Are you looking to hire an EOR in South Africa? If so this guide has everything you need to know.
Expanding into a new market can be difficult at the best of times. It’s expensive and understanding the nuances of the business climate and regulatory landscape can be challenging. To help with that, many UK and European businesses will seek the services of an Employer of Record. In this guide, we’ll explain what an EOR does, how they work and the key factors to consider when choosing one.
What is an EOR?
When you hire staff in South Africa, you need a clear formal framework through which to manage all the admin and legal requirements that come with it. This is where an employer of record comes into its own.
The EOR serves as the legal employer for your South African workers. That means they pay their wages, withhold tax, provide all employee benefits and manage the working relationship from initial onboarding to contract termination.
The EOR is effectively your HR department, with the added benefit that you’re fully protected from any legal issues that arise through this employment.
Working with an EOR is ideal in the following circumstances:
• You want to control costs: Although an EOR will involve high costs in terms of the fees you pay, you save money upfront by avoiding the need to set up a legal entity. That means there’s no need to set up an office and hire relevant support staff.
• You want a flexible team: An EOR enables you to scale your requirements up or down as you need. It means you’ll only pay for as much capacity as you use and no more.
• You want to protect yourself against liability: South Africa’s labour laws can be complex and ever-changing. As a foreign company with no direct experience of the South African regulatory environment, it’s all too easy to run into compliance problems. Having an EOR as the legal employer shields you from liability if anything goes wrong.
• You want to access new talent: An EOR can provide dedicated expertise in the labour market, which extends to assistance in sourcing and recruiting professionals. These companies can help you identify people with the talent you need to manage your team as effectively as possible.
What to look for in an EOR?
For all these benefits, the value of the experience may vary considerably depending on the EOR you work with. Here are a few factors to consider.
• Sector expertise: Different sectors may have their own set of regulations, such as in the legal or hospitality sectors. When choosing an EOR, you should make sure it has expertise in your chosen sector.
• Payment: The EOR pays staff directly, and you pay the EOR a fee based on the number of employees you want to work with. It stands to reason that this fee will be higher than the wages of each employee. Some companies will offer tiered arrangements with varying levels of support coming at varying price points.
• Control: Because the EOR serves as the legal employer, there might be a disconnect in terms of the level of control you have over the sourcing and recruitment of employees. Work closely with each EOR to understand how much of a say you will get in building your team.
• Cyber resilience: Working with an EOR means transferring data and money from one territory to another. You’ll be putting a great deal of faith in that country’s cybersecurity measures. A weakness in the EOR’s defences will put your data at risk. Remember, when processing customer data, liability for any loss will rest with you, even if the other company is at fault.
In addition to this, you need to make sure an EOR aligns with your strategic goals as a company. There are many scenarios in which an EOR might help, such as:
• A pilot expansion: Expanding into a new market is difficult and risky. An EOR can help you build a core team to test out your product and service within the South African market. You can scale up relatively cheaply without the need to set up a legal entity. If it doesn’t work, you can back out with minimal hit to your finances.
• Sourcing talent: The lower labour costs in South Africa make it a great option for hiring professionals. An EOR can make sure you classify all professionals and help you manage the growing team.
• Outsourcing: Many companies seek to optimise costs by outsourcing key services such as call centres. An EOR can help you manage that growing team. Lower labour costs and high levels of spoken English make South Africa a perfect destination.
What might the future hold?
Markets are evolving quickly. Technology is changing everything about the way we live and work. The last few years have seen rapid change, and it’s fair to predict that the next few will see even more.
The role of an EOR is likely to become much more important. EOR providers have scaled up their operations and are offering much more detailed services such as help with recruitment, specialist support, more personalised services and state-of-the-art recruitment software.
They provide a more in-depth and professional service that leverages the specialist expertise and technology that an EOR can bring to the table. This helps them to offer a much more immersive and long-lasting experience to their end clients.
What this means in practice is that an EOR can become a much longer-term solution. While it might once have been a temporary fix, giving companies a low-cost introduction to a market before they decide to take the leap and establish a full subsidiary, now they are forging permanent and long-lasting relationships. Some of the largest corporations in the world use EORs – even those which already have legal entities in the country.
The depth and breadth of services available means they can continue to support expansion while giving your company access to highly skilled individuals across all industries.
As they do that, the range of industries and job roles covered by EORs is also likely to grow exponentially. What was once the preserve of simple functions such as customer service is now rising the skills ladder. Highly sophisticated functions such as software design, web design, finance or legal support are now being outsourced through EORs. Whatever your size as a business or your strategic goals, therefore, an EOR can offer a host of promising advantages. Their value has grown rapidly in recent times and is likely to grow even quickly in the future.
