An Employer of Record (EOR) in South Africa is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before you hire your remote team in South Africa.
Basic Conditions of Employment Act (BCEA) ▶
The Basic Conditions of Employment Act (BCEA) safeguards a fair and balanced work environment in South Africa. It achieves this by:
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Establishing Basic Employment Conditions:
The BCEA outlines fundamental rights and entitlements for employees. This encompasses aspects like working hours, leave policies, termination procedures, and minimum wage requirements.
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Ensuring Fairness for Workers:
The Act promotes just treatment for employees by creating a level playing field within the workplace.
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Compliance with Constitution and ILO:
The BCEA aligns with the South African Constitution's guarantee of fair labor practices. It also upholds South Africa's commitments as a member of the International Labour Organization (ILO).
Below is a summary of key BCEA provisions that apply to individuals earning below the earnings threshold:
- Ordinary working hours
- Overtime policies
- Compressed workweek options
- Averaging of work hours
- Requirements for meal breaks
- Mandatory daily and weekly rest periods
- Compensation rules for Sunday, night, and holiday work
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BCEA Earnings Threshold The BCEA Earnings Threshold is R254 371.67 per annum and R21 197.63 per month effective from April 2024. |
Employment Contracts in South Africa ▶
Generally, no formal requirements are mandated, although the BCEA does specify a minimum set of written employment particulars that must be provided. These can be met without a formal employment contract, but written agreements are commonly used. For employees earning below the BCEA threshold, written offers for fixed-term employment must include specific details, such as the reason for the fixed-term arrangement. Once a valid offer is accepted, a contract is formed. Both parties must agree on the job duties and payment terms. At the start of employment, the employer must disclose payment calculations and methods. Employees cannot waive certain BCEA rights.
Employment contracts frequently include extra responsibilities like confidentiality, data protection, intellectual property agreements, and non-compete clauses.
The employee should receive a copy of the signed contract, and the original must be kept in their personal file. When visited by labor inspectors from the Department of Employment and Labour, employment contracts will be one of the first documents they request to review.
Employment contracts are bilateral. Any changes to the contract is to be signed by the employee on either the modified contract or by adding addendum to the contract.
Employment Options in South Africa ▶
Employee
Various forms of employment—full-time permanent, fixed-term, part-time, and those below minimum monthly hours—can impact entitlement to minimum benefits.
Fixed-term Employment
Employers can roll over fixed-term contracts once or twice without issue. However, rolling over a contract three or more times gives the employee a "right of expectation," meaning they can reasonably expect their contract to be renewed. If the contract is not renewed and the employee is dismissed, they have strong grounds to claim unfair dismissal with the CCMA (The Commission for Conciliation, Mediation and Arbitration.
If an employee is on a fixed-term contract for more than three months and earns below a threshold set by the Minister of Labour, they are considered a permanent employee, unless specific exceptions apply.
Part-time Employment
Employers hiring part-time employees earning below the BCEA threshold have specific responsibilities. After an initial 3-month period, these employees must receive equal treatment compared to full-time counterparts doing similar work, unless there is a valid reason for different treatment. Additionally, employers must provide part-time employees (earning below the threshold) with access to training and skills development that is comparable to what full-time employees receive.
Employees who work fewer than 24 hours a month are exempt from certain rights under the BCEA, such as regulations concerning working hours and leave entitlements.
Independent Contractors
Independent contractors do not receive the same employment protections as employees. However, if certain conditions exist, such as employer supervision, the law presumes an employment relationship for those earning below the BCEA threshold. For others, the common law dominant impression test is used. Courts consider the overall relationship, with the level of employer control being a key factor in determining whether it is an employment or independent contractor relationship.
Agency Worker/ Temporary Employment Services (TES)
Employees earning below the BCEA threshold receive extra protections when placed at a client through an agency (like a temporary employment service). If an agency worker remains at a client for more than 3 months, they are considered employed by the client under the Labour Relations Act, 1995, but remain employed by the agency for other legal purposes. This designation ensures the worker is treated equally to permanent employees of the client, unless a valid reason for different treatment exists. Agency workers earning above the BCEA threshold are not subject to this deemed employment rule.
