Employee Benefits and Compensation in South Africa: A Comprehensive Guide

What are Employee Benefits?

Employee benefits are additional or fringe benefits that companies provide to employees and staff members in addition to their monthly salaries. These may or may not include monetary benefits. 

Employee benefits aid companies and their employees from the long-term perspective. Employers may regain a motivated and content workforce by ensuring employees receive the appropriate benefits and perks. On the other hand, employees feel valued and appreciated when their employers think about their professional development and take action in their favor.

The labor laws of almost all countries ensure that workers receive just and fair compensation for their work. Such compensation may include many benefits like maternity leaves, retirement funds, paid time off, pensions, health insurance, etc. 

Compensation Laws in South Africa

Here are the compensation laws that govern various benefits and compensation to employees in South Africa: 

• Employment Act 75 of 1997 oversees the work time, employment termination, and leave benefits in South Africa. 
• The National Minimum Wage Act was enforced on January 1, 2019. It ensures that employees get a specified minimum wage. As of March 2023, the minimum wage is 25.42 ZAR per hour.
• South African labor law ensures that employees get overtime compensation under employee benefits in South Africa. The maximum overtime limit for workers is 10 hours every week, and explicit consent from the workers is required for working overtime. 
• As per South African labor law, female employees are eligible for paid maternity leave. 
• Section 25C of the Employment Act provides commissioning parental leave to all parents. 
• Employment Act Section 17 ensures that employees who provide night work are compensated for the same.

How to Design an Employee Benefits Program for Employees in South Africa?

When organizations in South Africa decide on designing an employee benefit program, two major things should be considered: the company’s budget and the employees’ needs. 

Following are the basic steps that help organizations to design a compensation package in South Africa.

Step 1: Look at the resources and objectives of the company

Profit is the main formula of success for any organization. There must be a parity between allocating resources to compensation benefits and organizational needs. A company must start planning by setting objectives and documenting the available resources. 

In this phase, a company might think about the objectives and how the benefit and compensation packages in South Africa can help achieve the organizational goals. For instance, if a business focuses more on hiring and retaining talented workers, it can allocate more funds to benefits.

Step 2: Analyze the market standards and needs of the workers

Organizations must comprehend the labor market and analyze other companies’ strategies to develop a competitive benefits plan. Also, companies need to meet employee expectations by looking at a company’s size and working model.  

To develop an effective benefit plan for employees, a company can conduct surveys or interviews to properly understand the employee needs that comply with the market standards. 

Step 3: Finalize a benefit plan for the organization

One can create an employee benefit plan with the help of the surveys and interviews conducted in the previous step. Accordingly, companies can allocate the budget to different benefits and compensation structures in South Africa. 

Step 4: Communicate the benefit plans to the workforce

After deciding on a specific employee benefit plan, communicate and share the draft with stakeholders and employees. This allows employees to understand what perks they can obtain from the company they are working in. It gives a sense of security to the employees, allowing companies to retain them.

Step 5: Run regular assessments to check the effectiveness of the plan

It is essential to check the effectiveness of the employee benefit plan through regular assessments. A plan that worked a year ago may not work due to the volatile business environment. In such cases, benefit plans must be revised per the company’s requirements.

Types of Guaranteed Benefits in South Africa

According to the compensation structure in South Africa, employers are entitled to provide certain guaranteed benefits to their employees. The following are the guaranteed employee benefits in South Africa:

Fixed working hours

• The standard working hour in South Africa is 9 hours per day and 45 hours per week. 

Overtime pay

• The leave benefits South Africa offers the profession of paid overtime benefits. 
• The maximum period of working overtime is 3 hours a day which makes it 10 hours of overtime per week. 
• However, if employees consent, the overtime period can be extended to 15 hours a week but only for two months a year. 
• Employees working more than standard hours are liable for overtime compensation at 150% on weekdays and 200% on weekends. However, overtime compensation only applies if the employee’s salary is below 205,433.30 ZAR. 

Sick leave

• According to the medical benefits for employees in South Africa, workers are entitled to 1 day of sick leave every 26 working days for the early six months of joining a company. 
• After six weeks, employees have immediate access to the bank of sick leave, including a minimum of 30 days of paid sick leave. 
• Employees generally working six days a week receive 36 paid sick leave. This is valid for three years, after which the bank resets itself on the date of the joining of employment of the employee. 
• However, sick leave doesn’t work on an accrual basis. The compensation package in South Africa does not let the unused sick leave get carried forward in the next 3-year term.

