Blog

We live in a more globalized world than ever, but is that a good thing for you and your business?

Depending on your point of view globalization is either the best or worst thing about the modern world. Technology has made the world much smaller and opened up a host of new markets and opportunities. On the other hand, it has also exposed businesses to new risks and unfamiliar challenges for which they might not be fully prepared.

Here are the pros and cons of globalization and how you can prepare your business to thrive.

Globalization – the pros

Whatever the size of your business globalization presents a host of opportunities including:

• Accessing new markets: The most important impact of globalization is that it can open up your business to new and exciting markets. The barriers to overseas expansion are coming down, giving even small businesses the chance to sell their products and services to customers in markets that were previously out of reach. Innovative business structures and e-commerce also make it possible to export to new markets without necessarily setting up an overseas business entity with all the costs and risks that come with it.

• Broadening your talent pool: Improved technologies and faster communications are breaking down the barriers to international cooperation. While most businesses would have previously drawn their talent pool from their immediate surroundings, it is now possible to work quickly and efficiently with professionals from any country in the world. It opens your business up to new professionals with skills that might previously have been unavailable.

• Reducing your costs: The cost of labor can be much lower in many parts of the world. South Africa, for example, has labor costs of between 40% and 60% of levels in the UK. Sourcing talent from these countries can help you optimize your costs and make valuable cost savings.

• Transforming culture: Exposing your company to new markets, countries and professionals can encourage a positive culture change to incorporate new ways of doing business and open up new opportunities. A more diverse and cosmopolitan business environment in which you’re accustomed to working with multiple professionals from all walks of life can be immensely beneficial.

Globalization the cons

However, there are dangers and risks to globalization.

• Regulatory risks: Operating in a new and unfamiliar market can be difficult. Your domestic team may have a limited understanding of the market or the local

employment laws. Regulations are constantly changing, which can be difficult enough for locals to keep on top of not to mention foreigners. Without a full understanding of requirements, it can be easy to run afoul of the authorities.

• Data protection: When moving data from one country to another, you need to make sure you understand the data protection laws in each of the territories in which data is being housed. Data protection regulations vary considerably from country to country and the fines for non-compliance can be extremely high.

• Loss of focus: Spending time focusing on new pastures may be profitable but if you’re not careful it might distract you from your core markets and customers back in the UK. Expansion is good, but you don’t want to lose focus on what’s made your business successful to this point. Managing compliance across multiple jurisdictions can be almost impossible for most small to medium-sized businesses.

• Additional costs: Globalization may make overseas expansion easier than ever, but there are still costs to getting started. How high this will be will depend on your chosen structure. Traditionally if you were planning to employ overseas professionals you would need a legal entity. However, other, lighter touch, structures can be used today.

• Competition: Globalization works both ways. While you can expand to another country, businesses in those countries can also come the other way. In a globalized economy, competition is high and you’ll need to be on your game to thrive.

Making globalization work

As a business, whether globalization ends up being a bonus or a threat depends largely on how you approach it. Capitalizing on the opportunities of outsourcing and foreign expansion can set you up for success.

This starts with choosing where and how you are going to target. There are two reasons you might want to expand your reach:

1. To outsource domestic operations to a specialist provider.

2. Expand your product or service to new territories.

Each of these options will need staff either on a full-time basis or as contractors. However, managing those staff can be difficult which is why it pays to work with a specialist outsourcing company or Employer of Record (EOR). An EOR will serve as the legal employer in that country. They will assume all legal liabilities relating to employment and will handle all administrative duties including:

• PAYE

• Tax deductions

• Employee benefits

• Onboarding

• Disciplinary processes when necessary.

The company will employ the staff directly and you will typically pay a set fee per employee. You may also pay additional fees for one-off services such as specialist recruitment software.

An EOR might also offer customized services including assistance with recruitment to help you find the right people for your organization.

Another option is to use a Professional Employers Organization (PEO). They will do many of the same things as an EOR and the terms are often used interchangeably, but a PEO sees employment liabilities shared with you. They handle all the onboarding and administrative duties of the employment while you manage day-to-day relationships. It’s a lot like having your little HR department.

For freelancers and contractors, meanwhile, an Agent of Record can provide services such as onboarding, contract management, and worker classification. They can help you find the best freelancers in each role and ensure you comply with employment regulations.

The specialist knowledge on offer from an EOR or PEO can be invaluable in helping you stay compliant with all regulations and ensure all workers are classified correctly. Their local insights can help you find the best people for each role and that they are trained in the practices and offerings of your company.

Globalization, therefore, can open the door to a whole world of opportunity – quite literally. However, opportunity does not come without challenges. A globalized marketplace is more lucrative but more complex and competitive. As with anything the secret to making it work is to develop the right strategy, work with the right people, and set clear, attainable goals.

If you get it right, you could take your business to a whole new level.

To help your business thrive in a globalized world download a PDF of our report today.

