South Africa

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in South Africa, outlining the potential cons.

HQ country employment & payroll
What it is: While the person is in South Africa, they are employed and payrolled directly by the company’s HQ entity.
Cons: This may appear attractive, but it generally isn’t legal in the long term. Also, HQ payroll won’t be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements
What it is: People are locally registered as sole traders or limited liability company owners in South Africa and invoice for their work. There is no direct employment relationship.
Cons: In South Africa, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup
What it is: The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record or full-service Professional Employer Organisation
What it is: Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

Generally, the process of registering a company with the Companies and Intellectual Property Commission (CIPC) in South Africa can take anywhere from a few days to a few weeks, depending on the complexity of the company structure and the completeness of the application.

However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, and changes of rules and regulations followed.

While many employers practice employing remote workers as independent contractors, it’s a bad practice. If an individual is giving their full and undivided attention to your company in South Africa, treating them as an independent contractor is likely a breach of South African employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefits, maternity benefits, or other legal measures. Since the individuals you are working with do not receive the benefits of local employment laws and protections that are often afforded to people working full-time hours.

When you hire employees in South Africa, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices.

Complying with local employment law in South Africa is fundamental for the correct running of your business – not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but also to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, and working hours regulations.

As with every other country, there are certain costs associated with employing a worker in South Africa that come on top of the gross salary you are offering. In South Africa, those are the Unemployment Insurance Fund (UIF), the Skills Development Levy (SDL) and Compensation for Occupational Diseases.

To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

It means that Boundless is the legal employer of the individual, as far as the South African government, tax, and employment authorities are concerned.

We are responsible for:

• informing you about any pre-employment requirements
• ensuring employment is compliant with South African employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers that work with an Employer of Record in South Africa are responsible for:

• sourcing and recruiting their own workers
• managing the employee’s day-to-day workload
• contributing to the personal/professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in South Africa, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless as the Employer of Record files all pertinent taxes and UIF, SDL and other contributions as they relate to the compliant employment of an individual in their home country.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including South Africa. They ensure the South African employment contracts and any other relevant documents required for new employees comply with the local jurisdiction.

We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice periods or work-from-home regulations. Whenever a potentially sensitive issue arises in South Africa, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

The company remains responsible and informs employees of the day-to-day management of the people and teams employed through Boundless, including any disciplinary or performance issues. Boundless ensures compliance with South Africa-specific procedures, practices, and labour laws while employing people and teams on behalf of the company.

Any new employee who is locally employed through an Employer of Record gets full employment rights and benefits as specified in South African employment law. They get a locally compliant employment contract, statutory parental leave, annual leave, illness benefits, any relevant tax credits, and many more.

Healthcare is not a requirement under South African employment law, and medical aid and disability benefits are both commonly provided for by South African employers as non-mandatory benefits.

In South Africa, both employers and employees have to pay taxes. For employers, these include three social security contributions toward the Unemployment Insurance Fund (UIF), the Skills Development Levy (SDL) and Compensation for Occupational Diseases.

For employees, they include income tax via PAYE and contributions to the Unemployment Social Fund. To get a clear overview of both employee and employer taxes, use our salary breakdown calculator .