Hiring international employees has become more popular in recent times, due to the massive surge in remote work. Not only has remote work become popular, but employers are also looking for cost-effective ways to hire international talent.
Due to this, South Africa has become a popular destination for overseas companies. South Africa, being a culturally rich, multilingual country, has become a hotspot for those looking to expand their businesses to newer boarders. South Africa has qualified and talented professionals, who come with a multitude of skills and have a cultural background easily adaptable to those of Western countries. Not only that, but due to the exchange rate and the national currency, hiring in South Africa comes with significant financial benefits.
If you are an international employer looking to hire in South Africa, then this is the perfect article for you. We will be exploring the various ways in which international clients can successfully recruit in South Africa by touching on Employer of Record services, independent contractors, and hiring through the use of a local subsidiary.
How to hire in South Africa
Hiring international talent can be an incredibly arduous and daunting process, particularly when not well versed in the local laws and cultural dynamics in the country in which you wish to recruit. However, this guide will give a brief, yet comprehensive, guide on how to hire top quality talent in South Africa, as well as providing additional information to each method.
Below are the three main ways to hire in South Africa:
1. Employer of Record
An Employer of Record (‘EOR’) is an organization that assists companies in managing key employer responsibilities and obligations on behalf of another company. This option is often used by companies looking to outsource their Human Resources (‘HR’) functions and employer-related duties. There are different functions of an EOR, which include:
1.1. Employment Administration
When utilizing the services of an EOR, the EOR in effect becomes the legal employer of the company’s employees. This would mean that the EOR would handle the employees’ payroll, tax withholding, benefits administration, and other HR-related tasks. Using this function of an EOR would allow the hiring company more time to focus on its core functions of its business, while the EOR would manage all of the employee-related matters.
1.2. Compliance
One of the essential functions of an EOR is ensuring that all legal compliance related matters are addressed when hiring employees from a foreign jurisdiction. This is crucial when hiring international talent, as it is critical that employers adhere to laws and regulations of the foreign country in which they are hiring from. An EOR takes care of all this, as they have conducted all relevant research and have pre-determined procedures in place to deal with onboarding of foreign employees.
1.3. Benefits
An EOR ensures that employees receive their prescribed benefits under their employment contract. These benefits can include health insurance, retirement plans, annual and sick leave, etc. Having prescribed benefits are one of the best ways to attract and retain top talent to your company.
1.4. Labor law (risk management)
EORs also come equipped with a labor team that manage all labor-related queries, which include onboarding and compliance related matters. These labor teams are often seasoned professionals specializing in labor law, and are there to deal with any potential legal disputes, including employee terminations, resignations, unemployment claims, or any issues that cannot be resolved internally.
1.5. Cost savings
The use of an EOR can be expensive in some cases, as EORs take on a sizeable responsibility on behalf of a company. However, despite this price, some EORs can be more affordable than hiring smaller businesses that may not have the resources to manage the HR functions in-house or navigate complex employment regulations independently.
Overall, an EOR acts as a partner for businesses, helping them manage their workforce more efficiently, navigate complex HR and legal landscapes, and allow the hiring business to focus on the more core aspects of its business operations. EORs can be incredibly useful and beneficial in employers who intend on hiring internationally. They are also incredibly useful to those companies who are hiring international talent for the first time, and who are unsure as to all the processes and procedures to be followed in a foreign market.
2. Independent Contractor
An independent contractor is a person or business entity that provides goods and services to another individual or company under the terms of a contract or agreement. Independent contractors are not employees of the company as they manage and operate their owner separate businesses or entities. They are often referred to as ‘self-employed’ or ‘freelancers’. Independent contractors, like an EOR, have key characteristics, including the following:
2.1. Separate Business Identity
Independent contractors have a completely separate legal identity to the company they provide their services to. They generally self-employ themselves and operate their own businesses entirely. They are not at all considered employees of the companies that have hired them for their services.
2.2. Contractual Agreement
Independent contractors have more freedom and independence in terms of their agreements and their contractual obligations. This is due to the fact companies outsource services to independent contractors, meaning they have more flexibility in the way in which they perform their tasks and duties.
