South Africa, one of the world’s most culturally diverse countries, is regarded as the most advanced, diversified and productive economy in Africa. Multinational companies (MNCs) are increasingly attracted to South Africa for global business expansion, thanks to the country’s strong consumer class, exciting developments in innovation and cost-effective workforce. Along with offering numerous market opportunities within its borders, South Africa also serves as a gateway for MNCs looking to tap into Africa’s rapidly growing marketplace of over 1 billion people.
Why South Africa?
- South Africa offers political and macroeconomic stability and an abundance of skilled, semiskilled and unskilled labor. For professional roles, labor costs are often less than half of that in Europe and the United States.
- The country’s outsourcing footprint is thriving. South Africa’s business process outsourcing (BPO) industry, which proved resilient against the COVID-19 crisis, is projected to triple in size and create nearly a million new jobs by 2030, according to insights from McKinsey.
- South Africa has launched a series of programs to support training, develop skills, drive investment and implement sound regulatory measures in key technology sectors, such as healthtech, fintech and information technology (IT).
- According to the Global Innovation Index 2021, South Africa outperforms other middle-income economies in five pillars: institutions, human capital, market diversity, business sophistication and technology outputs.
What should MNCs be aware of when hiring in South Africa for the first time?
Understanding the cultural and ethnic nuances of South Africa will help MNCs better tap into the country’s diverse workforce. While South Africa does not have a clear lingua franca or one official language, English has increasingly become the most common in business contexts. At the same time, English is the first language of just about 8% of South Africans. Different cultures are predominant in different regions. Some of South Africa’s prominent ethnicities include the Khoikhoi and San, Zulu, Ndebele, Xhosa and Sotho cultures.
The main platforms for employment regulations in South Africa are the Basic Conditions of Employment Act (BCEA) and Labor Relations Act (LRA). The BCEA addresses matters such as written contracts, payment of wages, working time, rest breaks, annual leave, sick leave, maternity leave, other parenthood-related leave, family responsibility leave and notice periods. The provisions under the BCEA exclude employees who work less than 24 hours a month. The LRA regulates issues such as unfair dismissal, unfair labor practices, trade unions, collective bargaining, strikes, workplace representation, fixed-term contracts and part-time work. MNCs must also be aware of the provisions set out in the National Minimum Wage Act, Employment Equity Act (EEA) and Occupational Health and Safety Act.
As an employer, the MNC should furnish a formal, written employment agreement with each worker, outlining remuneration, hours of work, leave entitlements, benefits, etc. Employment agreements can be fixed-term (limited duration) or open-ended (indefinite), entailing either full-time or part-time work. Employers are allowed to engage temporary workers through agencies. However, if such workers are engaged for a period exceeding three months, they will be deemed to be employees of the client (employer) and not of the agency.
South Africa maintains strict laws for working time, with the work week capped at 45 hours. Daily working time must not exceed eight hours if the work schedule is more than five days per week; daily working time must not exceed nine hours if the work schedule is five days or less per week. Employees may work overtime only if they agree to or if an applicable collective agreement provides for this. Employees must not work more than 10 hours of overtime per week, though a collective agreement may permit them to work up to 15 hours of overtime for up to two months in any 12-month period. An employee can legally refuse to work more than 12 hours on any one day. Employees must be compensated extra for overtime, either with an additional pay supplement of 50% greater than the normal rate or with time off.
Employment law in South Africa does not recognize the concept of the termination of an employee’s employment “without cause” or “at will.” The employer is always required to act fairly when terminating a contract, both substantively and procedurally. Termination of a contract by the employer is generally only permissible if the employee is in breach of the employment contract. On the other hand, employees are entitled to resign with notice at any time and for any reason. An employee is also entitled to terminate employment without notice if the employer has made continued employment intolerable or risky.
Why is South Africa seeing demand rise for Employment of Record (EOR) services?
Thanks to its stability and relatively high economic development, South Africa is an eminent choice for MNCs looking to tap into new market opportunities in Africa. Even as other countries in the region advance, South Africa is still seen as the economic powerhouse of Africa. Globally speaking, it also surpasses many other emerging markets in terms of the overall cost of doing business and value proposition
For these reasons, prominent brands like Barclays Bank, BMW, General Electric, Standard Bank Group, Vodafone and Volkswagen have deepened their business footprint in South Africa. The EOR model is very useful for MNCs looking to take their first steps into South Africa, allowing them to harness its talented workforce and test drive the market.
How can GoGlobal help MNCs grow their team in South Africa?
Part of South Africa’s allure is its cost-effective talent pool. However, maintaining a workforce in South Africa entails additional processes, resources and fees that can make hiring a tricky endeavor. This is especially true for global HR teams who are unfamiliar with the nuances and provisions of managing a workforce in-country. However, GoGlobal’s local team is led by HR experts who each have a track record in successfully hiring and managing workforces in South Africa.
When we partner with MNCs, GoGlobal takes on the burdensome tasks involved in administering payroll and managing a workforce in South Africa. For example, there are rigid requirements when an employee works overtime hours or when an employee must be terminated. Our team will ensure these requirements are met – compliantly and cost-effectively.
At GoGlobal, we embrace a global mindset but also maintain a dedicated team of local experts on the ground in each market we serve. Our team in South Africa is well versed in the regulatory environment as well as the cultural customs. This empowers a positive and tailored hiring experience for both clients and client-employees.
If your company offers an enjoyable employee experience in your home country, GoGlobal will help you localize it and bring it over to South Africa. Before we onboard, GoGlobal’s team in South Africa will work hands-on with the worker to outline how the EOR arrangement will operate. After onboarding, that same dedicated term will be the point of contact for both your company and the worker. We remain ready and available to answer any questions that arise regarding payroll, taxation or benefits.
As we service our clients and client-employees, we aim for agility, efficiency and peace of mind. Through our tested and proven EOR solution, MNCs free their internal HR teams from the usual burdens of managing a workforce in South Africa. GoGlobal ensures compliance and handles all payroll functions, including contributions to statutory benefits, taxation and benefits. This way, our clients can focus on core business-growth activities while they tap into burgeoning market opportunities in South Africa.