Paid leave

• Paid time off is a guaranteed employee compensation policy in South Africa governed by statutory and national law. 
• According to this rule, employees must obtain at least 15 paid leaves in South Africa, excluding the 12 national holidays. 
• If any holiday falls on a weekend, the next working day is declared a holiday to compensate for the loss of one. 
• South African companies must permit the rollover of unused paid time off. Employees must run a payout of all unused paid leaves when any employees choose to quit their jobs.

Maternity leave 

• According to the provisions of maternity benefits in South Africa, employees are entitled to at least four months of unpaid maternity leave. 
• However, the Unemployment Insurance Fund (UIF) program in South Africa provides up to 60% of salaries for females on maternity leave for 121 days. This payment of maternity benefits in South Africa is not compulsory and is totally at the discretion of the employers.
• Employees can start their South Africa maternity benefits leave one month before the birth is due when taking maternity leave. 

Parental leave

• Employee compensation and benefits South Africa allows new parents to apply for parental leaves.  
• All new parents, including fathers, adoptive parents, and surrogates, are entitled to get at least ten days of parental leave after childbirth. One parental leave is allowed in a year.

Family responsibility leaves

If employees have worked in the company for more than four months, they are entitled to four days of family responsibility leave. Situations that qualify for the family responsibility leave under the compensation structure in South Africa are as follows:

• Childbirth is included under maternity benefits in South Africa.
• Illness of a child
• Death of a family member under certain conditions, including children, spouse, legal partner, grandchildren, grandparents, etc

Employee Benefits for Expatriates

Expats working in South Africa are entitled to the same benefits and compensation that nationals receive when employed. Employee compensation and benefits in South Africa also include special provisions of benefits for expatriates. Such benefits can be enumerated as follows:

• Major benefits of allowing the expatriate to use residential accommodation
• Benefits of availing of the company car for transportation purposes
• Availing compensation from the company to hire a private car if not availing a company car
• Employers may also provide subsistence allowance to expatriates

How Are Employee Benefits Taxed in South Africa?

Employee benefits and the majority of the forms of compensation come under the category of taxable income. As part of the workers’ compensation in South Africa, benefits in kind are subject to several rules governing the estimation of value and income. 

South Africa has a progressive taxation system. It increases with the increase in the employee’s income. In South Africa, employees must pay income tax ranging between 18% to 45%. 

Restrictions for South Africa Benefits and Compensation

A company should always look into the benefits and salary limitations for their workforce in South Africa before they finalize the employment contract with anyone. Employee compensation and benefits policy in South Africa do not have any noticeable restrictions, and CBAs are not as prevalent in South Africa as in other countries. 

It is advisable to always double-check for the CBAs when recruitment any employees, whether they apply to any particular sector or employee or not. This can escalate further limitations.

Supplemental Benefits for Employees in South Africa

Following are the supplemental benefits that employee receives in South Africa.

Health insurance

Even though South Africa’s public health care system is new, the government offers free health care to all its citizens. In addition, companies also offer private healthcare insurance to their employees. 

Employee benefits insurance in South Africa works in two ways. Firstly, the big companies decide on health and dental benefits in South Africa and make health plans for their employees. Secondly, the small companies opt to issue a stipend amount for the employees for availing of employee benefits insurance in South Africa and choose their medical plan.

13th-month bonus

Companies in South Africa issue 13th-month bonuses after the end of the year for their employees. 

According to the compensation and benefits policy in South Africa, a monetary incentive is assigned to every employee each year in December, equivalent to the amount of a month’s salary for an employee. This is, however, not a statutory law and depends entirely on the discretion of the employers.

Retirement funds and pension scheme

In South Africa, many firms provide their staff with some type of pension plan, retirement benefits, or funds. Some industries provide retirement benefits or pensions to attract top employees to join their organizations. These contributions are mainly tax deductible.

The compensation package in South Africa pays pensions to eligible seniors and those who are permanently disabled. This is a needs-based public policy and is not supported by any designated funds of a company.

How Multiplier Can Help with Benefits Management in South Africa

Multiplier is a one-stop solution for your business when entering a new market. Our team of experts provides the infrastructure to employ talent in the country. You can explore the new market and attract talent at cheaper costs without setting up a legal entity. The skilled workforce at Multiplier is productive and abides by national and international labor rules.