In today’s rapidly growing global market, a strategic approach to hiring top-notch talent is crucial for businesses in South Africa and beyond. South Africa has become a prime business destination for leading global brands like BMW, Barclays Bank, Vodafone, Standard Bank Group, Volkswagen, and General Electric. The powerful blend of advanced infrastructure and competitive business expenses makes it a magnetic force for ingenuity and progress.
But with complicated labor laws in the country, it often gets hectic to figure out how to hire employees in South Africa. Discover the unique aspects of South Africa’s employment landscape, where intriguing variations in employment laws, payroll necessities, taxation, the hiring process in South Africa, and popular perks set it apart from the rest of the world.
Things to Know Before Hiring in South Africa
Embarking on a journey to hire employees in South Africa or introducing international workers to expand the business?
Discover how to navigate South African employment laws and learn about recruitment and selection in South Africa to build a dynamic workforce.
Working hours and overtime
People looking to hire South African employees should note that they dedicate an impressive nine hours each day to their professions, tallying up to 45 hours of hard work weekly. Additionally, 10 hours per week of overtime is allowed, offering employees the opportunity to go the extra mile.
Those clocking in beneath the 205,433.30 ZAR annual income threshold enjoy the benefits of their labor with a well-deserved 150% of their standard wage for weekday overtime and an even more enticing 200% in case of Sundays. As stated under the recruitment and selection in South Africa, employees cannot reject the provisions above.
While those surpassing the threshold don’t experience the same overtime benefits, they are safeguarded from being obligated to work those extra hours sans compensation unless agreed upon beforehand.
Probationary and notice period
The recruitment process in South African companies entails a probationary period of three months.
However, notice periods vary depending on the length of the employment relationship for both resignations and dismissals. Resignation or termination can be notified within the time specified in section 37 of the BCEA:
- Six months/less: One week’s notice
- Six months-less than a year: Two weeks’ notice
- More than a year: Four weeks’ notice
Non-compete agreements and IP protection
When hiring South African employees, employers should know that non-compete agreements are enforced for six to twelve months. This agreement does not require employers to pay employees separately.
Termination of employment
An employer in South Africa must pay one week’s severance pay for every year an employee works if an employee is terminated due to operational requirements. Dismissals for other reasons do not require severance pay.
Paid vacation
Someone looking for recruiting South African employees should know about the following rules:
- A South African employee is entitled to 21 days of paid leave consecutively within a leave cycle (from the first day of employment to 12 months). As long as an employee puts in work hours for 24 hours or more with the existing/same employer each month, they’re eligible for these fantastic benefits.
- According to the number of days worked per week, 1.25-1.5 vacation days are accrued for each working month.
- Employees of South Africa are legally entitled to three days of Family Responsibility leave annually.
Sick leave
According to Sections 22(1) to 22(4) of South Africa’s Employment Act, sick leave for an average South African employee is structured on a 36-month cycle starting from the first day of employment. However, the employee is entitled to a single day of sick leave for every 26 working days for the first six months of employment.
From the start of the seventh month, the following are the benefits they receive:
- For a five-day work week – 30 days
- For a six-day work week – 36 days
- For Monday to Friday plus a Saturday for alternate weeks – 33 days
Upon completing the 36-month, a fresh start is granted as the count for sick days recommences.
Parental leave
Someone looking to hire employees in South Africa should be aware of the following rules:
- The South African government provides employees with unpaid maternity leave for four months, commencing four weeks before delivery. Employees must give their employers a month’s notice before maternity leave.
- Maternity leave is not mandatory for employers to cover. In contrast, employees who have contributed to the Unemployment Insurance Fund (UIF) can claim from the Maternity Benefit Fund. This fund will provide them up to 60% of their regular salary for up to 121 days. Besides ten days of parental leave (unpaid), employees can receive 66% of their regular salary from the UIF for ten days of unpaid parental leave.
Social security
Social security is an important aspect covered under recruitment and selection in South Africa. While South Africa does not possess a conventional social security system, they implement measures akin to those contributions, including Unemployment Insurance Fund and Compensation Commission inputs. These provisions offer restricted financial aid to those affected by unemployment, accidents, or illnesses.
The Unemployment Insurance Fund offers financial assistance to jobless individuals and the dependents of deceased contributors, providing a valuable safety net in times of need. In South Africa, employers and employees must contribute 1% of the worker’s capped monthly salary to this necessary fund.
Employers withhold the employee’s portion directly from their wages to streamline the process. However, specific remuneration types and employee categories may be exempt from these requirements.
Employer tax
In South Africa, employers graciously contribute a modest 2% towards their employees’ social well-being, encompassing skills development, unemployment insurance, and essential workers’ compensation.
Additionally, a 15% Value Added Tax (VAT) is mandated on the entire employment cost, contingent upon the employee’s primary area of work being located within the nation’s borders (such as managing a South African team or conducting critical business endeavors in the country). However, this VAT is graciously exempted for those whose business pursuits primarily transpire outside South Africa.