2.3. Taxes
Independent contractors, unlike employees of a company, are responsible for paying and managing their own taxes, which includes income tax. Independent contractors receive compensation without tax withholding, and they may need to make estimated tax payments to the government.
2.4. Benefits
Independent contractors do not typically receive benefits, unlike employees of a company. They are not entitled to benefits such as health insurance, retirement contributions, or any paid annual or sick leave. They are responsible for providing their own benefits.
2.5. Flexibility
Independent contractors have more flexibility in their work schedule, as well as flexibility in the way in which they complete their work. Independent clients, unlike employees, are able to work with multiple clients simultaneously and have more control over their schedules. They also often take on project-based work with a set duration. They do not usually have an indefinite work period like regular employees.
Hiring through the use of an Independent Contractor has its own benefits, as companies usually save in money and time, as they do have the same legal obligations to them as they do their employees. Hiring Independent Contractors can also prove to be uncomplicated administrative wise, as the burden to manage aspects such as taxes and HR mostly fall onto the Independent Contractor. In general, this is an ideal alternative to companies wishing to hire global talent, as it is a low-risk, low-cost option that could breed incredible possibilities.
3. Companies
The final way in which companies can hire is through the use of a subsidiary company. This is not the most ideal option, as most companies do not have the financial means to establish a new company in a foreign territory. However, this option, if available to an employer, is the most logistically sound option available, for various reasons. These include the following:
3.1. Local Presence
The main advantage of having a subsidiary is the local advantage it presents. As the subsidiary is already established in the foreign jurisdiction, it has pre-established systems in place, and has already built a rapport with local partners, customers, and suppliers.
3.2. Legal Separation
A subsidiary is a separate legal entity from its parent company. This separation can be key in protecting the subsidiary against certain liabilities incurred by the parent company. Further, due to its separate legal identity, the subsidiary can also create its own brand presence and process, to be more compatible with the market that it is established in.
3.3. Access to local markets
Setting up a subsidiary allows companies to tap into a local market, essentially allowing companies to access a broader range of employees and skills otherwise unavailable to them in their local jurisdictions.
3.4. Employment Control
One of the greatest advantages to hiring an employee through a subsidiary is the control in process this offers. Hiring through subsidiaries allows employers the opportunity to manage the entire recruitment process, including sourcing of candidates, negotiation of contracts, as well as performance management. This can be invaluable to maintaining consistent business operations and quality standards.
3.5. Cultural Understanding
Hiring through a subsidiary allows a company the benefit of an in-depth and personal outlook on the local culture. Understanding the culture of a foreign jurisdiction will allow a company to be able to better understand local markets, consumer behavior, as well as their employees or any potential candidates. This is incredibly beneficial to making informed decisions and adapting strategies accordingly.
Essentially, hiring through a subsidiary provides significant value to an employer looking to broaden their global footprint, as well as to diversify their workforce. Having a subsidiary in a foreign jurisdiction can give a company a competitive advantage in that they are expanding their market and consumer reach. Further, setting up a subsidiary, although costly, can provide tremendous long-term value to a company. All in all, a subsidiary, if not already established, can prove to bean incredibly useful alternative to hiring employees in a foreign jurisdiction.
How can we help?
Remote Talent is an all-inclusive recruitment agency that specializes in hiring in South Africa. Not only is South Africa a country rich in diversity, but it is a destination teeming with exceptional and competent professionals. At Remote Talent, as part of our recruitment services, we offer our clients the option to utilize the services of our Employer of Record service. Our Employer of Record service manages all HR, payroll, tax, and legal compliance matters so that all our clients need to focus on choosing the right candidate. For more information regarding this service, please book a call with us for a free consult to find out more!
Conclusion
Hiring talent abroad offers a wealth of advantages to companies. Not only does it reduce recruitment costs, but it provides companies with the opportunity to expand their talent-base, as well as to diversify their workforce. South Africa is the perfect place to find all of that, as it is a country full of brilliant and highly skilled professionals, who provide top quality services at an affordable rate.
