What is a PEO?

So, what exactly is a professional employer organization and how does it work?

A professional employer organization (PEO, for short) is essentially a human resources (HR) service provider and global legal team. Startups and small to medium-sized businesses usually enlist the help of these services to take care of all the administrative tasks for foreign employees. This would include everything from onboarding to managing payroll to ensuring that all statutory benefits requirements are being met concerning the local labor laws. 

PEOs also take things a step further by designing competitive employee benefits packages that help businesses attract and retain top talent from all over the world — all while ensuring they remain compliant with local legislation.

By partnering with a professional employer organization in South Africa or elsewhere, business owners can build a global team of remote employees without having to worry about HR functions. For example, who gets paid in what currency? What’s each country’s tax rate? How much do I need to contribute to the social security systems? You know, things of that nature.   

What’s more is that without the help of a PEO, business owners would have to incur the expenses that come with establishing their own legal entity within the countries they wish to hire from. This would also require assembling their own in-house HR and legal teams, which is often enough to cause even larger businesses to financially crumble.

Are you wondering if you should enlist the help of a professional employer organization in South Africa? Hop on a call with one of Skuad’s experienced team members.

What are the benefits of using a PEO provider in South Africa?

When you decide to partner with a PEO in South Africa, you’re taking your small or medium-sized business to the next level in terms of becoming a global company. 

This is exactly what can make a PEO an incredibly valuable asset for companies looking to expand internationally. 

Find and hire the best possible candidates

With remote work on the rise, putting together the best team no longer means being confined to your home city or country. Now businesses can reach out across oceans to find the best people for the job.

As a continent, Africa is resilient, resourceful, and agile when it comes to adapting to new markets. Today, South Africa and most other countries within the continent are seeing a trend of young entrepreneurial youth transforming before their eyes. Using a PEO means you can tap into this emerging source of young, skilled professionals in South Africa who are looking for better opportunities.

Become more competitive as an employer

When you’re a business looking to expand internationally, you don’t just want consumers to know your name. You also want the most qualified and promising candidates to know your name.

A PEO in South Africa will understand how to make your company a household name when it comes to the job hunt. They’ll do this by ensuring that you’re going above and beyond the basic statutory benefits to offer the best possible incentives to work for your company.

Save on unnecessary and unexpected costs

If you were to hire talent without a professional employer organization in South Africa, you would have to assemble your own HR and legal teams and then some. Even larger, enterprise-level companies opt for PEO services simply because there’s too much involved in physically expanding into other countries just to hire one or two employees.

It’s plain and simple — working with a PEO is much more financially sound. It’s also less tedious in terms of manpower.

Become experienced in a new market

South Africa operates as a market economy with additional diverse private industries, making it a mixed economy. Its economic infrastructure is also well integrated with the Johannesburg Stock Exchange (JSE), which ranks among the top market exchanges worldwide.

When you use a PEO in South Africa, you’ll get valuable insights into this market directly through your South African employees. These insights will prepare you to expand into the neighboring markets, including North Africa, Europe, the Middle East, and even Asia.

Are you ready to expand and gain insights into new markets? Let Skuad get you started!

Avoid setting up your own legal entity in South Africa

Forming your own legal business entity in South Africa is a great idea — if you plan to physically expand your business into the country indefinitely. Otherwise, it’s a terrible idea as it will cost you a lot of money and a lot of time just for the incorporation alone.

Not to mention, you’ll need to be there to oversee the entire process of essentially setting up an international business in South Africa.

When you partner with a PEO, you won’t have to set up a business in South Africa. They’ll do it for you because they already have their own legal entities established in various countries for this specific purpose. This allows them to also act as your employer of record in South Africa, which means they can recruit, hire, and manage your South African employees on your behalf!

Remain culturally aware

While South African work culture is rather standard, the country is a melting pot of different cultures and races, making it the opposite of a monolithic society. So, if you hire three different employees from South Africa, it’s a safe bet that each will belong to a different faith and have different customs — all of which will need to be individually respected.

Your PEO in South Africa will ensure that each culture you onboard is recognized and respected in every legal aspect.

Remain compliant with South African labor laws

Each country has its own legal requirements for what employers are expected to provide to their employees. If you are found non-compliant, you could face severe penalties, including a business ban.

Labor law compliance includes everything from employee classification to payroll to statutory benefits.

Here’s what you should know about South African labor laws at a glance:

Payroll  

• The rand is the official currency of South Africa
• The payroll cycle may run monthly, weekly, or bi-weekly, and a 13th-month bonus is required. 
• The national minimum wage is R23.19 per hour
• The typical work week ranges from Monday through Friday, 9 am to 5 pm. Overtime must not exceed 10 hours per week, and employees must not work overtime unless officially agreed upon with their employer
• A strong and specific employment contract is a legal requirement and must be executed for an indefinite duration as employment laws in South Africa prohibit fixed-term contracts

Tax and employer contributions  

The South African income tax rate is progressive, with the current rates being:

18% - ZAR 0 to ZAR1 216,200

26% - ZAR 216,201 to ZAR 337,800

31% - ZAR 337,801 to ZAR 467,500

36% - ZAR 467,501 to ZAR 613,600

39% - ZAR 613,601 to ZAR 782,200

41% - ZAR 782,201 to ZAR 1,656,600

45% - ZAR 1,656,601 and above

• The South African corporate tax rate is a flat rate of 28%
• Employers must contribute to the social security system at a rate of 2% — 1% for gross remuneration and 1% on behalf of each employee
• Companies with a payroll of more than ZAR500,000 per year must also contribute 1% to the sector of education and training

Paid leave

• Employees are entitled to one paid sick day for every 26 days worked, increasing every 6 months
• Maternity leave is at the employer’s discretion. However, new mothers are expected to take a mandatory 6-week unpaid leave after giving birth
• Paternity leave is allowed for up to consecutive days but is also unpaid
• Employees are entitled to 15 days of paid vacation leave per year 

There’s a lot to learn, but luckily you don’t need to. Find out more about how Skuad’s PEO services can help your business to grow by booking a demo today.

What does it cost to build a team in South Africa?

Depending on the type of business entity you plan on forming in South Africa, you can expect to pay upwards of ZAR453,772.31. That’s around $28,767. Yes, nearly $30,000 dollars. 

That’s not including how much it would cost to assemble a legal and HR team. It also doesn’t include how much it would cost to stay there for the duration of the engagement period, which is roughly 12 weeks.

PEO pricing, on the other hand, varies among providers. With Skuad, you can get started for free with the option to cancel at any time — hassle-free!

Our PEO services in South Africa and everywhere else begin at just $19 per month, and that allows you to start onboarding and paying your employees right away. We also offer custom pricing for enterprise-level business, just reach out to our sales team to get your quote today.

Let’s get started onboarding and paying your international employees in South Africa. Book a demo to see how Skuad’s global PEO solutions work today!