2026 SA Salary Increase: What Salary Increase Will You Use?

“Sharon, please could you give Bob from Finance the forecast salary increase percentage for 2026 and the projected increase in our salary cost?”

This request often sparks a sense of urgency and foreboding—it signals that the annual salary increase process is imminent, along with all the associated challenges of union negotiations, heated discussions, and hard work.

However, preparing the forecast is not as daunting as it seems. We have long advocated for a scientific approach to the preliminary salary increase forecast. Start with an initial estimate, then refine it over the coming months as economic data unfolds. Finally, incorporate qualitative factors to formulate an equitable final salary increase for 2026.

Inflation

The first step in the forecasting process is determining the expected inflation rate for 2026. Salary increases are closely tied to inflation because employees aim to maintain their purchasing power year over year.

Consistent with the Axiomatic methodology, we recommend a forward-looking approach—forecast inflation for 2026 and base the proposed salary increase on that projection. This method calculates the portion of the increase that will be absorbed by inflation. In contrast, the backward-looking approach, which uses the previous year’s inflation rate, is less effective because past inflation is already “sunk” and does not influence future purchasing power.

Axiomatics’ inflation forecast for the remainder of 2025, 2026 and 2027 is detailed in the table below:

Surprisingly, our inflation forecast is closely aligned with the MPC Committee’s November 2025 forecasts:
The lower inflation outlook may surprise some, but it reflects the new inflation target announced by SARB Governor Lesetja Kganyago at the November 2025 MPC meeting:

“… we have moved away from the 3-6% target range, which was established 25 years ago. The revised target, agreed between the Minister of Finance and myself as the Governor of the South African Reserve Bank, is 3% plus or minus 1 percentage point… Most of the time, we should be expected to keep inflation within the tolerance band, with breaches occurring only when there are severe shocks. We will always be setting policy so that inflation is going back to 3%… The tolerance band, of 1 percentage point either side of 3%, does not mean we will be indifferent to inflation anywhere between 2% and 4%. We want to be at 3%.”

This shift implies tighter monetary policy going forward, anchoring inflation—and expectations—around 3%.

Real Salary Increase

The next step is determining the real increase, which is the portion of the salary increase above inflation. For example, if salaries rise by 5% and inflation is 3%, employees receive a 2% real increase.
Historically, South African companies added a 2% real increase to inflation when setting salary adjustments. However, recent trends show smaller real increases. The five-year moving average has declined, partly due to anomalies in 2022 and 2023 when inflation exceeded expectations, eroding real increases.
Today, the general “rule of thumb”, is that a 1.0% real salary increase is the “new normal”. However, one must take cognisance of the fact that the average 5 year real increase is only 0.6% because of 2022 and 2023.

FORECAST OF 2026 SALARY INCREASE

The scientific approach would conclude that an equitable salary increase would therefore be:

However, our current forecast salary increase for 2025 is thus 5.00%.

We do acknowledge that this represents a 1.3% real increase. Even with this adjustment, the five-year average real increase remains modest at 0.7%.

Of course, this forecast excludes other quantitative factors such as economic growth, union demands, compensation trends, and your company’s financial position. These should be considered closer to implementation.
Over the coming months, Axiomatic will continue to refine our 2026 salary increase recommendation as new data emerges, incorporating quantitative factors and market trends.

Stay ahead of the curve, contact us for the latest insights and ensure your business remains competitive!

Refine Your 2026 Salary Strategy

Stay Ahead of the Curve by Accessing Axiomatic’s Latest Economic Data and Quantitative Analysis to Ensure Your Business Remains Competitive and Financially Prudent.

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