Individual tax
According to their income bracket, South African employees pay between 18% and 45% in taxes. A detailed tax breakdown is included below:
| Taxable Income | Tax Rate on the lower amount (ZAR) | Tax Rate on the excess amount (ZAR) | |
| Exceeding (ZAR) | Not Exceeding (ZAR) | ||
| 1 | 226,000 | 0 | 18% of taxable income |
| 226,001 | 353,100 | 40 680 | 26% of taxable income above 226,000 |
| 353,101 | 488,700 | 73726 | 31% of taxable income above 353,100 |
| 488,701 | 641,400 | 115 762 | 36% of taxable income above 488,700 |
| 641,401 | 817,600 | 170 734 | 39% of taxable income above 641,400 |
| 817,601 | 1,731,600 | 239 452 | 41% of taxable income above 817,600 |
| 1,731,601 and above | — | 614 192 | 45% of taxable income above 1,731,600 |
The Cost of Hiring an Employee in South Africa
Hiring employees in South Africa requires employers to consider numerous costs, such as recruitment fees in South Africa, job adverts, and other factors involved in the hiring process.
The following are the potential costs associated with hiring employees in South Africa:
Recruiting expenses
The initial financial investment of onboarding a new team member may extend beyond the anticipated recruitment fees in South Africa. These costs may manifest in administration tasks, including position promotion, interview coordination, contract development, comprehensive orientation training, etc. In South Africa, the recruiting cost is estimated at around R30,000. However, this figure differs between a junior and a senior hire.
Total remuneration
The comprehensive compensation package encompasses the employee’s overall expense to the organization, typically including a fixed wage, an estimated bonus sum, and potential participation in established or future short-term and long-term incentive programs.
Equipment cost
Equipping the workforce with the necessary tools, such as computers, desks, phones, and chairs, is an essential investment. While some items, like desks, may have a higher upfront cost, their longevity ensures a reasonable expense spread over time. However, shorter-lived electronics, like computers and laptops, coupled with insurance expenses, result in higher annual employee costs.
Additionally, software licenses, often overlooked, can amass considerable expenses as multiple licenses are generally needed for each device, making them a vital component to factor into both equipment and ongoing costs.
Training
For the ones looking to hire employees in South Africa, it is equally important to consider training costs at the time of a new hire. Employees’ professional growth is a crucial aspect of their tenure, with advanced skill-building becoming indispensable for those in senior roles. Naturally, this elevated training often comes with a higher financial investment.
What Does a Company Need to Hire Employees in South Africa?
To start with the recruitment process in South Africa, a company must first establish a legal entity in South Africa. One may opt for a subsidiary, a partnership, a private or a public company, or a joint venture.
Typically, starting a business in South Africa takes at least 40 days. The following are the prerequisites to establishing a South African subsidiary:
- Apply for a company name
- File and submit the memorandum of incorporation
- Open a South African bank account
- Tax registration
- File for UIF through the Department of Labor
- Apply with District Council
- Register with COIDA
- Special business license (in lieu of the industry and business operations)
Various Options for Hiring Employees in South Africa
Typically, there are two ways in which an employer can conduct recruitment and selection in South Africa.
- Through a subsidiary: To hire people in South Africa through a subsidiary, a company needs to establish its presence in the country. Hiring through a subsidiary is, however, a time and resource-intensive process.
- Through EORs: However, if a company wants to hire South African employees without a physical business presence in the country, partnering with an Employer of Record (EOR) can be proven extremely beneficial.
The Steps to Hiring in South Africa
To recruit South African employees, the following are the steps that a company might follow to carry out a seamless hiring process:
- Post job ads: To attract the ideal South African candidate, consider showcasing your job opportunities on well-regarded platforms such as Careerjet and Indeed. Acknowledging the relatively modest 56.3% internet usage rate in the country, it may be prudent to broaden your reach by featuring ads in leading national or local print publications. Catering to your desired audience, ensure your advertisements are composed in English or include translations in widely spoken languages such as Zulu.
- Evaluate applications: Typically, in South African professional applications, it is intriguing to note the inclusion of certain personal elements in a candidate’s CV. These encompass one’s birth date, demographic identity, marital and health status, alongside the possession of a driver’s license. Furthermore, the nation’s lesser focus on higher education may result in fewer degree holders among the promising prospects.
- Screening applications: South African employers are entitled to conduct background checks before hiring a South African employee. This step includes checking credit history, criminal records, and previous employment records. Screening allows for a quick shortlisting of the final candidates, making the hiring process quicker.
- Interview shortlisted candidates: After the successful screening, a company can conduct its interviewing process. However, the employer needs to take note of the South African work culture and labor laws while interviewing a candidate for final selection.
- Offer letter and employment contract: It is mandatory for companies with a workforce of five or more to provide a written employment agreement for staff members dedicating 24 hours or more per month. One can opt to unveil this contract immediately or highlight key aspects while reserving the complete document for the onboarding process.
- Onboard new employees: As the onboarding journey commences, it is essential for organizations to craft a comprehensive employee code of conduct, orchestrate engaging training sessions, formulate a well-structured employment agreement, and present detailed offer letters to ensure a seamless and professional experience.
Let Multiplier Be Your EOR Platform in South Africa
Mastering the intricate regulations of international territories can be daunting, which is why numerous enterprises wisely choose an EOR platform, ensuring a seamless and compliant hiring experience across borders. Multiplier is an industry-leading EOR with local business entities in over 150 countries, including APAC, Europe, and America.
As your esteemed EOR, we offer a seamless experience in onboarding your chosen employees, delivering lawful employment contracts and protocols while adeptly managing rewards and benefits.
Relish a fruitful association with your South African workforce, devoid of complexities arising from international employment, without the immediate need for establishing an entity in the country.