South Africa has become a hub for remote work in recent times. Companies across the globe are looking to use South Africa as a means of hiring remote workers, due to its competitive pricing and exceptional talent marketplace. If you’re one of those companies looking to hire, then look no further. This comprehensive guide will walk you through the ins and outs of the hiring process in this diverse and dynamic country. Whether you're a local business owner or an international company expanding into the South African market, understanding the local employment landscape is essential to success. From navigating labor laws to finding top talent, we've got you covered.
General facts about South Africa
Currency: South African Rand (ZAR)
Minimum wage: R25,42 ($1,35) per hour
Working hours: 08:00 – 16:00 SAST
Languages: English (main language), Sesotho, Afrikaans, Setswana, isiXhosa, isiZulu, isiNdebele, Xitsonga, siSwati, Sepedi, and Tshivenda
Leave periods:
· Annual leave – 21 days
· Sick leave – 30 days per three years
· Family responsibility leave – 3 days
· Maternity leave – four months
Average salary: R31 300 ($1 662,26) (before tax and deductions)
Population: 60 million
Capital cities: Pretoria (executive branch), Bloemfontein (judicial branch), and Cape Town (legislative branch)
Tax:
· Employee Income Tax
· Skills Development Levy
· Unemployment Insurance Fund
Understanding the Labor Market in South Africa
South Africa boasts a rich pool of highly skilled and talented professionals across various industries. With its diverse workforce and growing economy, the country offers numerous opportunities for businesses looking to hire. However, finding the right fit for your organization requires a deep understanding of the local culture, norms, and legal requirements.
To attract the best talent, it's essential to have a clear understanding of the skills and qualifications required for each position. Take the time to research industry trends, job market demands, and salary benchmarks. This will enable you to create attractive job descriptions and competitive compensation packages that align with market expectations.
Business culture of South Africa
The overall culture of South Africa is a very open and warm one. South Africans are known to be friendly and extroverted people, and it follows that the business culture there would reflect that. The business culture in South Africa is diverse and greatly influenced by the country’s history, which includes a mix of African, European, and Asian cultures.
South Africa is a country rich in diversity. The same can be said in its corporate world, as diversity is one of the many things emphasized in corporate South Africa. Companies often emphasize and take pride in having a workforce reflective of its culture.
Communication styles in South Africa are similar to that of the West. South Africans have a direct and open way of communication, where honesty and clear dialog are valued. In addition, punctuality and time sensitivity are also key aspects which form part of the work culture in South Africa. The business culture, particularly in the major cities, is very fast-paced and time management is essential.
Lastly, while South Africans are known to work hard and go beyond regular business hours, there is a strong emphasis on work-life balance. This is largely due to the impact of the pandemic and the rise of remote work. This has led to an increased acknowledgment and recognition of promoting clear professional boundaries between employers and employees. While work is important, employees in South Africa also value having personal time to spend with their loved ones and on their hobbies.
Legal Landscape for Hiring in South Africa
Before diving into the hiring process, it's important to familiarize yourself with the legal landscape in South Africa. The country has strong labor law legislation that protects the rights of employees and sets clear guidelines for employers. Below is a summary of key labor legislation essential to hiring South African employees:
1. Basic Conditions of Employment Act, 1997(BCEA)
The BCEA is a key labor law legislations that covers the minimum employment conditions within South Africa. It covers a range of matters, including working hours, leave entitlements, and termination procedures. The terms contained in the BCEA are clear and basic, and employers cannot include contractual terms less favorable than what is contained in the Act. A summary of the salient points of the BCEA:
i) Working hours:
(1) 45 hours per week (maximum normal working time allowed);
(2) Nine (9) hours in any day if an employee works for five days or less in a week; or
(3) Eight (8) hours in any day if an employee works for more than five days in a week.