The world of work is becoming more diverse with remote working becoming the norm. They can be truly transformative for your business.

The world of work is changing rapidly. Covid-19 accelerated the transition to remote working to the extent that most businesses today operate with at least some of their workforce working remotely. This has opened up many opportunities. Not only does it give employees a better work/life balance but it can also open up a whole world of opportunities to you and your business. No longer do you need to be confined to your local talent pool. Now you can work quickly and efficiently with anyone you like.

The rise of remote work

The arrival of the lockdown prompted a major shift in working patterns. Remote work quickly became the norm with businesses transforming their operations to ensure continuity. Technology enabled a relatively seamless move with on-site and remote workers collaborating easily.

As restrictions were eased, enthusiasm for remote working remained. More than half of UK businesses offer it as an option. According to recent figures, 13% of all employees work exclusively remotely, and a further 28% mix the office with working from home. The boundaries between home and work became blurred.

In addition to that businesses are working with more and more freelancers across a range of business functions. It enables them to become more flexible and to scale services up and down as required.

What’s more, those freelancers are not necessarily located solely in the UK. Digital technology is enabling businesses to maintain seamless communication between multi-disciplinary teams in several different countries at the same time.

Third-party providers can also provide remote functions including call center work, technical support, and financial or HR services. These companies enable companies to offload certain specialist tasks to enable them to focus on their core operations and to benefit from the latest technologies and specialist expertise.

Hiring remote workers

Businesses, therefore, can hire all sorts of remote workers of all kinds through several mechanisms including direct employment, working with contractors, and hiring an offshore outsourcing company. Whichever of those options you choose it’s important to approach it in the right way.

The first step is to ensure a secure infrastructure. Remote working opens up multiple endpoints in your central IT systems. The old-fashioned approach in which everything was held onsite is being replaced by something much more agile in which people can connect via many different devices and engage with multiple cloud services.

Maintaining a secure, encrypted pipeline for all this work is critical, but the more remote workers you use, the more difficult it can be.

Third-party due diligence is critical. If you work with contractors or outsourcing companies you need to understand their security operations. Any weaknesses in their systems could create vulnerabilities for you.

If you’re passing data to a third party you will lose control over how it is secured. However, from a regulatory point of view, you could still be held liable if that data is breached. Not auditing third parties, therefore, is like building the best home security system only to leave the backdoor open.

Working with a reputable outsourcing company with a strong commitment to best practices and robust security infrastructure will help to avoid any unpleasant surprises.

Hiring remote workers overseas

For many businesses, remote workers may be based in other countries. It’s not uncommon for even small enterprises to be working with professionals from around the world. Doing this has several benefits including:

• Broadening the talent pool: A traditional onsite business model is restricted by the talent available in its local surroundings. Opening the door to remote workers widens the talent pool to potentially include the entire world. Instant messaging and video calls make it possible to collaborate instantly with people in any location.

• Reducing operating costs: Outsourcing operations remotely can often help you save money. For example, offloading your account functions saves you from having to employ accountants. Many companies are extending their gaze further and outsourcing to companies overseas. By taking advantage of lower labor costs all sorts of operations can be delivered more cost-effectively.

• Accessing specialist infrastructure and expertise: Outsourcing companies that specialize in a certain role can add immense value to your business. For example, outsourcing an accounts function will give you the benefit of skilled professionals with in-depth expertise whose sole focus is accounting. As well as employing top-notch accounting professionals the focus of a specialist outsourcing company will enable it to harness the latest financial software solutions.

Each of these options will involve slightly different types of employees and a slightly different approach.

Working with contractors or freelancers can often be done directly. Freelancers are responsible for their tax details and so can be hired and paid directly. Common methods to do this would be through a bank transfer, or by payment through an online money transfer platform.

If you work with contractors regularly, you may want to consider working with an organization such as an Agent of Record. The more regular the working relationship becomes the more you risk classification problems. If someone starts to work on-site, and exclusively with you the authorities may consider them to be employees and, as such, liable to employer tax obligations.

Fines for practices deemed to be disguised employment can be high and if you’re thought to have broken the rules deliberately you may be in line for criminal prosecution. It pays, therefore, to avoid any unintentional non-compliance. An Agent of Record can handle the onboarding and classification of all contractors and ensure you stay on good terms with the regulators.

Setting yourself up to succeed

Hiring remote workers – either full-time or on a contract basis, can therefore be a great way to transform your business operations and open up a host of new opportunities. In a more connected and agile world, a more diverse talent pool can put you in the best possible position to achieve your goals.

However, as with everything else, you must get the details right and find the right people to help take your business forward. For more information on your options when hiring remote workers, download our useful guide today.

South Africa’s booming outsourcing market is fast becoming the preferred option in locations such as the UK, USA and Europe.

India has long been the number one name in business processing outsourcing, but that’s beginning to change. Evolving market demand and regulatory requirements have seen many companies turning their attention instead to South Africa. A thriving economy, and a highly skilled workforce together with a low cost of labor make the perfect environment for those companies that want to optimize costs without sacrificing quality.

