3 Ways To Hire And Pay International Employees in South Africa

Expanding your business by hiring international employees holds multiple benefits, such as access to broader pools of talent and cost-effectiveness. South Africa is proving to be a key location for businesses that are eager to explore global markets - with its convenient GMT+2 time zone, professional use of English, low employer costs and multicultural talent pool.

If you're an HR manager, business owner, or part of an international hiring team, expanding your workforce in South Africa can open up exciting new opportunities. This guide will take you through the three main approaches to hiring and paying international employees in South Africa, with tips on how to stay compliant with local laws and key employment practices in the country.

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3 Ways to Hire and Pay International Employees in South Africa

1. Hire independent contractors

For businesses that have short term projects or require temporary skills, hiring an independent contractor is the best way to go. Independent contractors are an appropriate short-term choice for cost effective and flexible work. Additionally, organizations can avail of people with high skills for business development that may not be available for in-hours.  

However, there is a possibility of these contractors charging a higher rate than the monthly salary of a full time employee. It is also important to ensure the distinction between independent contractor and full time employees, since they are treated differently by  the South African government. Treating contractors the same as full-time employees can lead to a misclassification risk, leading to fines and penalties. 

Independent contractors can be paid through international payment platforms or wire transfers as long as they are timely and comply with any local regulations.

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2. Set up a legal entity in South Africa

For companies hiring foreign workers in South Africa that have substantial resources at hand to employ them, the roadmap is different. Businesses will need to set up a legal entity compliant with South African labor laws by registering with the official authorities and being aware of the various laws for businesses. 

With a relevant business permit visa, business owners can register their company with the Companies and Intellectual Property Commission (CIPC). Bizportal was introduced by the CIPC to simplify the registering process, and entrepreneurs can use it to register their business and set up the corresponding domains and funds. Businesses should have secured funding to sustain the company and hire a team of experts for global HR and operations management. 

While this process supports companies wanting to hire skilled workers, the process can be time-consuming and costly, and these entities can be difficult to close once established. Despite these drawbacks, having a legal entity allows companies to have complete control over their operations and payroll processes. Paying employees through a local entity involves setting up a local payroll system, which includes managing taxes, social security contributions, and other employee benefits.

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3. Partnering with an Employer Of Record (EOR)

While setting up a legal entity in South Africa is a good option for growing businesses, it entails setting up a local office, a subsidiary address and an account with the local bank – as well as compliance to regional benefits, global HR and payroll taxes. All of this in a foreign country can be a complicated and time-consuming process. 

A viable option in this scenario is to partner with EOR services, that essentially hires and pays employees on the business’s behalf. Acting as the employer on paper, an EOR ensures a smooth onboarding process for companies wanting to test global markets, make initial hires, and avoid navigating local compliance themselves. The benefits of using an EOR include the provider taking over all employment-related tasks. They manage benefits administration, payroll, and compliance with South African labor laws.

Payroll management through an EOR typically involves the provider managing the entire payroll process on your behalf, from calculating salaries and deducting taxes to ensuring timely payments to employees.

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Playroll’s Cost Calculator

For those considering hiring in South Africa, tools like Playroll’s employee cost calculator can be invaluable in benchmarking salaries, providing a detailed breakdown of the cost to hire a foreign employee in new markets. It will show you the exact cost of statutory benefits, employer taxes and contributions, and allow you to compare the costs in different countries.

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Navigating Legal Compliance in South Africa

Businesses can only operate smoothly if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and social security obligations. Partnering with an EOR can help navigate the complex employment and tax regulations in new markets, reducing compliance and financial risk.

Listed below are the most important legal considerations businesses need to abide by in South Africa to avoid any compliance issues during the hiring process:

• Employers must provide a detailed employment contract establishing the employment status – written particulars of employment and include details regarding the terms of employment, job responsibilities and remuneration.
• In South Africa, individual income tax is on a Pay-as-you-earn (PAYE) and progressive basis. Employers need to withhold PAYE from employee salaries and submit these taxes to the South African Revenue Service (SARS) regularly. They are also required to contribute 2% of each employee's salary to the Unemployment Insurance Fund (UIF). 

Popular Employment Practices in South Africa

When hiring in South Africa, being familiar with compensation benchmarks and employee benefits is key to staying a top runner in the competition. Based on a country’s standards, offering competitive compensation packages can give you the edge you need to attract and retain top talent. Here’s the key facts of employment in South Africa, to help you ensure fair working conditions for employees:

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For more detailed information on hiring in South Africa and other countries, businesses can refer to Playroll’s country guides which provide comprehensive insights into hiring practices and legal requirements in over 180 countries.

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Future Trends For Remote Workers in South Africa

South Africa is on the path to attracting new workers with the introduction of their 'remote working visa' that allows foreigners to work remotely for foreign employers within South Africa for up to three years. 

Notably, visas shorter than six months do not require tax registration and an income tax exemption is also proposed for those working less than six months. However, the latter is pending legislative changes. South Africa is shaping up to be a strong player for businesses looking to hire internationally, with a growing appeal to digital nomads.

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Choosing the right approach to hiring and paying international employees in South Africa depends on your business needs and resources. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. It’s easy to get overwhelmed when navigating the finer details of local employment law – but it doesn’t have to be complicated.

Playroll is an Employer Of Record service that can support your business to seamlessly hire, pay and manage international employees in 180+ countries, including South Africa – with a team of experts on-hand to handle compliance with all local employment laws. Playroll also offers visa support services in the country.