SALARY negotiations between the government and its employees’ representatives are set to continue in January after the Government Employees Medical Scheme's (GEMS's) decision to increase contributions by 13.4%, which threatens to erode any pay hike.
Public servants fear that any wage increase agreed at the Public Service Coordinating Bargaining Council (PSCBC) in the current round of talks will be eroded by GEMS's increase in contributions.
Unions have indicated that following GEMS’s 13.4% increase, they are unwilling to accept any salary increase not in the range of 5.5% and 6%.
GEMS, which had 22% of the entire medical aid scheme market with almost 845 000 principal members and 2.27 million beneficiaries by the end of December last year, has indicated that in recent years it has kept contribution increases much lower than the rising cost of healthcare.
“To keep offering good value to members, it now needs to adjust them to keep up with healthcare inflation,” the scheme told parties to the PSCBC, adding that it deliberately used its extra reserves to keep contribution increases low, resulting in a R10 billion saving for members.
GEMS warned that a lower contribution increase is not sustainable in the long term and that its reserves would decline rapidly.
According to GEMS, its contributions are 25% lower than other medical schemes, even before applying subsidy enjoyed by public servants, and 67% lower after the subsidy for a typical family.
The scheme claims that on average a family pays R2 029 less before the subsidy and R4 361 less after subsidy.
In its justification for the 13.4% increase last month, GEMS stated that relevant healthcare expenditure (claims) exceeded the budget by R216 million in October, and on a year-to-date basis, claims have surpassed the budget by R1.2bn.
“This deviation impacts contribution adjustments for the subsequent year,” the scheme’s principal officer, Dr Stan Moloabi, informed the bargaining council on behalf of the joint GEMS-PSCBC working group.
In 2022, GEMS’s contributions increased by 2% and 5% in 2023, while this year it was 9.5%.
Public Service and Administration Minister Inkosi Mzamo Buthelezi has approved a 6% increase to the government’s subsidy for employees on GEMS with effect from January 1, 2025.
The monthly subsidy will be between R1 918 for a principal member without a dependant and R7 352 for a principal member with four or more dependants.
However, the Public Servants Association (PSA) is firm in its rejection of GEMS's proposed 13.4% increase in member contributions for next year.
“While the PSA acknowledges the marginal adjustment in the employer subsidy, it falls significantly short of addressing the financial burden that the proposed GEMS subscription hike would impose on members,” the union complained.
The PSA is among the public sector unions demanding that GEMS justify this steep increase in an urgent workshop with the aim to find solutions that balances affordability with the scheme's sustainability.
Unions fear that any hard-won salary increases could be undermined by GEMS’s proposed 13.4% contribution increase.
The PSA’s Claude Naiker told the Sunday Independent that members were very infuriated by the increase and the labour has been engaging with GEMS for some time after it made submissions to the Council for Medical Schemes, which approved the contribution hike
He said while on average the increase is 13.4%, it gets different when people have more dependents.
“Having seen what GEMS has proposed, any increase public servants will get will be eroded next year with this 13.4% increase.
Basically, we indicated that we are not prepared to accept 4.7% and that they (government negotiators) must come back with a better offer—anywhere between 5.5% and 6% is something we can take to our members,” he said.
Naiker added: “Obviously, this GEMS increase has put a spanner in the works, we had a meeting at the PSCBC on Thursday and the employer looked at our demand and told us they will come back on the 10th of January to see that they are amenable to anything between 5.5% and 6%”.
He said with GEMS’ contributions increasing such steeply, it means that any increase or gain that unions sign for this year will be eroded next year and that this is not something their members will be happy with.
Unions informed the government to revisit its 4.7% offer, and they will not accept anything lower than 5.5%.