Businesses are voting with their feet. South Africa has surged to the top of outsourcing destinations across multiple industries. For those looking to make the move, here’s how South Africa stacks up against India.

Cost

India earned its reputation as an outsourcing powerhouse thanks to the extremely low cost of labor and despite some growth in the economy, that remains the case. However, the pure cost of labor can be a blunt instrument.

South Africa boasts between 60% and 70% of the costs of major Western economies in Europe, the UK, or the USA, which means it still represents a substantial discount on domestic operations as long as they are of sufficient scale. When you factor in government incentives, the overall costs can be similar to India.

When calculating costs, businesses have also come to consider the impact on their customer relationships and reputations. Customers have been vocal about their dislike of outsourced call centers. A survey from Microsoft revealed that 90% of customers research a business’ customer service reputation and 60% would switch firms due to poor customer service.

Banks such as Lloyds and Santander are among those to have relocated away from India due to customer dissatisfaction.

Economy and infrastructure

South Africa’s economy is growing steadily helped by a highly diverse and educated workforce and a pro-growth government. According to Deloitte, the economy is predicted to grow by 1.6 in 2025, 1.8% in 2026, and 2.5% in 2027 and inflation is expected to remain under control.

South Africa has also navigated its way out of COVID-19 better than most. While lockdowns imposed disruption on economies around the world, South Africa transitioned successfully to a remote working model which enabled key services to continue.

India’s economy by contrast has been slowing sharply over the past few years plagued by weak manufacturing results.

South Africa, meanwhile, boasts excellent IT infrastructure with high-speed broadband being rolled out across the metropolitan areas. In India, though, it’s still a work in progress. Although internet adoption is on the rise, coverage can be patchy and more than half of internet users are battling speed issues.

Education

South Africa benefits from a rapidly improving education system. Graduate numbers are rising and they cover a diverse range of skills. This has enabled the BPO sector to diversify and spread its wings beyond traditional outsourcing industries and into other areas such as IT, marketing, and financial services.

It served to supercharge the country’s customer service offering with call centers becoming staffed by highly educated staff who could empathize and engage with customers on a much deeper level. They could also offer a wider range of expertise giving customers access to better levels of customer support.

For example, having highly qualified IT staff means you can offer in-depth technical support operations covering highly complex queries. As such South Africa has become a preferred destination not just for existing outsourced operations but also for previously unexplored markets.

Regulatory environment

The South African government is liberalizing its economy and sees the thriving BPO market as being crucial for future growth. Regulation is favourable with lucrative incentives for those companies who invest within South Africa and create new jobs. The scale of those incentives will rise along with the number of jobs created.

Businesses can benefit from a host of non-repayable grants and tax breaks. For example, The Global Business Services Incentive Scheme (GBS) was set up to help generate more employment in South Africa through the offshore services industries. It aims to increase export revenues from offshore services and create new jobs, particularly for people between the ages of 18 and 35.

South Africa’s overall regulatory climate and culture are also similar to most European locations. Its data protection regulations are similar to those in Europe which minimizes the friction of moving data across international jurisdictions. Even so, there is some regulatory friction in how employees are counted. Employment law can be strict and moveable.

If you’re looking to outsource to South Africa, therefore, it pays to gain a complete understanding of the regulations and keep track of any developments. This can be easier said than done and foreign companies are at particular risk of unintentional non-compliance.

Working with local support organizations can help smooth the process. For example, EORs take on the work and legal liability of South African employees which minimizes your risk exposure as an outsourcing company.

Market Opportunity

South Africa represents a large and lucrative market with a growing economy and thriving middle class. Furthermore, it has historically been regarded as a gateway to the even more lucrative wider African market.

For Western companies, it represents an attractive first point of call. The market and culture share many similarities with the West, but it also has good connections across the wider continent. Even for the biggest corporations and the world’s most recognized brands finding success in a new market can be challenging.

South Africa has a comprehensive support network of companies and other organizations that can help companies launch new products or with overseas expansion.

For example, Employers or Records (EORs), Professional Employers Organizations (PEOs), or Agents of Records (AOR) provide convenient, low-risk ways to employ South African staff or to work with South African freelancers. They offer lower-cost alternatives to establishing subsidiaries or overseas branches.

India also has a large and attractive market. However, getting a toe hold can be difficult. Along with its size India is highly fragmented with each state being its ecosystem with its challenges. It’s much more difficult for a foreign company to access the entire Indian marketplace.

Time zones

South Africa operates under the Central African Time Zone (CAT) which is only one or two hours ahead of major European countries. Good communications and high-speed internet make online collaboration quick and easy within working hours. It’s ideal for real-time communications and avoids delays in service delivery.

