How to Hire Remote Employees In

South Africa

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The Basics

Currency
South African Rand (ZAR)
Employer Taxes
2%
Payroll Frequency
Monthly/Bi-Weekly/Weekly
Official Language
Afrikaans,English
OVERVIEW

Employment in

South Africa

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors

  • Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
  • Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
  • Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.

Disadvantages of Hiring Independent Contractors

  • Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
  • Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
  • Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
  • Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.
EMPLOYMENT IN
South Africa

Set up a subsidiary in

South Africa

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in South Africa can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in South Africa, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for South Africa.

EMPLOYMENT IN
South Africa

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Hire with Panther

Paying Remote Employees

Paying employees in South Africa is not the same as paying workers in your own country. Employees have to be paid using South Africa's employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

South Africa

 Specific Information

Working Hours

Full-time employment is considered 45 hours weekly, and 9 hours daily.

Overtime

Up to 10 hours overtime per week is permitted. Employees earning below the threshold (R 205,433.30 per year) must be paid 150% of their normal wage for overtime worked on weekdays and 200% for Sundays. 

Employees who earn in excess of the threshold (R 205,433.30 per year) are not subject to overtime pay. However, the employer cannot force employees to work overtime without compensation unless the employee agreed to this. 

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Taxes

Payroll Tax

Employer

2%
- Employer Contributions

Minimum Wage

The minimum wage in South Africa is 20 ZAR an hour.

Payroll

Pay Cycle

There is no set pay date in South Africa, this typically is something that the employee and employer come to an agreement on. The payroll cycle can be done monthly, weekly, or bi-weekly.

13th Salary

There is a 13th salary in South Africa, paid in December.

Leave

Paid Time Off (PTO)

The minimum mandatory annual leave in South Africa is 15 workdays and it is accrued monthly at a rate of 1.25 days per month. 

Public Holidays

There are 13 public holidays in South Africa.

Sick Days

In South Africa, sick leave is based on a 36–month cycle.  

For the first 6 months of employment, the employee is entitled to 1 day of sick leave for every 26 days worked. From the first day of the 7th month, the employee receives:  

  • 30 days if they work a 5-day work week or  
  • 36 days if they work a 6–day work week  
  • 33 days if an employee works Monday- Friday and a Saturday every 2 weeks, but does not apply to employees who work less than 24 hours a month. In this case, sick leave would need to be determined when negotiation the employment contract.   

The number of sick days taken is subtracted from these amounts to come up with the total number of sick days the employee is able to take.   

At the end of the 36–month cycle, the number of sick days resets.  

If the employee is absent for more than 2 consecutive days, they must produce a medical certificate.  However, if the employee is sick from Friday to Monday, this is not considered consecutive days of sick leave, and are not obligated to produce a medical certificate.  

During a leave due to illness, the employee is entitled to full pay and cannot be terminated so long as they have a medical certificate.

Maternity Leave

In South Africa, a woman is entitled to 4 months of unpaid maternity leave.

This entitlement can begin from at least 4 weeks before the birth.  However, If the woman is not able to work due to her medical condition, it is possible to begin the leave earlier.

The employer is not obligated to pay the employee for maternity leave. Instead, a claim can be made from the Maternity Benefit Fund if contributions have been made to the Unemployment Insurance Fund (UIF).  The maximum the employee is able to receive from this benefit is 60% of their regular pay and are paid for 121 days.

Paternity Leave

Paternity falls under Parental leave.

Parental Leave

Fathers are entitled to 10 days of parental leave, paid by the UIF at a rate of 66% of the regular pay.  For the father to exercise parental leave, they must inform their employer in writing at least one month before the expected due date of the child. This leave also applies to adoptive fathers

Termination

Termination Process

In South Africa, employers are not able to terminate an employee at will, but can be dismissed for the following:

  • Misconduct– usually given without notice
  • Incapacity (health or poor performance)- termination due to poor performance is usually given after the employee receives an opportunity to meet his or her performance standards.
  • Operational requirements of the company

When the employee and employer would like to separate amicably, a separation agreement is common.

Notice Period

Both the employee and employer must follow the same notice period based on the length of the employment relationship:

  • 6 months or less – 1 weeks’ notice
  • 6- less than 1 year – 2 weeks’ notice
  • More than 1 year- 4 weeks’ notice

For farm and domestic employees, the above notice periods must be followed and may not be shortened.

It is possible, however, to shorten the notice of 4 weeks to no less than 2 if stated under a collective bargaining agreement for other types of employees.

Severance Pay

If the employee is terminated due to poor performance or misconduct, the employee is not entitled to provide severance pay.

If the employee is terminated due to operational requirements, the company is obligated to pay the employee one week’s severance pay for every year employed.

Probation Period

3 months is the common practice.