Using an employer of record in South Africa

South Africa offers global companies a great chance to grow their teams. It has a large, educated, and English-speaking workforce. 

However, navigating local employment regulations, tax compliance, and payroll processes can be complex and time-consuming for companies.

That’s where an Employer of Record (EOR) in South Africa comes in. Working with a South African EOR offers businesses a fast and compliant solution for hiring in South Africa. 

Whether you are a startup, a scaling SaaS company, or a large enterprise, this guide walks you through the key aspects of hiring, paying, and managing employees in South Africa. Plus, we cover how EOR services can help efficiently and compliantly grow your global team.

How to hire employees in South Africa

When expanding your team in South Africa, you have three main options to hire employees:

• Set up a local legal entity: Establishing a company in South Africa allows you to hire employees directly under your own entity. This process requires significant time, legal expertise, and administrative effort to comply with local registration, tax, and labor laws.
• Hire independent contractors: You can engage contractors who provide services on a freelance or project basis. This option offers flexibility and fewer compliance obligations, but misclassifying employees as contractors can come with fines and legal trouble.
• Hiring with an EOR in South Africa: An EOR acts as the legal employer for your hires, managing payroll, compliance, benefits, and contracts on your behalf. This option enables you to onboard full-time employees and contractors quickly and compliantly without setting up a local entity.

By choosing an EOR South Africa service like Payoneer Workforce Management (WFM), your company can accelerate growth, reduce risk, and focus on managing your team’s performance and goals while the EOR handles all employment-related administration.

For more details on hiring options and processes, read our guide on hiring employees in South Africa.

Partnering an employer of record in South Africa

An Employer of Record in South Africa acts as the legal employer for your South African employees. This means the EOR handles all employer obligations such as compliance with labor laws, payroll processing, tax withholding, benefits administration, and statutory reporting. 

You maintain full control over the employee’s daily work, performance management, and business direction, while the EOR manages all legal and administrative requirements.

The key responsibilities of a South African EOR include:

• Drafting compliant employment contracts aligned with local laws
• Managing statutory deductions, including income tax, unemployment insurance, and pension contributions
• Helping you stay compliant as per the Basic Conditions of Employment Act and other labor laws
• Handling payroll and employee benefits like leave, bonuses, and health insurance
• Administering work permits and visas for foreign nationals
• Managing employment termination and severance processes when needed

Partnering with an EOR in South Africa is convenient for companies wanting to hire quickly and avoid registering as a legal entity. It enables businesses to enter the market quickly, mitigate compliance risks, and accurately manage employee payments and benefits.

How to onboard employees in South Africa

Onboarding remote employees in South Africa requires a structured process to stay legally compliant while providing a positive experience for employees. 

Typically, onboarding includes:

• Collecting key documents such as proof of identity, tax number, banking details, and signed contracts
• Setting up payroll and benefits enrollment
• Providing orientation on company policies, labor rights, and workplace culture
• Registering employees with statutory bodies such as the South African Revenue Service (SARS) and the Unemployment Insurance Fund (UIF)
• Offering training and communication tools to integrate remote staff effectively

Using an EOR in South Africa simplifies onboarding by managing these tasks centrally and efficiently, reducing your HR burden and speeding up time to productivity. 

Pay employees in South Africa

Paying employees in South Africa requires compliance with local payroll laws and tax regulations. Employers typically pay salaries monthly, aligned with the South African fiscal year from April 1st to March 31st.

Salaries must meet the national minimum wage, which varies by skill level. Employers can give bonuses, but must follow contract terms.

Employers are responsible for deducting and contributing to several mandatory taxes and funds, including:

• Income tax: Employers withhold Pay-As-You-Earn (PAYE) tax from salaries and submit it to the South African Revenue Service.
• Unemployment Insurance Fund (UIF): Both employer and employee contribute 1% of an employee’s salary to UIF, which supports employees during unemployment, maternity, or illness.
• Skills Development Levy (SDL): Employers pay 1% of total payroll to fund skills training programs.
• Pension contributions: Often offered but not legally required.
• Health insurance and other benefits: Vary by company.

Using an Employer of Record in South Africa ensures seamless payroll processing and compliance with tax deductions and contributions, saving time and minimizing risk.

Employment laws in South Africa

Several key labor laws govern employment in South Africa, including:

• Basic Conditions of Employment Act (BCEA): Sets minimum standards for wages, work hours, leave, and termination
• Labour Relations Act (LRA): Governs collective bargaining, dispute resolution, and unfair dismissal
• Employment Equity Act: Promotes non-discrimination and affirmative action in the workplace
• Skills Development Act: Encourages employee training and skills development
• Occupational Health and Safety Act: Ensures safe working conditions

Key provisions include:

• Standard working hours are limited to 45 hours per week.
• Overtime pay is required for hours beyond agreed limits.
• Probation periods of up to 3 months are commonly used to assess employee suitability.
• Protections are outlined against unfair dismissal, discrimination, and harassment.

Employers need to stay updated with changes to these laws to avoid legal issues. Partnering with an EOR in South Africa helps stay compliant with all employment laws and regulations.

Minimum wage in South Africa

South Africa has a national minimum wage updated annually to keep pace with inflation and living costs. The minimum wage is approximately ZAR 28.79 per hour (around $1.62 per hour). 

The minimum wage does not vary by region, but it can differ slightly for specific sectors or types of workers, such as domestic workers or farm laborers. 