The time difference between South Africa and the US is larger, but that can be a benefit as it’s become a useful location for customer support operations ensuring out-of-office hours coverage without the need to employ domestic staff on night shift contracts. It’s a great way to provide articulate and highly skilled customer service representatives who can provide customers with the 24/7 support availability they have come to expect.

Languages

One of the biggest gripes with Indian call centers was the lack of English or the fact that agents often spoke with heavy accents that were difficult to understand. Such was the level of frustration that major companies such as BT chose to reverse outsourcing decisions and relocate back to the UK. The idea of local, English-speaking agents became a major selling point and marketing opportunity.

In South Africa, English is commonly spoken. Most people are fluent in English and speak with a neutral easily recognisable accent. It’s a good way to give English-speaking consumers

what they want – without having to shoulder the additional cost of establishing a domestically based call center.

The numbers speak for themselves. Customer experience levels are 18% higher in South Africa than in India. If businesses have been relocating away from India due to customer demand, South Africa represents an ideal alternative – one that enables fast and easy communication between all parties, while still offering the prospect of savings.

Conclusion

In a head-to-head between the two there is only one winner. India still has a thriving and welcoming BPO market, but it struggles to match the diversity, breadth, and quality of South Africa. Where India implies an offset between the cost of doing business and the quality of the result, South Africa has established itself as offering the best of all worlds – a chance to optimize your costs while ensuring higher levels of quality and service results. Taken alongside government incentives and the chance to access new markets, South Africa is moving ahead as the outsourcing destination of preference for companies across the world.

Why outsource to Africa? From the strength of the economy to the diversity and depth of the talent pool, South Africa has much to recommend it.

As businesses seek to deal with rising costs and narrowing profit margins, outsourcing has become increasingly popular. In a world of fast global communications, countries such as India have become global outsourcing hubs. However, for those looking for high-quality outsourcing services, South Africa is rapidly becoming one of the go-to options. A combination of a growing economy, skilled workforce and links to Western economies makes it one of the most desirable outsourcing destinations anywhere in the world today. Here are five answers to the question: why outsource to Africa?

1. A strong economy

After Egypt and Nigeria, South Africa is the third largest economy in Africa. Furthermore, it has strong cultural and economic similarities with the West which makes for a seamless link between the two. English is the country’s first language which means there are no barriers to communication – something that has been difficult when it comes to customer service in other popular outsourcing locations such as India or the Philippines.

The country boasts a highly educated and diverse population from a range of different backgrounds. It has an open and multicultural society that is much more open and inclusive for foreign businesses and investors.

Like many countries, it has faced economic headwinds, but the IMF still expects modest economic growth throughout 2024 of 0.9%. Even so, the underlying foundations of the economy are strong with a healthy and welcoming economic environment.

The government also provides plenty of incentives for those companies looking to outsource operations to South Africa. It’s a mutually beneficial arrangement with outsourcing stimulating growth in the country. Outsourcing companies can expect to benefit from subsidised office space, computers and internet connections.

For example, the Global Business Services (GBS) Incentive offers operational expenditure grants in proportion to the number of South Africans each company employs. The South African government has invested heavily to provide incentives to those foreign businesses committed to creating jobs in the country. These incentives mean that the eventual operational expenses of outsourcing to South Africa will eventually be similar to those in the traditional low-cost outsourcing hubs such as India. For those looking to balance the cost versus rewards of outsourcing, this makes South Africa an even more valuable proposition.

2. Value for money

The main reason people choose to outsource is the cost of labour. Although not quite as low-cost a destination as some of the other established outsourcing hubs, South Africa still has plenty going for it. The cost of labour is still below the global average, while a favourable exchange rate against Western currencies means it’s a good way to reduce operational expense.

The exact extent of the savings varies from industry to industry but estimates suggest companies can expect savings of between 50% and 60%. Those savings come without the need to make sacrifices either in the skills or language capabilities of your workers.

Other companies that have outsourced to the lowest-cost destinations such as the Philippines have suffered due to the relative lack of skilled labour and language barriers – particularly in customer-facing roles. A mix of low labour costs and highly skilled labour makes South Africa an extremely cost-effective option in which you don’t necessarily have to sacrifice value for cost.

3. A highly skilled workforce

South Africa boasts all the ingredients needed for a diverse and skilled workforce. The education system has a good track record with the number of people going on to university education rising. According to recent figures from the OECD, 46% of young people between the ages of 15 and 19 are enrolled in general upper secondary education with a further 32% in lower upper secondary education programs. His compares favourably against the OECD average of 37%. The South African government is investing heavily in getting that number up and increasing the number of people, from all backgrounds, who go on to university.

The education system also boasts a strong emphasis on STEM (science, technology, engineering, and mathematics) subjects which means the country is home to a large pool of talented professionals with relevant expertise in engineering, finance and customer services.

English is, of course, widely spoken in South Africa which means communication with overseas clients is smooth and efficient. Customers have become increasingly frustrated with struggling to make themselves understood on company phone lines. Having competent English speakers opens up a wide range of industries which can benefit from South African outsourcing.

