Challenges When Hiring Employees In South Africa

Here’s a unique set of challenges companies must face if they are planning to hire employees in South Africa or hire engineering teams in South Africa.

1. Cutthroat Competition for Talent

The employment market in South Africa is ripe with immense levels of ambition and diversity. The talent landscape is a special blend of skilled and semi-skilled labor and provides a wide scope for companies to tap into.

This also makes the employment prospects in South Africa a highly competitive playing field.

Moreover, the extended cultural variance in South Africa necessitates companies to become well-versed in the cultural nuances. Also, businesses should manage the workforce in tandem with the country’s socio-economic expectations.

For instance, hiring South African workers takes longer than usual as they take more time to understand the business. They also expect to have a say in the final business decisions, and you might also find them to have a relaxed approach towards deadlines.

So, companies should craft hiring strategies that embrace the local culture without any bounds.

2. Complicated Employment Laws 

South African employment laws and regulations extensively cover work timings, entitlement to leaves, minimum wages, onboarding & offboarding procedures, and more.

These laws often push employers into a learning mode, which takes a large chunk of time delaying the actual hiring process.

Moreover, employers need to consider affirmative action and acknowledge past inequalities as stated in the Employment Equity Act.

Besides, compulsory adherence to the Labor Relations Act, basic conditions of the Employment Act, and other crucial regulations add an extra layer of difficulty for companies hiring employees in South Africa.

3. Exhaustive Payroll & Tax Regulations

South Africa has a multifaceted payroll and taxation system with many statutory requirements for employers like employee tax deductions (PAYE), unemployment insurance fund (UIF) contributions, skill development expenses, etc.

The taxes are supervised by South African Revenue Services (SARS), which enforces the need to maintain detailed and accurate records and reports.

So, managing payroll in such a climate requires a deep and clear understanding of the tax laws and a robust payroll platform. 

Being unfamiliar with the local regulations might prove to be fatal to your hiring plans, making it a significant challenge for employers.

However, one shouldn’t feel beaten down because of these challenges as one could easily overcome them using the best hiring practices.

Here’s a payroll guide to help you understand the South African payment systems better.

How to Hire South African Employees

As discussed, South Africa has a skill-rich talent mine that many companies are yet to explore, and if you’re planning to hire remote staff or contractors from South Africa or hire engineering teams in South Africa, here are a few legal ways to do it.

• Hire employees in South Africa by setting up a legal entity
• Hiring employees in South Africa through an employer of record (EOR) service
• Hire contractors in South Africa using an agent of record (AOR) service

1. Establishing a local entity

Businesses can set up local establishments for direct hiring of local talent legally. This demands close involvement of the company in all matters relating to sourcing, hiring, paying, and managing teams in compliance with local laws and regulations.

This helps companies have more control over operations, but the initial costs of administrative setup, legal expenses, and accountability make it a risky solution for businesses expanding into South Africa.

Moreover, companies should also become knowledgeable about elaborate employment laws, payroll, and tax regulations, which is quite a daunting task.

2. Hire employees in South Africa via an EOR platform, like Skuad

Using an EOR platform, like Skuad, for hiring employees in South Africa is a strategic solution that saves most of your time and efforts while enabling you to hire legally within your budget.

Here’s how it works:

• Skuad hires employees on behalf of your company.
• Skuad will managesome text
  • Onboarding
  • Compliance
  • Payroll
  • Taxes
  • Benefits
  • Offboarding 
• Skuad ensures all employees are hired and managed legally without any mistakes in the legal procedures.

By choosing Skuad as your EOR partner, you can focus all your energies on your core business operations. Here’s a hiring guide that helps you hire employees in South Africa better.

This way your company is shielded from any legal, and compliance issues allowing you and your team to work in peace.

3. Hire contractors in South Africa through an effective AOR, like Skuad

Hiring independent contractors in South Africa is a flexible and cost-effective way for companies to observe and understand the South African market and see how their business fits into the country’s market and culture.

Although companies have lesser control over how and when contractors work, this significantly decreases the administrative burden and provides more clarity over project scope and requirements.

Using an AOR like Skuad is one of the best ways to hire contractors in South Africa. 

Skuad ensures:

• Contractors are paid on time
• Zero accuracy errors in payments
• Compliant contracts
• Avoidance of misclassification fines

Key costs to consider when hiring South African talent

It’s important to be mindful of the costs of hiring in South Africa and multiple factors influence your hiring budget.

Here are some elements that have a vital impact on your hiring plans:

1. Talent Discovery & Acquisition Costs
2. Onboarding & Training Expenses
3. Administrative Costs
4. Legal & Compliance Management Costs
5. Employee Salaries & Contractor Payments
6. Additional Benefits
7. Social Security Contributions
8. Opportunity Costs
9. The Cost of Time

For detailed information and insights into how much it could cost you to hire employees in South Africa, head to Skuad’s cost calculator.

Laws to follow when hiring employees in South Africa

The employment market in South Africa is closely controlled by the South African Labor Law. It has many laws that govern aspects of employment like minimum wage, leaves, taxes, etc.

Here are some necessary laws that companies must comply with when hiring South African talent:

• The Labor Relations Act
• The Skills Development Act 
• The Unemployment Insurance Act
• The Basic Conditions of Employment Act  
• The Employment Equity Act 
• The Occupational Health and Safety Act
• The Compensation for Occupational Injuries and Diseases Act

Hiring in South Africa? Skuad can help!

Streamline your hiring and management process across 160+ countries.

With Skuad as your EOR, you can legally hire, pay, and manage your remote teams in South Africa. Leave all the compliance risks, legal liabilities, and payroll issues to us and expand your business operations with ease.

Try Skuad today!

FAQs

How to hire an employee in South Africa?

To employ someone in South Africa, ensure your business is registered with the relevant authorities, draft an employment contract compliant with South African labor laws, register the employee with the Unemployment Insurance Fund (UIF) and the Compensation for Occupational Injuries and Diseases Act (COIDA), and adhere to local labor and tax laws. Or you can choose simply Skuad’s EOR for hiring employees in South Africa legally.

What is the average cost per hire in South Africa?

The average cost per hire in South Africa varies widely depending on the industry, level of position, and recruitment method, but it can range from R15,000 to R40,000 for mid-level roles, including advertising, recruitment agency fees, and administrative costs.

What is the difference between a contractor and an employee in South Africa?

The main difference lies in the relationship with the employer. Employees have a permanent or fixed-term contract and enjoy labor law protections and benefits. In contrast, contractors are hired for a specific task or period, manage their tax contributions, and generally have more freedom but fewer protections.

What is the tax rate for independent contractors in South Africa?

Independent contractors in South Africa are taxed as individuals on a sliding scale ranging from 18% to 45%, based on their annual income. They are responsible for their tax filings and payments and may deduct business-related expenses.