The Department of Employment and Labour in South AfricaIt is a government department responsible for overseeing labor-related matters, including employment regulations, workplace standards, occupational health and safety, and dispute resolution. It ensures compliance with labor laws and promotes fair labor practices across various sectors of the economy. https://www.labour.gov.za/ |
Background Verification in South Africa ▶
In South Africa, background checks are permissible under certain conditions. Conducting a criminal record check requires the candidate to provide fingerprints and consent, as mandated by the Protection of Personal Information Act, 2013 (POPIA) from July 1, 2020. The National Credit Act, 2005 restricts credit report release without consumer instruction, mainly for roles involving trust or financial handling, requiring prior consent. Medical checks similarly need individual consent. While consent isn't mandatory for qualification, reference, and employment history checks, it's advisable to obtain it. Applicants must also be informed of all background checks as per POPIA regulations.
Employment Laws in South Africa ▶
Employment laws in South Africa are designed to protect the rights of workers while promoting fair labor practices and ensuring compliance with regulations. These laws cover a wide range of aspects including contracts, wages, working conditions, and termination procedures.
Minimum Wages
As of March 2024, the national minimum wage is at R27,58 per hour.
Working Hours
In South Africa, employers cannot require or allow employees to work more than 45 hours a week. For those working five days or fewer, the daily limit is nine hours, while those working more than five days have an eight-hour daily limit. Ordinary work hours can be extended by up to 15 minutes a day, but no more than 60 minutes a week, to assist employees whose duties involve serving the public. There are also procedures in place aimed at gradually reducing the maximum ordinary hours to 40 per week and eight per day.
Overtime Pay
In South Africa, employers cannot require or allow employees to work overtime unless there is an agreement in place. Overtime is limited to three hours per day and ten hours per week. Employers must pay employees at least one and a half times their regular wage for overtime hours. Alternatively, an agreement can allow employers to pay the regular wage and grant at least 30 minutes of paid time off for every hour of overtime worked or grant 90 minutes of paid time off for each overtime hour. Paid time off must be provided within one month, but this period can be extended to 12 months by written agreement. Agreements made at the start of employment or within the first three months expire after one year.
Probation Period
Probationary periods are allowed in South Africa, typically lasting 3 to 6 months, depending on the time needed to assess an employee's suitability for the job. Employers cannot terminate employment at the end of the probation without following a fair performance management process. This involves providing reasonable guidance, counseling, and training. A fair process is mandatory regardless of probation status, but courts have indicated that the reasons for dismissing an employee for poor performance may be "less compelling" during probation.
Termination Policy
In South Africa, employment is not at-will, and termination must be both substantively and procedurally fair. Dismissal is justified only for misconduct, incapacity (ill-health or performance), or operational requirements. Termination due to the end of a fixed term or reaching retirement age is not considered dismissal and does not require a fair process.
Protection from Unfair Dismissal
All employees, regardless of income or service length, are protected from unfair dismissal. Automatically unfair dismissals, such as those due to lawful strike participation, pregnancy, protected disclosures, transfer-related reasons, or discriminatory reasons, carry increased penalties.
Notice Period
Minimum notice periods range from 1 to 4 weeks, depending on the length of service, unless otherwise specified in employment contracts or collective agreements. Notice must be given in writing and cannot be issued while the employee is on leave. Employers may opt to pay in lieu of notice, but the employee must agree to waive the notice period. Accrued leave cannot be forced during the notice period, and garden leave is not regulated by statute.
Severance Pay
Severance pay is only required for dismissals due to operational requirements. The minimum is one week's remuneration per completed year of service, with potential additional payments as agreed during consultations. Severance pay is a mandatory topic in these consultations.
13th Month Salary
South Africa does not mandate 13th-month pay by law, but many companies offer it as a discretionary benefit. This extra payment, often referred to as a Christmas bonus or gratuity, is typically given to employees in December.
Social Security Contributions in South Africa ▶
South Africa doesn't have a social security system like some other countries, but it does have similar contributions covering unemployment, skills development, and compensation for work-related injuries.
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Unemployment Insurance Fund (UIF):
- Both employers and employees contribute 1% of the employee’s remuneration to the UIF, up to a limit of ZAR 17,712 per month (effective 1 June 2021).
- UIF provides benefits for unemployment, maternity leave, and to the dependents of deceased contributors.
- Contributions are mandatory for both local and foreign employees.
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Skills Development Levy (SDL):
- Employers contribute 1% of their total payroll to the SDL.
- This fund is aimed at promoting learning and development in the workplace.
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Compensation Fund:
- Contributions are made under the Compensation for Occupational Injuries and Diseases Act (COIDA).
- The fund insures employees against work-related injuries or illnesses leading to death or disability.
- Employers' contributions are based on annual remuneration, capped at ZAR 568,959 for the period from 1 March 2023 to 29 February 2024.
These contributions collectively ensure a level of social security by providing essential benefits and promoting skill development among employees.