Last, but not least, South Africa is a diverse and cosmopolitan country with excellent international links. South African workers will have often interacted with international companies and collaborated with customers and business partners overseas.

Whether delivering customer service through a phone line or working with business contacts, employees in South Africa have no problem making themselves understood or collaborating across borders. In an increasingly global world, driven by connected services, that comfort helps companies work quickly and efficiently with multi-disciplinary teams based all over the world.

4. A convenient strategic location

Location, location, location – so runs the mantra when buying a house, and the same applies to outsourcing. South Africa’s position at the southern tip of Africa, provides a wealth of strategic advantages for companies looking to expand their global footprints. With its coastal location and strong ties to the West, South Africa can be the gateway to the rest of the African continent.

Africa offers a host of business opportunities. It is home to some of the fastest-growing economies in the world, with new markets opening up across the continent. A rising middle class is driving demand for products of all kinds. From South Africa to Morocco, the continent offers multiple exciting market opportunities to businesses of all sizes. All that’s needed is a place to gain a foothold.

Outsourcing to South Africa can be the first step in tapping into this vast market of more than a billion upwardly mobile consumers.

At the same time, South Africa has a well-developed infrastructure good communications a stable political environment with a positive attitude to business. It is a safe and encouraging place for businesses of all kinds to work.

5. Culture and time zone

By leveraging the unique strengths and capabilities of South Africa as an outsourcing destination, companies can unlock new opportunities, expand their market reach, and stay ahead of the curve in an increasingly interconnected world. Whether you are a small start-up or a multinational corporation, South Africa has the potential to be a valuable partner in your quest for business success.

Another reason why so many Western companies favour South Africa is because its culture looks and feels so familiar. South Africa has a diverse and multicultural society that strives to be open and inclusive. The government is highly welcoming to foreign businesses as it strives to bring growth and economic activity into the country. A stable political environment eliminates many of the uncertainties that can exist with other outsourcing hubs. Businesses can expect a safe environment in which to work and stable regulatory conditions.

South Africans themselves are marked by their strong work ethic, professional attitude and willingness to adapt to different challenges. The business culture looks and feels much the same as it would in any other Western country and a familiar legal framework will not require too much adaptation for any business. its working day also makes for a good fit. It’s only a few hours different to Europe which facilitates real-time communication which makes it easier to streamline collaboration.

At the same time, companies outsourcing to South Africa can benefit from extended opening hours. In those areas with a significant time difference, South Africa can help them add 24-hour support to their customers, with a daytime shift in South Africa conveniently covering nights in places such as the US.

Why outsource to South Africa?

To sum up, South Africa provides a compelling opportunity for any company looking to outsource offshore. A skilled workforce, cost-effective operations, compatibility with time zones, cultural links, lack of language barriers and access to other markets offer the perfect combination of cost and reliability. Elsewhere in the world, outsourcing may be linked with a sacrifice in quality, but that’s not the case here. In South Africa, companies can have their cake and eat it – with a highly skilled workforce and the opportunity to cut down on costs. It’s all the benefits of outsourcing without any of the negative.

More and more UK companies are looking to hire employees overseas. If you’re one of them, this guide provides all the information you need.

The world is becoming more global every year. With the pandemic accelerating digital transformation and remote working, businesses of all sizes are looking beyond their own borders – both to sell their services and to hire new people. While previously, a business would be constrained by the local talent in their area, now anyone can work with any professional anywhere in the world. Doing so opens up a world of new opportunities such as new markets, fresh talent and lower labor costs.

So, can a UK company employ someone overseas?

The short answer to that is yes. If you’re based in the UK, there’s nothing to stop you from hiring staff anywhere in the world. You might be employing people in a different country to reduce your labor costs or access a wider talent pool than is currently available in your immediate surroundings. Alternatively, you might be looking to kickstart an overseas expansion in a new country. Whatever your goals there is a growing range of options to help you do so in the most cost-effective way possible.

How can I employ someone overseas?

Employing people comes with costs and a host of legal and regulatory responsibilities. As soon as you start hiring people overseas, you’ll have to find a way to meet all those obligations.

Three of the most common options for employing people overseas include:

1. Establish a legal entity in that country: The traditional route is also the most expensive. Companies expanding overseas and hiring foreign employees can establish legal entities in the form of a foreign subsidiary to handle all locally-based employees. This can be an enormous logistical and financial undertaking and is often only open to those companies with sizeable budgets. Each overseas expansion comes with risk. For small and medium-sized businesses the upfront cost of an overseas subsidiary is simply unsustainable. Furthermore, setting up a legal entity can be an expensive way to manage a small number of employees.

