that the new framework does not imply indifference to inflation within the 2% to 4% band. Instead, the SARB aims to keep inflation as close to 3% as possible most of the time, allowing deviations only in the event of severe economic shocks. The shift signals a tighter and more disciplined monetary policy stance, which is expected to anchor inflation expectations around the 3% mark in the years ahead.
Once expected inflation is established, the next consideration is the real salary increase, which represents the portion of a pay rise that exceeds inflation and improves employees’ standard of living. For example, a 5% salary increase alongside inflation of 3% would result in a real increase of about 2%. Historically, many South African companies targeted real increases of around 2%, but this has changed in recent years.
Elevated and unexpected inflation in 2022 and 2023 significantly eroded real wage gains, leading to a decline in the five-year moving average for real salary increases. Axiomatic notes that the current environment reflects a new normal of closer to a 1% real increase. When averaged over the past five years, real salary growth stands at just 0.6%, largely due to the inflation shocks earlier in the decade.
Based on current assumptions, a 5% salary increase in 2026, with inflation projected at around 3%, would deliver a real wage gain of approximately 1.3%. Even with this improvement, the five-year average real increase would rise only marginally to about 0.7%, underscoring how constrained wage growth has remained across the South African economy.
Axiomatic cautioned that the 5% forecast is not final and excludes several important factors that will need to be considered closer to implementation. These include economic growth prospects, union wage demands, sector-specific compensation trends, and the financial position of individual companies. As more economic data becomes available in the coming months, the firm expects to refine its salary increase recommendations to reflect evolving labour market and macroeconomic conditions.
