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When outsourcing to South Africa, an employer of record service can be a crucial partner.
South Africa is quickly becoming an outsourcing hub for the world. Its attractive combination of high-quality services and affordable labour costs has seen this market take off in recent years. However, hiring and managing staff in South Africa can be complicated with an intricate network of laws and regulations to navigate. For foreign companies, it can be all too easy to make a mistake. That’s why your company could benefit by working with an Employer of Record.
An Employer of Record is a third-party company based in South Africa that manages the administrative and practical duties of managing your South African-based workers.
The EOR serves as the legal employer of those workers, which means they have full legal liability for complying with all regulations and making sure all relevant taxes have been paid.
Because the EOR assumes the status of a legal employer, it protects your company from any legal or compliance risks. Given the complexities of South African employment law and the need to keep up with the latest developments, it’s all too easy for foreign companies with limited sector knowledge to make mistakes.
With the EOR taking on the status of employer, you don’t need to set up a foreign subsidiary as might previously have been the case. Now you can simply pay the EOR a fee and focus on the work.
EOR companies can be found across all industries and can theoretically work across any industry and time frame.
An EOR offers a fast, convenient, and compliant route to growth.
The EOR market has surged in recent years, driven by increased globalised expansion, improved technology and a growing appetite among companies in the West to reach out into the African market.
By the end of 2023, the EOR market in South Africa had reached 35% of all EOR services in Africa, indicating South Africa’s growing reputation as an outsourcing hub.
As technology continues to develop, the EOR sector is set for continued growth as it moves into other industries beyond those normally associated with business process outsourcing.
South Africa is rapidly making a name for itself as an attractive location to source high-quality professional workers.
Labour costs are between 50 and 70 the levels found in Western economies such as the US, UK and Europe.
High-quality professionals such as financial consultants, graphic designers or software developers at a fraction of the cost of their counterparts in the West.
South Africa’s location is perfect for both the European and Middle Eastern economies, with only a few hours’ time difference between them.
English is widely spoken with a clear and neutral accent that is easy for people to understand. In customer service operations, there will be no misunderstandings that have caused so much frustration when operations have been outsourced to other non-English speaking locations.
South Africa’s culture contains many similarities with the West, with plenty of familiar reference points making it easier to forge closer and more profitable customer relationships.
State-of-the-art technology makes communication quick and simple. Collaboration with a professional in South Africa is as easy as with any remotely based domestic employee.
South Africa’s commitment to quality comes with strong levels of government, strong action against fraud and best-in-class cyber security measures.
All in all, South Africa offers an excellent source of talent, at an affordable price and robust infrastructure facilitating seamless collaboration.
An EOR gives you an affordable and convenient route to access this market and grow your business.
Moving into a new market is expensive and risky. Traditionally, businesses needed to set up a foreign subsidiary and recruit a locally based team of administrators, legal experts, financial and HR assistants. They would also need local marketing professionals to help adapt the business proposition to the new market.
All this comes at a cost and involves a high risk of failure. Working with an EOR is a great way to dip your toe in the water and test market conditions before moving forward.
When hiring staff in a foreign country, it can be difficult to adapt to the local rules, culture and requirements.
South Africa’s labour market differs significantly from the UK’s. Labour laws are relatively liberal with strong protections for worker rights. Equality requirements are also particularly strong with provisions for affirmative action. Trade unions can be pretty strong, and penalties for non-compliance with the rules can be hefty. Authorities will have their expectations about how reports should be made. Legislation changes every year, and keeping up with updates can be challenging.
South Africa’s main labour law is the Labour Relations Act (LRA), which governs the interaction between employers and employees. It covers provisions such as:
The Basic Conditions of Employment Act (1997), meanwhile, covers provisions such as:
As in your domestic market, your company must abide by all regulations. These can be subject to change and have certain complexities that can be hard to nail down.
You need an expert, and an EOR can provide ongoing expert support to help you fulfil all your obligations and to avoid any unintentional compliance issues.
When choosing an EOR to be your partner, you should consider several factors.
At Future Teams, we offer a comprehensive range of services and support tailored to your company, including cutting-edge technologies. Give our team a call today to discuss your requirements.
When you use an EOR, they will pay your employees directly. They make money by charging fees to you. The way these are structured will vary from one provider to another, but will generally include:
Each EOR will have its policies regarding fees. It’s important to make sure you’re clear at the start of the contract about what fees will be charged and how they are calculated.
When determining the cost versus rewards of an EOR, many people will point to the fact that you’re paying more than the individual’s salary of that employee.
However, this should be set against multiple savings through the lack of a legal entity. You’ll save on office costs and equipment, as well as the logistical challenges of maintaining a physical presence in the country.
You also optimise your costs by enhancing the focus of your operations. Running a local subsidiary can distract you with low-value administrative tasks such as HR and other duties.
By handing all of this over to an EOR, you can keep your eyes on the prize and focus on your core business activities. It’s more profitable and rewarding for your company and will continue to save money in the long run.
An EOR will offer the following core services:
Recruitment and onboarding: support hiring staff, drafting employment contracts and managing the onboarding process.
All the while, the EOR provides risk mitigation solutions by protecting you from any regulatory penalties. It serves as the legal employer, but you retain full control over the working relationship.
Aside from EORs, there are several different support options you might consider.
Each of these has its benefits depending on your company’s situation. To find out what works for you, feel free to contact one of our friendly advisers.
The market is moving forward rapidly, and as it does so, the role of an EOR is evolving. With high-tech solutions becoming the norm, today’s generation of EORs can offer cutting-edge technologies, unrivalled levels of personalisation and ongoing support.
Whether supporting you through the early days of a foreign expansion or serving as a long-term trusted partner, an EOR can help you get the most out of your EOR operations.
At Future Teams, we offer a host of EOR and outsourcing services to clients around the world. To find out more, feel free to download this handy guide or speak to a member of our team today.