2. Partner with EOR services: An employer of record (EOR) is a low-cost and convenient way to handle your overseas workforce. An EOR will become the legal employer for your overseas workers. That means they handle all the administrative and legal requirements such as managing payroll, paying taxes, and employee benefits. They also have legal liability for those workers, so if there is a compliance issue you won’t be legally accountable. The EOR will pay workers directly and you will pay them – either through a proportion of your payroll or on a per worker basis.

3. Hire contractors: Contractors are often the first port of call for companies in the UK. Working with freelancers has never been easier, with instant messaging and video conferencing meaning you can collaborate with professionals wherever they are in the world. The great thing about contractors is you only pay for what you use, and they handle their tax. If you’re just using people for ad-hoc projects this can be a low-cost and convenient option. However, if you’re working with them regularly it can be more cost-effective to pay salaried employees.

How do I pay employees overseas?

You can pay overseas employees in many different ways.

• Bank transfer: An international bank transfer direct to their account can be straightforward, but it can take a few working days and include transaction fees.

• Online payment services: Companies such as PayPal or Wise offer instant payment with lower fees and the chance to access mid-market exchange rates (the rate that banks charge each other).

• International money orders: The traditional way to send money overseas would be to use a service such as Western Union which allows you to send money physically overseas. However, this can be expensive and take time.

• Setting up a foreign bank account: If you set up a subsidiary you’ll have a business account in that country. You can send money to that account and on to the employee. This can be expensive and requires setting up a legal entity in the country.

Alternative options such as establishing an EOR can reduce the costs of paying employees and avoid exposure to risks such as exchange rate volatility. An EOR will pay your employees directly and take care of payroll and withholding tax obligations. All you have to do is to pay the EOR. It’s fast, efficient and means your costs are stable and predictable.

What are the risks of hiring overseas?

1. Misclassification: Each country will have its own rules about worker classifications. One of the most common issues foreign companies face is the transition from freelance contractors to paid employees. As your work progresses you may find yourself working with contractors more regularly. However, if that work becomes so regular that it starts to look like full-time employment, authorities may consider them to be disguised employees. Authorities in countries such as South Africa have strict classifications with high penalties for any company found to be breaking the laws.

2.  Incorrect payroll contributions: As you’ll know from working in the UK employers have to meet a complex network of payroll contributions. Rules can

change at any time. Keeping up with developments in your home country can be a full-time occupation, let alone a separate country you’re not familiar with. When countries seek to handle all payroll contributions themselves, without the help of local legal experts, it can be all too easy to get payroll contributions wrong, causing additional expense and friction with the authorities.

3.  Permanent establishment risk: The traditional route of setting up a foreign subsidiary to handle any overseas workers is expensive and comes with a host of risks. Even the biggest companies in the world have run into trouble when expanding into new markets. Every market is new and unfamiliar. No matter how well you’ve done at home, your product may not be suited to a new market. When setting up a foreign legal entity you’re spending a great deal of money up front without any guarantee of success. Alternative options such as EORs offer a low-cost way to test market conditions before committing to further expansion.

4. Intellectual property: IP rules vary from country to country. When creating or launching a new product in a new country you need to protect your intellectual property. However, if you don’t understand the rules, you can make critical mistakes which may leave you exposed. Local experts such as EORs can make sure you register all IPs correctly and in accordance with the laws.

Why start employing in South Africa

If you’re a UK company, therefore, you can pay and manage employees in any location. South Africa is a particularly attractive option for UK-based companies for several reasons including:

• Low labor costs compared to Western countries.

• A diverse and highly skilled workforce with professionals available in all industries.

• No language barrier.

• A convenient time zone with South Africa only being a couple of hours away from Europe.

• A favorable regulatory environment with the government offering lucrative incentives for any company generating employment within South Africa.

Whatever your goals when working with South African employees it’s important to find the right partner for handling their employment. Whether hiring a few employees or building a large team to support a growing presence in South Africa, an EOR can reduce the cost and administrative burden of handling foreign employees, freeing you up to concentrate on working towards your strategic objectives.

So, to answer the question can a UK company employ someone overseas, download our full guide to find the best way forward.

Employers of Record and Agents of Record can both help foreign companies employ staff in South Africa, but which is best?

It’s easy to forget how much the employment landscape has changed in the last ten years. The number of freelancers has grown and so too has the number of part-time, gig workers and flexible employees. Each of these will be treated differently under South African law. If you misclassify your workers or fail to carry out your legal obligations you could end up paying a hefty penalty.

To avoid that, several organizations can provide support in managing working relationships. Two of those are Employers of Record (EORs) and Agents of Record (AOR).

The short answer is that one will be best for dealing with contractors while the other will be ideal when dealing with employees. However, at a deeper level, the question of EOR vs AOR will depend on your company’s structure and how you prefer to work

What is an Employer of Record?

An EOR is designed to manage the administrative and legal obligations surrounding your employees in South Africa. The EOR will become the official employer of that person and will handle everything from payroll to tax, compliance with employment law, employee benefits, and much more.

