Build Your Team with an EOR in South Africa
Businesses in the UK are turning to Employer of Record services to optimise their workforce and find new talent for the digital age.
As digital technology becomes the dominant force in business, the range of skills companies need is expanding rapidly. Talent is in high demand but short supply. According to recent data, 68% of small businesses struggle to attract skilled staff. An ageing population, limits on migration, and growing competition from larger, better-funded corporations make it impossible to attract people with the diverse range of skills needed to compete in the modern business environment.
Doing without those skills puts these companies at a distinct disadvantage, heightening inequality and hampering business growth. But while digital transformation has created this challenge, it also drives part of the solution. Ultra-fast internet and the boom in remote working have enabled businesses to cast their talent sourcing nets much wider. If talent is hard to find or prohibitively expensive, at home they can go looking for it overseas.
Hiring in South Africa
The need for talent has seen businesses of all sizes look towards South Africa. Labour costs in the country are around 50% the levels back in the UK for most jobs, including skilled professionals. English is widely spoken, and the working culture and times make for a positive match with the UK. You can hire and communicate with South African professionals in real time via video conferencing and instant messaging platforms.
Talent is widely available. Graduate levels are consistently rising, with educated and qualified professionals to be found across all sectors of the economy. South Africa’s workforce is young, ambitious, highly qualified and diverse. However, unemployment levels remain in double figures, which continues to limit opportunities in the domestic market.
For foreign companies looking to hire talent in South Africa, that’s all good news. There is a good supply of talent that is freely available and accessible much more cheaply than in the domestic market. South Africa has been a good source of talent across all sectors, including finance, technology, the law and marketing teams. Digital technology removes much of the friction of working remotely and allows them to work as a simple extension to your domestic team, collaborating on projects in real time, sharing work and offering feedback.
The economic impact for SMEs in the UK is immense. South Africa represents an opportunity to close the talent gap with larger corporations and give your company access to the skills it needs. The cost/benefits calculation is helped in no small part by a highly welcoming regulatory environment. The South African government has been keen to encourage inward investment from overseas companies and offers a range of benefits for any company that promises to create jobs within South Africa.
How to source talent in South Africa
South Africa, therefore, represents not just a way to reduce your costs, but to access new talent and equip your company with the skills it will need to thrive in the age of digital transformation. The only question remaining is what’s the best way to source that talent?
In the short term, the answer will often lie in the freelance market. This was becoming much more globalised even before the surge in remote work, with talent boards connecting businesses with freelancers from all over the world.
In many cases, there will be few practical differences in working with a South African freelancer and one in your own domestic market, aside from the cost. You can assign work by email, communicate over instant message or video conferencing and collaborate remotely on shared documents online.
For example, if you’re looking to hire a software developer or content writer, there will be a few practical differences to working with someone in your own home market. Work is assigned, completed, and paid for via an invoice. As in the UK, freelancers and contractors will handle their own taxes, so the only thing to worry about from your perspective is how to pay the invoice.
Complexities start to emerge if the working relationship becomes more regular. In that case, for practical and legal reasons, you may need to move into a formal employment relationship. That in turn creates the necessity to set up a legal entity to serve as the legal employer in that country. As well as all the financial and administrative work of setting up the company, you’ll also have to hire support staff such as administrators and HR professionals to support your new employees.
For many small and medium-sized businesses, the costs and risks of this approach will be prohibitively expensive. The alternative many companies are turning to is to hire an Employer of Record (EOR).
Working with an EOR in South Africa
The major benefits of an EOR are that it offers a cheaper, easier and much less risky way to work with South African professionals full-time. The EOR serves as the legal employer for your South African workforce, which means it also has full legal responsibility. Any unintended compliance problems will have to be resolved by the EOR rather than your company. The EOR will handle everything from paying wages, managing payroll, employer-side taxes and making all relevant filings to the tax authorities.
Wages are paid directly to the employee by the EOR. However, in all other respects, the working relationship will be much like any other employee. You will assign work, oversee tasks and provide feedback.
For this, you will pay a fee to the EOR, which will cover all their employment-related costs, plus their fee. When assessing the cost of the EOR, therefore, you will need to manage calculations based on the individual costs of the employee and the fee to the EOR against the savings gained through not having to set up a legal entity.
Compared to a conventional business process outsourcing company, meanwhile, using an EOR gives you more control over the people you hire. BPO companies tend to cover single job functions such as customer service or IT support. They provide you with access to their employees rather than helping you to build a team of your own.
