Hundreds of thousands of public sector workers have stayed away from work, in what could be the biggest strike in South Africa's history.
Huge marches were held in all of South Africa's major cities
Many schools are closed, as teachers have mostly followed the strike call but many nurses and police officers have reported for duty.
Tens of thousands of workers, wearing bright red and yellow t-shirts are marching in towns across South Africa.
The strike is putting pressure on the alliance between unions and the ANC government.
Eight public sector unions, including those representing teachers, nurses, police officers and prison wardens, have rejected a 6% pay offer, demanding a 7% rise.
"If you get paid peanuts, you get monkeys," read some of the union placards in the capital, Pretoria.
Workers blew whistles and sang old liberation songs, before their demands were handed in to the finance ministry.
Other strikers marched to parliament buildings in Cape Town.
"The turnout has been overwhelming, extremely heavy," said South African Democratic Teachers Union (SADTU) official Steve Moropane.
"It went beyond our expectations," he told AFP news agency.
But an official from the health-workers union admitted that many nurses had turned up for work.
The BBC's Richard Hamilton in Pretoria says that teachers are the most embittered group as they have not had a pay review since 1996.
Essential workers are banned from going on strike, but unions say that about one-quarter of key workers will remain at work.
The government had threatened to sack any key workers who went on strike, the AP news agency reports.
The police service has not been affected, a spokesman said.
South Africa has about 1.1 million public servants, of which 990,000 are union members, and there are fears the strike could cost as much as $30m (£16.8m).
Unions leaders hope that 800,000 workers will stay away from work, which Professor Duncan Innes of the University of Witwatersrand says would make it the biggest strike in South Africa's history.
Thursday's one-day strike follows union rejection of a 28bn-rand ($4.29bn; £2.41bn) pay package and is the latest stage in a dispute which began in April this year.
The row began with the government's offer of a 4.4% wage rise for 2004, far lower than the union's 12% demand.
Both sides altered their positions in June, with the government raising its offer to 5.5% and unions lowering their demand to 7%.
Unions say they are being ignored by the government
Mass protests earlier this month in central Johannesburg prompted the government to offer a new three-year deal.
Under this new deal, the government has offered a 6% increase for 2004, plus a 1% performance-related pay rise. Workers would get a pay rise in line with inflation for 2005 and 2006.
Unions have refused this latest deal, wanting a 7% rise this year and the right to negotiate above-inflation rises for the following two years.
Public Service and Administration Minister Geraldine Fraser-Moleketi said the government simply did not have any more money to offer.
"If we are forced to increase this amount we will have to
discuss the issue with the finance minister and either discuss different tax implementation or borrow more money - and we can't do that," she told the AFP news agency.