However, in all other respects, you will deal with your employees directly as normal. You’ll set taxes, assess performance, and manage their roles within the team. The good news from your perspective is that the EOR will handle all the paperwork and make sure you’re complying with relevant regulations.

It’s a perfect option for a company which is moving into the South African market with just a few employees or one that is looking to benefit from the relatively cheap labor market in South Africa by outsourcing some operations.

There is no need to have any legal entity within South Africa or even any legal knowledge. You can simply engage their services and they will take care of everything. The local knowledge of the EOR will help you avoid any unintentional compliance issues and ensure you’re up to date with any changes to employment laws.

Furthermore, the local expertise and market knowledge of the EOR can make it much easier to source local talent.

As the South African government seeks to encourage foreign investment into the country, EORs are becoming increasingly important. One way in which they can be used, for example, could be for a company looking to outsource certain operations such as a call center.

There is no legal requirement to have an established legal entity within the country so an EOR can be used to handle all employees in the call center.

Equally, an EOR could be the start of an expansion into South Africa. Countries around the world see South Africa as an exciting opportunity. It’s often seen as a gateway to Africa. Get the South African market right and you can continue to grow across the continent.

For companies without any presence in the country, an EOR could be a good way to manage employees early on before deciding to permanently establish a local subsidiary.

What is an Agent of Record

An AOR, meanwhile, is ideal for working with freelancers and contractors. As remote work becomes more common the line between employees and independent contractors is blurring, which can make it difficult to find the right classification.

Contractors and freelancers will provide a service to a company but will retain independence and control over how they work and when. They will not have the same employment or benefits rights and will not be treated in the same way for tax purposes.

With people looking for more flexibility in their work, many companies are engaging contractors and freelancers on a long-term basis. Although they remain freelancers, they can often work with them in the same way as if they were part of the company.

The difference between an employee and a contractor may not always be immediately obvious, especially when dealing with unfamiliar employment laws in a foreign country.

An Agent of Record’s job will be to ensure contractors are classified correctly under the law and to handle all back-office requirements relating to that contractor. This includes ensuring the smooth running of an engagement and making sure they are paid on time. They handle all the admin and details of the engagement reducing the administrative load on your team and the risk of miscalculation.

What does an AOR do?

An AOR’s responsibilities will include:

• Worker classification: The AOR can provide expert guidance on the latest developments in employment laws and how workers are classified. They will make sure you are engaging with an independent contractor rather than accidentally hiring a remote employee who should be treated differently. They can advise you on relevant classification and make sure you adjust your approaches in line with any regulatory changes.

• Contracts: When drawing up contracts they will handle all legal details and additional documents such as non-disclosure agreements, confidentiality agreements and other legal issues. They will go through all paperwork and make sure all contracts are managed correctly.

• Getting started: When onboarding contractors you’ll need to sign certain documents and gather information such as their bank details, tax reference numbers, and so on. An AOR will take on the work and liability of this on your behalf. They may also perform background checks and verify all references to make sure your contractors have the qualifications they claim.

• Intermediaries: Throughout the progress of the contract, agents of records can serve as an intermediary between the company and the contractor. This can help foster a long-term engagement. While some contractors will be there for just one job, you may want to continue working with others for a long time to come. However, long-term engagements can start to resemble employment. An AOR will work with your contractor, ensure compliance, and make sure you don’t inadvertently stray into the territory of full employment.

• Invoices and payments: When managing multiple contractors, managing payments can become complicated. One of the biggest challenges for contractors is getting paid on time, and if you’re late with invoices or regularly get payments wrong, they will be reluctant to work with you again in the future. An AOR’s experience can be invaluable. Not only can they help you manage all payments in a fully compliant manner, but they will handle all the complexity of processing payments and other relevant details. This frees you and the contractor to focus on your working activities.

In short, an AOR can provide broadly the same service for your contractors as an EOR does for your full-time employees.

EOR Vs AOR

The question of EOR vs AOR will depend on how you engage workers in South Africa. Each organization does similar, but importantly different things.

An AOR is for independent contractors while an EOR will cover full-time and part-time employees.

EORs will help you manage full-time employment and will assume responsibility and liabilities for fulfilling all employment regulations. AORs meanwhile will also have liabilities for your contractors. They will manage onboarding and the ongoing relationship to make sure you aren’t inadvertently misclassifying them.

AORs are perfect for companies that engage with a high number of contractors or have fluctuating work requirements. For example, if you will need to engage with freelancers for ad-hoc requirements from time to time, an AOR can ensure you have a ready supply of talent on tap when you need it.

EORs are perfect when your employment needs are more stable or if you’re looking to investigate moving to South Africa. They can provide all the administrative and legal support required to work with employees in South Africa and make sure you fulfill all your legal obligations.

Whatever option you choose it’s important to select a company which will understand your requirements and work with you to provide a holistic solution based on your own needs and requirements. Although managing employees and contractors in South Africa can be complicated, the expert help of an EOR and AOR can prove incredibly valuable.