ii) Overtime:
(1) employers may not require employees to work overtime without an agreement;
(2) employers may not require employees to work more than ten (10) hours overtime a week;
(3) an agreement may not require employees to work more than twelve (12) hours on any day; and
(4) overtime must be paid at 1.5 times the employee’s normal wage or an employee may agree to receive paid time off.
iii) Leave entitlement:
Leave periods contained in table above.
iv) Public holidays:
(1) employees must be paid their ordinary pay for any public holiday that falls on a working day;
(2) work on a public holiday is by agreement and paid at double the rate; and
(3) a public holiday may be exchanged with another day by agreement.
v) Termination notice procedure:
(1) a contract of employment may be terminated on notice of not less than:
(a) one(1) week, if the employee has been employed for six months or less;
(b) two (2) weeks, if the employee has been employed for more than six months but not more than one year; or
(c) four (4) weeks, if the employee has been employed for more than one year.
(2) a collective agreement may not shorten the four weeks notice period to not less than two weeks.
(3) notice must be given in writing except when it is given by an illiterate employee.
(4) the notice on termination of employment by an employer in terms of the BCEA does not prevent the employee from challenging the fairness or lawfulness of the dismissal terms of the Labor Relations Act, 1995 or any other law.
2. Labor Relations Act, 1995 (LRA)
The LRA deals with the employment relationship. It gives both parties rights and governs the manner in which the employer and employee should conduct themselves during the employment relationship (i.e. employees’ rights to Trade Unions).The LRA regulates collective bargaining, dispute resolution, and the rights and obligations of employers and employees. A summary of the salient points of the LRA:
1) Collective bargaining and trade unions
a) This is one of the fundamental rights under the LRA. It allows employees to, through their trade unions, to negotiate with employers on issues such as wages, working conditions, and other employment-related matters.
b) Trade unions are incredibly important in this regard. They represent the interests of employees and ensure their rights are protected. Trade unions also provide support and advice to their members, assist in resolving workplace disputes, and advocate for better working conditions.
2) Dispute resolution
a) There are many ways in which workplace disputes are resolved under the LRA. These mechanisms were put in place in order to promote fair and efficient resolution of disputes and to minimize the need for litigation.
b) The LRA has established dispute resolution bodies such as the Commission for Conciliation, Mediation, and Arbitration (CCMA) which is an independent body that sets out to resolve work disputes between employees and employers. The CCMA is a neutral platform for parties to resolve their disputes through conciliation, mediation, and arbitration. Legal representation is allowed in very limited instances at the CCMA.
3) Unfair labor practices and unfair dismissals
a) The LRA prohibits unfair labor practices, including discrimination, victimization, and unfair treatment of employees. It also provides mechanisms of protection against unfair dismissals.
b) Unfair labor practices, in terms of the LRA, are defined as any conduct by an employer or employee that undermines the rights of employees or the principles of fair labor practices.
c) The Act also sets out procedures and criteria that an employer must follow when dismissing an employee. It provides protection against unfair dismissal, and ensures that employees are not unfairly deprived of their income.
3. Employment Equity Act, 1998 (EEA):
The EEA promotes equality and prohibits unfair discrimination in the workplace, ensuring that employment opportunities are accessible to all South Africans.
Employers, according the EEA, are required to have plans in the workplace to ensure employee equity, which must:
· have objectives for each year of the plan;
· include affirmative action measures;
· have numerical goals for achieving equitable representation;
· have a timetable for each year;
· have internal monitoring and evaluation procedures, including internal dispute resolution mechanisms; and
· identify persons, including senior managers, to monitor and implement the plan.
It is incredibly important to familiarize yourself with the above labor legislation to ensure that your hiring practices are in line with legal requirements and promote fairness and equality in the workplace.
