ENGAGING SOUTH AFRICAN TALENT THROUGH AN EMPLOYER OF RECORD

South Africa (SA) is a country full of diverse and highly skilled professionals, known for their work ethic, adaptability, and global perspective. These qualities make SA talent immensely valuable to businesses across the globe. SA talent is becoming increasingly sought after in the international job market. In the context of today’s remote-first world, where borders are less relevant and skills are what matter, South African professionals offer a powerful combination of education, work ethic, language proficiency, and global acumen.

Whether a company pursues SA talent and or expands into SA, there are three main routes to engage employees. These are setting up a local entity, engaging an Employer of Record (EOR) or contracting independently. Each approach offers a different balance of control, cost, and compliance responsibilities. The right choice is subject to the demand in the country, company’s hiring goals, and infrastructure.

Local Entity Setup

Setting up a local legal entity provides a company with full and direct control over operations, payroll, and employment terms. This option is feasible where the company is planning to hire a larger team or establish a long-term presence in SA, however it also comes with a high level of responsibility for compliant administrative filing and a thorough knowledge of employment laws. The company would need to register with the Companies and Intellectual Property Commission (CIPC) and the South African Revenue Service (SARS) for Pay As You Earn (PAYE), transfer contributions to the Unemployment Insurance Fund (UIF), and the Skills Development Levy (SDL).

The company would need a local bank account and payroll system that aligns with taxes in South Africa and conditions that comply with the Basic Conditions of Employment Act, 75 of 1997 (BCEA), a SA law that defines minimum employment standards and protects workers’ rights. As employment laws in SA is highly regulated, the company would need to resource a highly skilled team to ensure that risk associated with employment is managed and mitigated.

Employer of Record

The EOR solution accelerates market entry, enabling companies to onboard, remunerate and direct employees across the globe quickly and efficiently. EOR’s enhance workforce flexibility, making it easier to scale teams up or down in response to changing business needs. Partnering with an EOR supports faster expansion, improved compliance confidence, and operational efficiency making it a strategic enabler for companies looking to grow across borders, avoid upfront cost and administration incorporation. An EOR and the employer have different roles and responsibilities. The employer is not outsourcing the employer responsibility but rather outsourcing compliance. By understanding the roles played by each party in this relationship will help to avoid labour disputes, compliance penalties and any unexpected liability.

■ Fees and change control, which includes a transparent fee structure, notice for changes and currency handling An EOR operates as a compliance provider on behalf of the employer and is registered with the SA compliance authorities i.e. SARS for the payment of PAYE, UIF and SDL. The EOR manages compliant onboarding, benefits, plus payroll processing with all statutory requirements accounted for. This includes PAYE deductions, contributions to the UIF, and Skills Development Levy (SDL) filings with the South African Revenue Services (SARS). An EOR structure protects the employer from local compliance breaches by submitting accurate and timeous reporting to authorities. An EOR galvanizes the employer-employee relationship by facilitating an engaging onboarding process, aligning the employer obligations and the employees’ rights. It is best practice to have the employer initiate the terms and conditions of the employment agreement with the employee; in this way both parties understand what is expected from the onset of the employment relationship. A key role of the company is to direct the employee’s day-to day activities from the date of engagement, managing their performance during and after the successful completion of the probation period and managing ongoing behaviour through consistently applying fair policies and processes and cultivating an engaging work culture. An invested employer retains an employee where the employee feels valued and engaged in a distributed workforce.

Independent Contractors

The foreign entity when seeking SA talent may opt to work directly with the individual and not work through an EOR. This arrangement would require a service level agreement between the parties. The individual in this instance would be a juristic entity where the engaging company would pay the individual in line with the terms agreed by the parties.

The individual would in this instance be responsible for their own statutory compliance and filing to SARS in order to remain a legitimate entity. The individual would thus be a service provider to the company. The main distinction between an employee and an independent contractor lies in the nature of their working relationship.

An employee works directly for the organization on the agreed terms of the employment contract, follows its directives, and is usually hired for an indefinite period. An international contractor operates independently, follows a contractual agreement, and is engaged for a specific project or timeframe. Companies have limited or less control over an independent contractor service provider when compared with an employee.

Independent contractors may not have the same level of loyalty or commitment to the company’s long-term objectives, as their primary focus is on completing the contracted assignment. This may affect their dedication and alignment with the company’s values and culture.

How Does an EOR Work In South Africa

The company engagers with local talent in SA and partners with the local EOR to onboard the employee. The EOR is a thirdparty service provider to the employer. The company and the EOR agree to terms that govern their relationship by way of a commercial services agreement which sets out the following:

■ Scope and service standards: onboarding, payroll accuracy, statutory filings, reporting cadence and response times

■ Confidentiality: watertight assignment provisions and ongoing confidentiality obligations

■ POPIA and data protection: roles of the parties, security standards, breach notification and audit rights

■ Liability and indemnities: where errors cause tax underpayments, visa issues or misapplied benefits

■ Right to work and background checks: clarifying the roles of each party in the process, third party appointments and specialisation requirements, pre-employment verification standards

■ Due diligence protocols: handles grievances, performance processes and terminations

An EOR offers organisations a streamlined, low-risk pathway to resourcing talent globally and significantly reduces administrative burden and mitigates legal risks.

This allows businesses to focus on core operations and growth rather than navigating unfamiliar regulatory environments. Speak to us at DRG, we are a professional EOR service provider with a passion for the work we have been doing for international companies and their employees for over 30 years.

Contact us at:

T: +27 (0)31 767 0625

E : info@drg.co.za

W: www.drg.co.za

View eBook