There is no official differentiation between the minimum wages for unskilled and skilled workers, but collective bargaining agreements can set higher minimums in certain industries.

Staying compliant with the latest minimum wage rates is critical to avoid penalties. EOR services in South Africa can help you automate pay rate updates, so you always meet local standards.

Employment contracts in South Africa

While oral employment agreements are legally recognized in South Africa, a written employment contract is strongly recommended for clarity and legal protection. 

Contracts should specify:

• Type of contract (fixed-term or indefinite)
• Employment start date and probation period
• Compensation details, including salary, benefits, and bonuses
• Working hours and leave entitlements
• Termination terms, including notice and severance pay

Leave policy in South Africa

Employers in South Africa must comply with statutory leave and time off entitlements, including:

• 12 public holidays per year
• A minimum of 21 consecutive days (15 working days) of vacation time after 12 months of employment
• Sick leave entitlement of 6 weeks over a 36-month cycle
• Parental leave, including maternity leave of at least 4 months and adoption leave
• Family responsibility leave and other statutory leaves as per the Basic Conditions of Employment Act

Work permits in South Africa

Foreign nationals wishing to work in South Africa typically require a valid work permit or visa. Who needs a permit depends on nationality and employment type. Common work permits include:

• General Work Visa for skilled foreign workers
• Intra-Company Transfer Visa for employees transferred within multinational companies
• Critical Skills Work Visa for individuals with in-demand qualifications
• Corporate Visa for multiple employees under one corporate sponsorship

Application times vary from a few weeks to several months, and costs depend on the type of visa. Securing a work permit is a legal requirement, and failure to comply can result in fines or deportation.

Partnering with a South African EOR streamlines visa processing. EORs are familiar with local immigration laws and can facilitate the right permits for foreign hires.

Background checks in South Africa

Background checks are an important step in the hiring process, but they must comply with South African law. Employers are not legally required to perform background checks, but they’re a common way to verify candidate qualifications and mitigate hiring risks. 

Typical checks include:

• Criminal record checks via a police clearance certificate
• Verifying educational qualifications and professional licenses
• Credit checks for roles involving financial responsibility
• Reference checks from previous employers

Some checks, like medical or psychological testing without consent, are illegal. Background checks should always respect privacy laws and be relevant to the job role for which they are conducted.

Using an Employer of Record in South Africa can help manage background screening compliantly and efficiently.

Employment termination in South Africa

When terminating employees in South Africa, employers must follow fair procedures and comply with local labor laws to avoid claims of unfair dismissal. 

Employers must have a valid reason for termination, such as misconduct, incapacity, or operational requirements, and must provide the employee with an opportunity to respond before proceeding with the termination.

Employers must give notice in writing, with a notice period determined by how long the employee has been working for the company:

• 1 week for employees with less than 6 months of service
• 2 weeks for employees with 6 to 12 months of service
• 4 weeks for employees with more than 1 year of service

Severance pay is only legally required in cases of redundancy. Standard severance pay is a week’s pay for every completed year of continuous service, unless a more generous arrangement is specified in the employment contract or collective agreement.

Company registration in South Africa

Registering a company in South Africa involves several steps, including:

• Reserving a company name
• Registering with the Companies and Intellectual Property Commission (CIPC)
• Obtaining a tax reference number from SARS
• Registering with relevant statutory bodies

For official company registration guidelines, visit the South African Government website.

The process can take weeks or months and requires local legal knowledge.

For global companies wanting to avoid this complex process, partnering with an EOR in South Africa enables immediate hiring without establishing a local legal entity.

PEO in South Africa

Though they may seem similar, a Professional Employer Organization (PEO) and an Employer of Record offer different services. 

A PEO typically provides limited domestic HR support services in foreign countries. However, they cannot act as the local legal employer of workers you hire in South Africa; Instead, your company would need to register as a local entity to act as the legal employer. 

An Employer of Record in South Africa differs by acting as the legal employer of your South African team, managing compliance, payroll, and local employment laws and regulations.

For companies building an international workforce, using an EOR in South Africa is essential to minimize risk and stay compliant. EORs offer greater operational control and peace of mind compared to PEO models.

Payoneer WFM: Leading EOR services in South Africa

Partnering with Payoneer Workforce Management (WFM) as your Employer of Record in South Africa offers unmatched benefits, like:

• Rapid hiring and onboarding without local entity setup
• Compliance with labor laws, payroll, and tax requirements
• Local expertise combined with a global digital platform
• Transparent pricing and scalable solutions for startups to enterprises
• Value-added services, including visa support, device management, and localized benefits

With Payoneer WFM’s South African EOR services, you gain a trusted partner that helps you grow your global team faster and smarter.

FAQs about South Africa employer of record

1) What is the employer of record in South Africa?

An Employer of Record (EOR) in South Africa is a third-party organization that acts as the legal employer for your workers in the country, handling employment contracts, payroll, tax compliance, and benefits, allowing your company to hire without setting up a local entity.

2) What is the difference between an independent contractor and an employee in South Africa?

In South Africa, employees have formal contracts, legal protections, benefits, and payroll deductions. Independent contractors work on a service basis, have more flexibility but less protection, and are responsible for managing their own taxes. Learn more about the differences between employees and independent contractors.

3) What benefits are required for employees hired in South Africa?

Mandatory benefits in South Africa include vacation time, sick leave, maternity or paternity leave, unemployment insurance fund contributions, pension or provident fund contributions (if applicable), and protection under key employment laws.