EORs and PEOs both help you manage employees to support your operations in South Africa, but which one is best?

If your business plans to operate in South Africa, it pays to have some local support to ensure the details of that employment relationship are all met. To do that, companies often opt for employer or record (EOR) companies or a professional employer organization’. Each organization can take on the burden of managing employees in South Africa. Indeed, they are so similar in some respects that the terms are often used interchangeably. However, there are subtle differences.

What is a PEO?

A PEO provides HR services to other companies. It will be a shared employer taking on administrative responsibilities such as handling payroll and tax, employee benefits, payroll and administration, and legal compliance. In other words, they handle all the legal and administrative details leaving you as a business to concentrate on more important and profitable work.

The cost of PEO can vary depending on several factors including the number of employees in a company and the services you need. Some PEOs will charge by taking a percentage of your total payroll while others will charge a flat fee every month.

When deciding on a partner it’s worth running the calculations to work out which option will be more expensive. In addition, you should also check out for any hidden fees and make sure you understand what you’ll be paying at what point. As with everything in life, it’s worth shopping around to get a better deal.

There are several good reasons to partner with PEO.

• Saving time and money: You can save money by not hiring an internal HR team and time because you alleviate yourself of all the administrative duties involved with handling employment.

• Expertise: Having a company dedicated specifically to HR means you can leverage a fair amount of expertise and deepen your engagement with your employees.

• Better benefits: A PEO company can help you design a more effective employee benefits package to help you attract and retain top local talent.

• Local knowledge: If you’re a foreign company hiring staff in South Africa you’ll also benefit from the PEO’s company expertise in local employment law and trends. They can stop you from inadvertently breaking employment rules and can keep you abreast of all ongoing changes in regulations. That local knowledge can extend to helping you find the right people for your business at the right times. These companies will have good connections in the market and will be able to source people with the skills you need much more quickly than would otherwise be the case.

PEOs are often used by small and medium-sized businesses that lack the resources for an extensive HR department. For companies such as that HR is often a small and piecemeal department. PEOs provide all the benefits you’d get from a dedicated professional HR department at a fraction of the price.

The one downside of this operation is that you must have a legal entity in South Africa to use one. If not you might have to look at the alternative option – an employer of record.

What is an Employer of Record?

At first glance, an employer of record is more or less the same thing. As with PEO, this company will take on all the administrative and legal duties involved with managing staff. It will help you manage tax, payroll, employee benefits, vacation time, and much more.

It can help you quickly hire staff with the specific skillset you need with a much shorter notice than if you were working alone.

As with PEOs they will also make sure you abide by all regulations and that each staff member is treated by employment law.

What’s the difference between PEO and EOR

So far, so very similar, but there are important differences between the two.

Firstly, unlike a PEO you do not have to have a legal entity to use an Employer of Record. It’s a much more straightforward operation and is great if your company is moving into the South African market.

While a PEO will share employment with you, which means you will both share responsibilities. The EOR will be the legal employee of your worker which means liabilities and legal responsibilities will lie with the EOR. However, that only applies to the details such as payroll. You will be working directly with the employer.

An EOR will also handle all tax relating to the employee while a PEO will require you to handle all tax reporting under your ID number.

What’s the best PEO or EOR?

The answer to this question depends on your circumstances and what you want from the relationship. Both will take on the administrative responsibilities of employees and both will normally require you to have a minimum number of employees.

An EOR for example, may require minimums of between one and five. A PEO, on the other hand, will probably set a higher minimum of between five and ten. If you only have one or two employees in the country it might be worth checking that your chosen provider is willing to work on such a small scale.

The biggest issue will depend on what status your company has in South Africa. EORs typically come into their own for those who are new to the market and do not possess any legal entity in South Africa. Companies will often use an EOR in each of the countries they employ people in allowing them to work without registering in any of them.

PEOs on the other hand will give you all the benefits of having your own dedicated HR team with expert knowledge in that area.

Your choice will depend on several factors including:

• Budgets – how much you’re willing to pay.

• How many employees do you have in the country?

• Your future goals.

• How many responsibilities do you have that you want to outsource?

For example, if you’re looking to hire staff across multiple countries, it might be worth working with an EOR in each one. That way you benefit from all their local expertise without having to establish a legal entity in either one.

If you’re moving into a new country an EOR could be a good way to find your feet and decide whether you plan to expand your presence in the country.

For those committed to building a long-term presence with multiple employees, a PEO can be a great way to off-set much of the administrative complexity that will come with that.

Whatever you choose it’s important to shop around and make sure you have a partner who will be able to understand your needs and tailor their services accordingly. When you choose a PEO or an EOR, you’re putting a great deal of trust in their services. Managing HR or employment law may not sound exciting but getting these wrong can cause all sorts of problems. However, getting them right opens you up to the exciting benefits of harnessing South Africa’s rich, diverse, and innovative talent pool.