Why South Africa is the Next Outsourcing Hotspot
Outsourcing to South Africa is helping UK businesses to save 50% on skilled workers, which is why it’s fast becoming the world’s outsourcing destination of choice.
If you’re a small or medium-sized business in the UK, times can be tough. Low growth, sluggish revenues, and spiralling costs place immense pressure on corporate finances. At the same time, a competitive marketplace repeatedly punishes those companies that cut corners or sacrifice service quality in order to save money. It’s a complex and highly demanding environment with no clear solution.
The changing outsourcing market
Traditionally, businesses would turn to the business process outsourcing sector to try and streamline costs. Developing countries such as India or the Philippines, which boast a well-educated and qualified workforce, are available at a much lower rate. Labour costs are a fraction of those in the West, prompting companies of all sizes to send whole business operations, such as admin and customer service, overseas.
The cost came in service quality, reliability and customer satisfaction. Complaints were rife about delays to queries, difficulties understanding call centre agents or concerns over data privacy and fraud. Companies began to repatriate services back to the UK.
However, cost pressures remain, and businesses still need to find a way to optimise costs without undermining the quality of business operations. To do that, many are turning to South Africa.
The South Africa outsourcing proposition
South Africa represents a tempting option for many reasons.
- English is widely spoken with a clear accent that most customers in the UK will find relatively easy to understand.
- Its culture is similar to the UK and other Western countries, which makes it easier to build lasting, profitable relationships.
- The country has put in place strong governance procedures, including best-in-class data protection laws designed to ensure the security of all data transferred in and out of the country.
- The Business Process Outsourcing industry is a key pillar in the country’s strategic development, with the government pinpointing it as a key part of economic growth. The sector has benefited from a host of business development opportunities, including government incentives and grants.
Most of all, South Africa has positioned itself as a high-quality alternative to business process outsourcing. If India or the Philippines represent the bargain basement supermarkets of this world, giving access to basic services such as inbound call operators, South Africa positions itself more in the middle market – a place where you might pay a little more, but can expect a much higher level of quality.
What jobs can you outsource to South Africa?
That commitment to quality is encouraging companies to outsource much more senior-level job roles than might previously have been the case. Customer service and support remain the most common job
roles, but they are joined by other sectors such as technology, finance or marketing.
Businesses might first dip their toes in the water by entering the freelance market. Job boards connect businesses and freelancers across all disciplines, enabling companies to access talent from anywhere in the world. South Africa’s close time match to the UK is great for same-day collaboration, which means the working relationship will differ little from any other domestically based freelancer.
Paying freelancers is straightforward, as they manage their own tax arrangements. All you need to do is make sure the invoices are paid promptly by whatever arrangement you agree on between you and the freelancer. When the number of freelancers you work with gets larger, you may decide to use an Agent of Record to manage the admin. These make sure freelancers are paid on time, provide advice on the correct worker classification and offer support with background checks and onboarding.
Before long, you could have a growing and increasingly diverse multidisciplinary team of freelancers covering all sorts of industries, including software developers, marketing professionals, content writers, financial professionals or legal experts. Each of these can provide high-quality services comparable to any domestic professional at a much reduced rate.
How much of a reduction will depend on the industry in particular and the type of freelancers. In general, average salaries in South Africa are approximately half the levels found in the UK, which puts overseas companies at a distinct advantage. They can pay higher prices than domestic employers, which puts them at the front of the queue when it comes to talent acquisition.
Hiring full-time employees
As working relationships evolve, freelancers may naturally evolve into full-time employees. This can present something of a legal and administrative headache. As with most countries, South Africa maintains strict provisions against practices of disguised employment in which a company attempts to present a de facto employee as a freelancer for tax purposes.
Generally speaking, anyone who works in a business premises, full-time under your direct supervision, will likely be viewed by the tax authorities as an employee, which makes you liable for PAYE, withholding tax and providing all relevant employee benefits.
Becoming an employer can be costly and complex. Unless you already have a subsidiary within the country, you will need to set up a legal entity in the country with all the costs that come with it.
A lighter touch option is to hire an Employer of Record company (EOR) to serve as the legal employer for you. It takes on full responsibility for the working relationship, including paying tax filing reports and providing all relevant employee benefits. The EOR employs the workers and pays their salaries, with you paying a fee to the EOR based on the number and type of workers.
This approach offers a low-cost and efficient way to hire the employees you need and tap the full potential of South Africa’s labour market. The benefits are felt by everyone. South Africa’s government can kickstart its economy, South African workers get high-paid jobs, and hiring companies get high-quality, skilled professionals at an affordable cost. Whether looking to supplement your domestic team or outsource full business functions, outsourcing to South Africa can be immensely beneficial for you and your business.
