EOR Basics
Want to find top talent without crippling your finances? Try using an EOR to build an overseas team in South Africa.
A business lives and dies by the talent it recruits, so the saying goes, and in a high-tech world, that’s seldom been truer. Businesses need talented professionals across a wide range of disciplines in order to thrive. However, talent comes with a price, and for many small and medium-sized businesses, that’s a price they can ill afford.
As business goes digital, the range of skills companies need is growing, but those people with the skills needed to transform your business operations are in high demand. If your recruitment is limited to your immediate surroundings, you may struggle to find people with the skills you need at a price you can afford.
The need to deepen talent pools is pushing many businesses to look overseas and build multi-disciplinary teams in separate countries, such as South Africa. Here, a combination of widely available skills and lower labour costs makes it possible to access the skills your business needs to thrive. With companies now routinely managing teams of people in separate countries, business structures such as employers of record are becoming more important.
Why South Africa
For hiring companies, South Africa represents virtually the perfect proposition. It’s a place where you can find highly skilled professionals to fill any gaps in your team. With domestic unemployment remaining stubbornly high, especially among the young, those professionals are freely available.
South Africa is a country on the up. It has invested heavily in its education and, as a result, has successfully fostered a generation of ambitious, highly qualified young professionals across all sectors, including finance, the law, marketing, technology, customer support, and many others.
This workforce is big on ambition, but low on opportunities. It is highly skilled but without the employment opportunities they need to kickstart growth. As such, both they and the South African government are looking overseas for opportunities.
For young professionals, foreign companies represent a chance to find high-paying and rewarding jobs. For the government, bringing those overseas jobs into the South African economy is a way to give that young workforce the opportunities it craves and prevent them from moving abroad to find them. It keeps talent within South Africa, fostering sustained and prolonged growth.
Why EORs
To achieve that, employers of record and other similar structures have an incredibly important role to play. By serving as employment intermediaries, EORs lower the barrier to entry for foreign companies and make it cheaper, faster, and easier to build a team in South Africa.
An EOR serves as the legal employer on behalf of foreign companies. From a legal perspective, it employs staff, pays their salaries, handles PAYE, draws up contracts, files reports, pays taxes, and provides all legal entitlements. However, the actual work done will be for a foreign company.
As a hiring company, you will manage the working life of these employees. You will assign tasks, monitor performance, and provide feedback on the work done. In all practical respects, it will be just like working with any other employee, except for the fact that the EOR handles all the admin. It’s like having an outsourced HR team that also has full legal liability for your employees.
The obvious benefit of this approach is that it removes the need to set up a legal entity with all the work and expense that comes with it. Traditionally, you would need to have a foreign subsidiary through which you can employ your South African-based workers. This is slow, expensive, and will quickly counteract any money you save on lower South African salaries.
Setting up a subsidiary represents a sizeable commitment. You need to determine how many staff you will need, and also recruit support teams of administrators, HR professionals, and legal professionals to make sure the employment is managed correctly.
If you get staffing levels wrong, putting things right can be difficult. Hiring people takes time to source, screen, and interview potential candidates. Likewise, reducing staffing levels poses legal complexities with full redundancy procedures to be followed.
With an EOR, you can scale staffing requirements up or down as needed. It’s perfect for companies that need to move quickly or those that have fluctuating or uncertain recruitment needs.
Managing freelancers
When building an overseas team, freelancers will play an important role in delivering critical services on an ad-hoc basis. South Africa has become a popular source of talented freelancers for UK businesses looking to find high-quality professionals at a more affordable price than their UK counterparts.
Freelancers are generally relatively easy to work with. They handle all their tax and accounting obligations. All you have to do is oversee the work and make sure invoices are paid on time. However, if you begin to work more regularly and if you build up a team of freelancers, they will need to be managed, not least to make sure they are classified correctly.
To manage teams of freelancers and contractors, you can use an Agent of Record (AOR). They will simply manage the administrative work involved with hiring and maintaining freelance contracts. They can assist with talent sourcing, background checks, onboarding, and the payment of invoices.
For hybrid teams incorporating both freelance and full-time workers, some EORs will combine an AOR function for those contractors. This helps you keep your entire workforce in one place and gives you the benefit of expert advice about whether to move freelancers into a full-time contract.
Looking to the future
Moving forward, the world of work is changing. For all the technological innovation coming onto the scene from machine learning and AI to the cloud, the key to success will always be bound up in the quality of your team. Getting access to top talent, be it on a permanent or freelance basis, is critical if your business is to thrive.
South Africa’s unique market characteristics represent an incredible opportunity to access talent that might not be available in your domestic market. It helps you broaden your horizons and operate on a completely different scale.
