How using an Employer of Record to hire Staff in South Africa can help you get the best out of hiring staff in South Africa.
South Africa’s increasingly sophisticated and diverse labour market is attracting businesses of all sizes from all over the world. If you’re one of them, then one question you’ll need to address is: how can you find the right people with the skills you need, and how can you manage the day-to-day requirements of a South African workforce?
Hiring Staff in South Africa versus the UK
When hiring staff in a new country, you need to understand the subtle nuances of the market, its culture, and laws. While there are many similarities, there are some critical differences.
South Africa’s employment landscape is shaped to a degree by its history. Employment is governed mainly by three laws:
Basic Conditions of Employment Act.
Labour Relations Act
Employment Equity Act.
There is a strong emphasis on employment equity and affirmative action brought about by the history of racial disparities. South Africa continues to work hard to ensure equal opportunities and to address any potential risks of racism.
The commitment to equity also shines through in recruitment. All job advertisements have to comply with the Employment Equity goals and will often have to specify certain groups, such as black, coloured, women, Indian, or people with disabilities. South African companies also have to consider BEE (Broad-Based Black Economic Empowerment status, which may influence your hiring decisions.
In the UK, on the other hand, there is a strong commitment to equal opportunities and diversity, but no provisions for affirmative action. Instead, companies will often have diversity targets.
Employee rights
There are also slight differences when it comes to managing employment. As in the UK, South African companies routinely include probationary periods, generally for between three and six months. In the UK, dismissal is relatively easy during this period. In South Africa, while it is easier than after an employee has passed his or her probation period, it should still follow a clear and established procedure.
When managing any employment terminations, they must be shown to be procedurally fair and equitable. Any dismissal has to involve a full disciplinary process and can be challenged by the employee by going to the Commission for Conciliation, Mediation and Arbitration
(CCMA).
South Africa also has a strong union presence in most industries, and strikes can be relatively common. In the UK, unions tend to be much weaker with fewer commitments to collective bargaining.
Legal obligations
Elsewhere, the rules are relatively similar to the UK, but you will still need to understand the details of specific provisions such as the amount of paid holiday, the minimum wage and maximum working time.
When drawing up contracts, you will have to make sure all these provisions are fully respected and applied.
As with the UK, the employer will be responsible for deducting tax, managing PAYE, and filing reports with the tax authorities. However, each authority has its expectations. Laws can evolve every year, which can make it difficult for foreign-based companies to keep up.
One particularly important area to get right comes in worker classification. South Africa’s government has been particularly keen to crack down on any tax evasion strategies, such as disguised employment – namely, the practice of trying to portray defector employees as freelancers or contractors.
From a tax perspective, managing contractors is much easier. They handle their own taxes and don’t need employer contributions. It can be tempting to try and frame workers as freelancers even if their practical working experience differs little from a full-time employee (for example, they may work in an office, and have set working hours).
This can be problematic for any foreign companies with evolving recruitment requirements. If you were to start by engaging freelancers on an ad hoc basis, but the relationship then becomes more regular, you could find yourself encountering classification challenges.
In the early days, you might work from one project to another, handing out a brief and paying invoices as the work is completed. However, if the working relationship evolves, you may find yourself bringing them more and more into the team. Perhaps they have their own desk in the office, and perhaps they start to work at set times.
Moving from a per-project basis to an ongoing retainer may also make them look and feel much like any standard employee. For you as a business, it can be difficult to know where to draw the line. Getting it wrong can lead to expensive fines and, in the most extreme of cases, criminal prosecution.
How an EOR can help
The penalties for noncompliance, then are high, so it pays to get some help. One of the best ways to do this is by hiring an Employer of Record (EOR). These companies act as the legal employer for your South African staff. They handle all the admin and legal filings, such as
making sure all workers are classified correctly and that the right taxes have been paid at the right time.
Because the EOR is the legal employer for those workers, it also assumes legal liabilities. That means that if there is any compliance error, it will be the EOR, rather than you, the company, that will have to pay the price.
It also removes the need for a costly legal entity, which makes it much more accessible for small and medium-sized businesses. All you have to do is pay the EOR, and they will make sure your South African workers get paid. They will manage all PAYE requirements, onboarding, and disciplinary processes, leaving you to simply focus on the working relationship.
Some EORs will also provide enhanced levels of service by helping you source the talent you need. This provides much more flexibility than a traditional BPO company, as you get to pick the people you want, with the skills you need to power your business forward.
An EOR is much like having your own HR team, with the added bonus of one that has full legal liability for your workers.
There are other options, such as Professional Employers Organisations and Agents of Record, both of which offer support in slightly different ways. PEOs, for example, share employment liability, which means they’re better positioned for companies that already have a legal presence in South Africa. AOR’s meanwhile, tend to be geared to companies with a large pool of freelancers or contractors. They tend to help you avoid any problems with the classifications of those contractors, and as such, avoid sticky questions about disguised employment.
An EOR gives you a perfect balance of flexibility, control, and legal protections. They help you save money and provide dedicated expertise that is crucial for managing your team in a cost-effective and compliant manner. Whether you’re just entering the South African market or are in it for the long haul, an EOR can be a successful partner powering you forward.
