Following the 2026 Budget, many employees may expect a welcome boost to their take-home pay from inflationary tax adjustments. On paper, it appears to be good news. When set against rising medical aid contributions and record fuel price increases, the outcome is far less encouraging.
Tanya Tosen
Tax and Remuneration Specialist
The Numbers Tell the Real Story
For the first time in two years, income tax brackets were adjusted, delivering 3.4% inflationary relief. However, this lags behind actual inflation of 4.4% in 2024 and just outpaces 3.2% in 2025.
So, what does this mean in real terms for the current tax year starting from 1 March 2026?
At first glance, this appears meaningful – until cost increases are layered in.
Medical Aid: The Silent Erosion of Relief
Average medical aid increases for Discovery Health Medical Aid effective from 1 April 2026 range between, 6.9% and 7.9% dependent on medical aid plan type. This is well above inflation and has been year on year.
This has a significant impact on members. Even at the higher end of tax relief:
The bottom line is that medical aid alone is enough to wipe out most, if not all an employee’s tax relief.
Fuel & Electricity Prices: The Multiplier Effect
From April 2026, fuel prices have increased to their highest levels in months, with government providing temporary relief in the form of fuel levies being reduced by R3.00 per litre until 6 May 2026.
Petrol prices have increased by ~R3.06 per litre, pushing inland prices to around R23.36 per litre for 95 Unleaded fuel, while diesel increased by ~R7.37 per litre, with broader inflationary effects across transport and goods.
For employees, this translates into hundreds or even thousands of rand in additional monthly costs, particularly for those commuting long distances.
In addition, from April 2026, direct Eskom customers will face an average electricity tariff increase of 8.76%, as approved by the National Energy Regulator of South Africa (NERSA). The impact does not end there: municipal customers, who typically see adjustments from 1 July 2026, are likely to experience even higher increases, as municipalities often apply additional mark-ups above the Eskom tariff.
Same Package, Worse Outcomes
Let us look at it practically taking 3 employees on identical cost-to-company packages, but who experience very different — and increasingly negative — outcomes:
The result is that net disposable income is declining, despite “relief” on paper.
Why This Matters for Employers
This is no longer just an employee issue. It is a business risk.
Net pay is under pressure from multiple fronts, in the form of employees’ tax with bracket creep, increased cost of benefits, and now fuel & electricity simultaneously.
Fuel is a multiplier as it increases not only commuting costs, but also the price of food, goods, and services which will be felt in the upcoming months.
Retention risk is rising because employees are increasingly sensitive to even small changes in take-home pay which may impact morale and retention.
What makes this particularly important is that these pressures are largely outside the employer’s control, but their impact on employees are not.
What Employers Should Be Doing Now
Employers need to take action sooner rather than later, which may include the following:
Final Thought
Tax relief in isolation no longer tells the full story.
When medical aid contributions increase, electricity tariffs are hiked and record fuel prices are factored in, many employees are facing a real decline in disposable income.
What looks like relief is, in reality, a growing net loss.
Employers who recognise this shift and respond with data-driven insights and smarter remuneration strategies, will be far better positioned to support their workforce, as well as retain critical talent in an increasingly pressured environment.
