Outsourcing to South Africa offers up a chance to access new talent and reduce labour costs. Here’s how to get started.
If you’re a small business looking to reduce your operating costs while deepening your talent pool, South Africa could be the answer. With a time difference of just a couple of hours and a healthy reserve of top-notch talent eager for opportunities, South Africa is attracting businesses looking to outsource operations across all sorts of sectors.
Why outsource to South Africa
Business process outsourcing has long been associated with moving front-line operations such as call centres overseas in a bid to save money on labour. However, its reputation for quality has been mixed. Customers have complained about difficulties understanding call centre agents with heavy accents. Other sectors, such as marketing, have reported poor levels of quality. Saving money, it seems, comes at a cost.
South Africa’s offering is very different and relies on a blend of talent, value for money and quality. While the cost of labour will be much lower than in places such as the UK, that’s not the only reason to choose South Africa.
South Africa’s clearest selling point is the English language, which is spoken fluently across the country with a clear and recognisable accent. For people accustomed to working hard to make themselves understood by people for whom English is a second or third language, that can be a welcome relief. South Africa has become a popular destination for companies looking to save money through outsourcing while also looking to improve their service offering, compared to and deepened engagement with clients.
Aside from that, BPO companies in South Africa are backed by state-of-the-art technologies and facilities that enable them to offer the very best services to their clients. Ultra-fast broadband enables quick and seamless collaboration, and some will also offer the latest recruitment software to provide next-level insights into your operations.
Generous government support in the form of grants and tax breaks designed to attract foreign investment also boosts the case from a bottom-line perspective. Depending on the type of role you source and the location, the actual cost of hiring staff in South Africa may be every bit as low as the cut-price outsourcing hubs.
Perhaps the most appealing feature for the future, though, is the range of talent available. South Africa is churning out highly educated and qualified professionals across the board. At the last count, there were more than 200,000 graduates in the country, plus countless others with vocational and other professional qualifications.
It’s a workforce high on potential but short of opportunities thanks to an unemployment rate that hovers in the double digits. Business process outsourcing, therefore, is a way to bring better-paid jobs into the economy.
Thanks to increasingly sophisticated digital communications, those jobs are becoming more senior all the time. Today, you can outsource functions across legal, financial, marketing, content and software development, among others. Customer service still leads the way, but businesses are waking up to opportunities further up the ladder.
How to find outsourcing opportunities
When looking to outsource, you may have several options:
Freelancer: Direct engagement with freelance and contractors in your chosen discipline.
BPO companies: Specialist BPO companies will often offer services in specific industries, such as call centres. They will have readily available professionals in their sector who can be made available to your company. It’s quick, easy and affordable, but you don’t get much say over recruitment or the day-to-day working relationship.
Direct employment: For more control, you can also try direct employment. This allows you to pick and choose your hires and maintain oversight across the whole working relationship. The downside of this option is that it can be extremely expensive and necessitates establishing a legal entity such as a foreign subsidiary within South Africa.
Employers of Record: A cheaper alternative to direct employment can be to hire an employer of record (EOR). The EOR handles the legalities and admin related to the employment relationship, such as onboarding, managing PAYE, providing benefits and making reports to the tax authorities. Because the EOR is the legal employer, you will have no legal liability for any employment-related compliance issues. Better still, because there is no need to set up a subsidiary, it’s a cheaper and faster way to scale up your presence in South Africa.
Professional Employers: A compromise between EOR and direct employment is the Professional Employers Association (POA). This is a shared employment model with both you and the POA being registered as employers, so you will need a legal entity. However, the POA handles all the administration. It’s like having a specialist HR team with local knowledge without the need to hire them directly.
The cost of outsourcing in South Africa
The overall cost of hiring in South Africa will vary depending on the roles and the location. Labour costs vary from one city to another. Each city may also have its own set of laws, regulations and tax incentives which may affect your decision-making. For example, establishing a presence in a less developed area of the country, away from the main cities, may entitle you to various government support schemes.
Different cities may be more beneficial for different types of business operations. Even if an area might be less central, it could still work well if you know there will be a good supply of local talent in the area. When choosing a location, you should check out the area to see what type of facilities it offers.
Think about the long term.
Hiring in South Africa shouldn’t be just about the short term. This could be a long-term relationship which sees you gradually moving more and more business operations into the country. Your end goal of this will shape your forward strategy.
For example, if you’re looking to expand into South Africa, you may want to work with an EOR to help scale up hirings quickly and affordably without taking the full risk of setting up a legal subsidiary.
Alternatively, if you’re working with freelancers, you may expand your talent pool across multiple types of job roles and functions, leading to a diverse team both in terms of their professional make-up and the type of contracts they’ll be working on. Some will be full-time while others will be working freelance or on a contract per contract basis.
These complex teams will need to find a way to manage them. If you’re already working with an EOR, you may want one that can also serve as an Agent of Record (AOR). These handle freelancers and contract workers. They do not serve as the legal employer, but they do handle all the paperwork involved with managing ongoing freelance relationships, such as onboarding, worker classification and payment of invoices.
For the longer term, you may want to consider moving to a direct employment model, which means setting up a foreign subsidiary. This is for companies that firstly have the resources to manage such an expansion and also intend to stay in the country for the long term. The benefit of this can be that you only pay direct employment costs, and you’ll have full control over the working relationship.
However, as EORs continue to refine their services, they are becoming more personalised, flexible and adaptable, giving hiring companies much more control over the types of employees they hire.
Moving into the future, therefore, there is no reason why they can’t be the basis for managing a growing and diverse team of employees in South Africa. It offers a way to benefit from lower costs, expand your talent pool and optimse your employment strategies for the future.
