Employers of Record can help your businesses quickly hire staff in South Africa to fuel your growth.
Today’s market is agile, multinational, and multidisciplinary. Businesses routinely manage staff and contractors working across multiple countries. This new, globalised workforce presents new challenges and complexities that many businesses are struggling to manage. Employers of Record can provide expert support, legal protection, and a low-cost way to quickly access international talent that can take your business to the next level. As the market environment changes and demand grows, EORs are adjusting their offering to provide more value and flexibility to hiring companies. In this article, we’ll look at the best ways to hire staff in South Africa through EORs.
Hiring staff in South Africa
Businesses in the UK are coming under financial pressure on all sides. Operating costs are rising, new taxes are pushing up the cost of hiring employees, and the cost-of-living crisis is putting upward pressure on wages. In order to thrive in an increasingly competitive marketplace, many businesses are looking overseas to countries such as South Africa to hire new talent.
South Africa is one of the most popular sources of that new talent. A highly educated workforce boasts expertise across a wide range of disciplines, particularly in finance, technology, and marketing. Unemployment levels in South Africa are high, especially among younger people, which means talent is widely available. The government has also focused on international investment from foreign companies as a way to create jobs for its most talented graduates. They are encouraging that investment with a range of incentives and grants, which can further reduce the cost of hiring staff.
Technological infrastructure is first-class class enabling fast and easy collaboration between staff. The time zone is a good match, with just a couple of hours’ difference between South Africa and European markets. Collaboration is easy, fast, and can happen in real time with none of the delays that come from working with employees in far-flung parts of the world. Talent in South Africa is available quickly and affordably.
The first option for hiring typically comes through the freelance market. This is a fast and low-risk way to get started. Freelancers can be available on an as-needed basis. For example, software developers or designers can work on individual projects, submitting invoices at the end, which can be paid by arrangement. Independent contractors are also responsible for their own tax with reduces the administrative burden on your company.
Businesses are increasingly looking to the freelance market to give them access to people with the skills they need on an ad-hoc basis. Today, it’s not uncommon for a business to work with various professionals based all around the world who can come in and work on projects as and when needed.
When to move to an EOR
In most cases, freelancers or contractors can be managed individually. However, if you have a large team of freelancers, it can be worth working with an organisation such as an Agent of Record to keep things in line. An AOR handles logistical tasks such as onboarding, managing contracts, background checks, and the payment of invoices, freeing you up to concentrate on the details of the work done.
However, if you work regularly with individual freelancers, the boundaries between full-time and freelance contracts can quickly become blurred. The South African government is keen to crack down on practices of disguised employment, with many businesses seeking to present default employees as freelancers in a bid to save on PAYE obligations.
Penalties or transgression can be high with repeat offences potentially attracting criminal prosecution. To avoid any regulatory risks, therefore, it makes sense to move to a full employment model. However, doing this can be expensive, especially if you do not already have a legal entity set up.
A more affordable option comes through an EOR. These companies operate as third-party intermediaries offering a form of employment brokerage. They will be the legal employer of the worker for all tax and official purposes, which means they have responsibility for paying wages, providing employee benefits, and making sure all employment laws are complied with. It’s a fast and effective way to hire employees and build your South African-based team.
The costs of an EOR
In the short term, at least, the costs of using an EOR are normally much lower. The EOR pays the wages while you pay a free. This will be high enough to cover the employment costs of the worker, which includes wages, admin, and employer-side taxes, together with a service fee of around 10 to 20% of the employee’s wages. For that, though, you avoid the costs of setting up a legal entity in the country, the risks of exposure to South Africa’s regulatory environment, and the administrative costs of managing the employment, including hiring financial, legal, and HR professionals.
It reduces the amount of time you spend on low-value administrative and legal tasks and frees you up to concentrate on more profitable activities, such as driving your business forward. In other words, aside from reducing admin costs, it makes your working time more valuable and rewarding.
Managing freelancers through an EOR
For those companies looking to hire diverse teams across different types of contracts, many EORs are offering more flexible services. For example, if your South African team includes independent contractors and full-time employees, EORs can also offer the same services as an AOR. For freelancers, they manage admin and payment tasks as well as advising on the correct classification of workers.
For those freelancers moving into a full-time role, they can simply assume employment responsibility. You can simply adjust your employment needs as and when you need them, allowing you to react to market demands and shape your team as needed.
Whatever team you build, and however you choose to work with employees, EORs will have you covered. They provide a low-cost and agile way to access South Africa’s multi-talented workforce, offer full legal protection and expert support to help you optimise your growing international team.
