EOR Basics
If you’re hiring employees in South Africa, an EOR can be critical to your success. Here are six reasons why.
Outsourcing in South Africa can be fraught with risks. Using an Employer of Record can mitigate some of the worst of these risks and help you build a team of South African professionals who can give you all the tools you need to be successful. In this article, we’ll show you why this option could be the cheapest, fastest, safest, and most effective to support all your overseas employees.
1 Cost
The first and most common reason is the cost. Hiring employees in South Africa can be expensive. Traditionally, you’ll need to set up a foreign subsidiary to act as the employer and hire an entire support team of HR experts, administrators, and a legal team to handle all the details of each employee. Costs can escalate, making it a major undertaking with no guarantee of success.
Hiring staff through an employer of record, meanwhile, avoids all that. The EOR is registered as the legal employer for tax purposes, which negates the need to set up a costly foreign subsidiary and support team. You can just sign a contract with the EOR and get to work.
Some will argue that the overall cost of an EOR per employee might be higher than hiring directly. You’ll have to pay the EOR’s passed-on costs, such as wages, employee benefits, and employer-side taxes, as well as a service fee to manage the employee. However, you don’t need to hire any admin team or incur the costs of setting up a business. Whether using an EOR for the short term to cover an initial market entry or the long term, it represents excellent value for money.
2. Speed
An EOR is great for those companies that need to hire quickly and get moving. There is little setup required and no legal work establishing the legal liabilities and responsibilities of each entity. In most cases, you simply have to contact the EOR, tell them how many employees you need and in which sector, and you can be ready to go. In some cases, they will already have the employees in place to be assigned. In others, they might need a little longer to recruit the workers you need. This can often be done in collaboration with you to give you as much of a say as possible in the selection process as possible.
Overall, though, it is much faster than other options. Direct employment requires a recruitment drive with systems being set up to manage the employment and make sure they receive all benefits and entitlements, as well as that all laws are fully complied with. Professional Employers Organisations, which are often thought of as being similar to EORs, have uncertainties about employment status and obligations that have to be ironed out in the contract. With an EOR, you don’t need to worry about any indirect costs or administrative work. The EOR manages that all for you.
3. Flexibility
This speed also lends itself to flexibility. Hiring and firing employees directly takes time. There are processes to be followed, and you need to ensure each employee is treated fairly and by the law. With an EOR, you can scale options up or down as you need, making it a great option when expanding into new markets.
Any venture into an unfamiliar market comes with risks. Depending on the business, you may find yourself with too many or not enough employees. If things are going better than expected, you’ll naturally want to scale up as quickly as possible. Likewise, if you experience a lull, you might want to cut back. An EOR makes the entire scaling process much quicker and easier, enabling you to react to uncertain market pressures in a more agile manner
4. Legal protection
With the EOR taking on the status of the legal employer, they also protect you from legal liability. Entering a foreign market can be difficult. Even with the best will in the world, mistakes can happen. Without a full understanding of regulatory requirements, mistakes can be made.
Some of the most common in South Africa revolve around worker classification and employee rights. South Africa’s history means it tends to have stronger rules surrounding racial equality and affirmative action than most in Europe. It’s easy to miss small details that can lead to unintentional compliance issues.
When moving freelance working relationships into more routine and regular engagements, companies can find themselves accused of disguised employment practices – namely, the practice of attempting to present employees as freelancers to reduce exposure to taxes and PAYE requirements.
An EOR can cut out the ambiguity in these relationships and make sure everything is run in full accordance with the law.
5. Specialist knowledge and technology
Using an EOR gives you access to trained HR professionals using the latest state-of-the-art technology. The better quality EORs, for example, may offer dedicated HR software that provides much more granular data for each employee. This gives you much greater oversight of the working relationship and enables you to tailor your recruitment strategies much more effectively.
The experts within the EOR will have a comprehensive understanding of the latest developments in employment law, including the best way to file reports and the expectations of regulators. It avoids any risk that you may unintentionally fall behind expectations.
6. Sourcing new talent
Last but not least, the main reason for moving into a new market is to broaden your access to talent. A global workplace means you needn’t be constrained by the talent available in your local area. You can reach out to other countries where professionals might be more affordable and available. In South Africa, labour costs can be as low as half those in the UK, and with jobs being harder to come by, there is a healthy reserve of highly qualified and capable professionals eager for work.
The local expertise of an EOR can help you source and recruit professionals with the skills you need. It’s a fast, effective, and affordable way to bring the skills you’re looking for into your company.