Tax and Employee Benefits
Next on the list is tax and employee benefits. Below we have summed up the relevant taxes to be paid by employers and employees:
1. Income Tax
Tax on individual income (gross annual income):
ZAR 1 – ZAR 226,000 = 18% of taxable income
ZAR 226,201 – ZAR 353,100 = 26%
ZAR 353,101 – ZAR 488,700 = 31%
ZAR 488,701 – ZAR 641,400 = 36%
ZAR 641,401 – ZAR 817,600 = 39%
ZAR 817,601 – ZAR 1,731,600 = 41%
ZAR 1,731,6001 and above = 45%
2. Pay As You Earn (PAYE)
Tax withheld by the employer and rates are based on income, with a maximum of 45%
3. Unemployment Insurance Fund (UIF)
Provides short-term relief to workers when they become unemployed.
· Employee: 1% of earnings
· Employer: 1% of employee's earnings
4. Skills Development Levy (SDL)
Used to fund education and training for employees.
Employer: 1% of total remuneration
Next, a summary on compulsory benefits:
1. UIF
· All employers are required to register their employees for and contribute to the UIF.
· Employers are required to pay 1% of an employee’s salary to the fund, and a further 1% of the employee’s salary is to be withheld is to be withheld and paid over to the fund monthly.
2. SDL
· The SDL is used to promote learning and development of skills in South Africa.
· Employers are required to pay up to 1% of the total employee salary.
3. Compensation for Occupation Injuries and Diseases (COIDA)
· This fund regulates the compensation of employees for occupational injuries and diseases.
· Employers contribute monthly to this fund, and cannot deduct the amount from the employee’s salary.
Recruitment and Hiring Methods in South Africa
There are various ways to hire remote workers in South Africa. Traditional methods such as job postings on online job portals, newspapers, and industry-specific publications are still widely used. However, with the increasing use of technology, digital recruitment platforms and social media channels have become popular tools for sourcing candidates.
To maximize your reach, consider partnering with recruitment agencies or utilizing the services of headhunters who specialize in your industry. These professionals have access to extensive networks and can help you identify and attract candidates with the right skills and experience.
To hire in South Africa, there are three popular methods: hiring an independent contractor, setting up a company, or using an Employer of Record.
Hiring an independent contractor offers numerous advantages for international employers. One of the key advantages to this is the flexibility this provides, as businesses can access specialized skill on a project-based timeline without the long-term commitment of traditional employment. Financially, independent contractors tend to be a popular choice of employment due to their cost-effective nature. Independent contractors are not employees as defined by the BCEA, therefore they are not entitled to the ordinary benefits that an ordinary employee would be entitled to. This makes it a more financially feasible option for those employers looking to hire skilled workers for specific period.
Next is setting up a subsidiary in a foreign jurisdiction. This is a great way to build up a local presence and attract top candidates from that jurisdiction. The main advantage to establishing a new company is that the company will be fully registered in that jurisdiction and will therefore operate as any company normally would. Therefore, recruiting and signing up new employees would be a relatively simple process due to the company having already established itself in that market. The major downside to registering a new company is the cost. Although this option is an excellent alternative as it will prove the most beneficial in the long run, it can be incredibly expensive to register and create a new company from scratch.
The final option is using an Employer of Record (EOR) service. An EOR is an entity that assists businesses to expand their candidate base internationally by hiring and managing global employees on their behalf. EORs provide services that employers, in the ordinary course of business, would provide. This includes managing payroll, legal and compliance matters, human resources, salaries, and more. The biggest advantage to using an EOR is the convenience they present, as they allow employers to hire internationally and outsource all their management responsibilities (without having to set up a new local entity in that jurisdiction). The biggest drawback to this option is the cost. EORs are known to be expensive. However, they are incredibly convenient and useful, particularly to those employers who are hiring globally for the first time.
Conclusion
South Africa is a fantastic option for any international employee looking for a cost-effective solution to hiring remote workers abroad. Due to its rich diverse culture, its workforce of exceptionally skilled professionals, and its dynamic people, South Africa has become an in-demand country for outsourcing. If you’re looking to expand your business to this country, contact one of our consultants for a free call where we’ll take you through all you need to know to get you started!