Payroll in South Africa ▶
The following are the requirements in order to set up and run payroll in South Africa.
Government Registration Requirements
- PAYE Registration: Employers must register with SARS using Form EMP101e within 21 business days of liability. No registration fees apply.
- SDL Registration: Mandatory for employers unless expected leviable amount is < ZAR 500,000 over 12 months.
- UIF Registration: Employers must register with SARS or Department of Labour using Form UI-8 if liable for UIF contributions.
- Compensation Fund: All employers must register within 7 days of hiring using COIDA Form W.As.2 for COIDA compliance.
Ongoing Compliance Requirements
- Return of Payroll Taxes (PAYE, UIF, SDL): Monthly submission (Form EMP201) to SARS within 7 days of month-end, online only. No cash payments accepted.
- PAYE: Calculated monthly on "balance of remuneration" per SARS tax tables, 25% deduction for part-time/temporary employees.
- SDL Contributions: 1% of leviable amount monthly, exemptions for learners, true independents, and IRP30-certified labor brokers.
- UIF Contributions: 1% each from employer and employee up to ZAR 17,712/month gross remuneration, exclusions apply.
- Biannual Reconciliation (Form EMP501): Required by October for March-August periods.
- Tax Year-End Reconciliation (Form EMP501): Due by May for March-February periods.
- Form UI19 Declarations: Monthly submission to Department of Labour within 7 days after month-end.
- Annual Return of Earnings: Filed by April 30 for earnings from March 1 to February 28, based on Form WAs.8/WAs.17.
Employment Equity Reports (EEA1, EEA2, EEA4)
- Mandate: Required under Employment Equity Act, No. 55 of 1998 for designated employers (50+ employees or specified turnover).
- Form EEA1: Declaration by Employee: Demographic and employment status declaration.
- Form EEA2: Employer Details and Workforce Movement: Workforce demographic and movement details.
- Form EEA4: Workforce Profile: Current workforce composition based on demographic categories.
- Purpose: Critical for diversity assessment and ensuring fair employment practices across sectors
Payroll Requirements
- Authority and Legislation: The Department of Labour oversees payroll regulations governed by the Basic Conditions of Employment Act, No. 75 of 1997 (as amended).
- Pay Slips (BCEA4):
- Content: Pay slips must include employer’s details, employee’s name and occupation, payment period, monetary remuneration, deductions, and net pay.
- Delivery: Provided at the workplace or agreed location, during working hours or within 15 minutes of these hours’ start or end.
- Format: Can be electronic (email) or hardcopy.
- Inclusion: Total remuneration, including non-cash benefits, must be clearly stated.
- Remuneration Payment: Employers must pay remuneration within seven days after the period ends or employment termination.
- Certificate of Service (BCEA5):
- Upon Termination: Employees receive a certificate with employer details, employment standards coverage, employment dates, job description, final remuneration, and termination reason upon request.
Personal Income Tax in South Africa ▶
The personal income tax rates in South Africa for the 2025 tax year (which runs from 1 March 2024 to 28 February 2025) are as follows:
- Income tax is applied to taxable income, which is your gross income minus allowable deductions.
- There are different tax brackets with progressive tax rates. This means the tax rate increases as your taxable income increases.
|
Taxable Income (R) |
Rate of Tax |
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1 - 237,100 |
18% of taxable income |
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237,101 - 370,500 |
42,678 + 26% of income above 237,100 |
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370,501 - 512,800 |
77,362 + 31% of income above 370,500 |
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512,801 - 673,000 |
121,475 + 36% of income above 512,800 |
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673,001 - 857,900 |
179,147 + 39% of income above 673,000 |
|
857,901 - 1,817,000 |
251,258 + 41% of income above 857,900 |
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1,817,001 and above |
644,489 + 45% of income above 1,817,000 |
Work Permit in South Africa ▶
In South Africa, work visas are required for foreign nationals seeking employment. There are several types of work visas, each with specific requirements and conditions.
Types of Work Visas
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Critical Skills Work Visas
- Issued based on critical skills or qualifications identified by the Government Gazette.
- Requires certification of foreign qualifications by the South African Qualifications Authority (SAQA).
- Valid for up to five years.
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General Work Visas
- Issued when no suitable South African citizen or permanent resident is available for the position.
- Requires proof through advertisements and interviews.
- SAQA certification of foreign qualifications is necessary.
- Valid for up to five years.
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Intracompany Transfer Work Visas
- Granted to employees transferred from a foreign company to a South African branch.
- Contract abroad must be valid for at least six months before transfer.
- Skills transfer plan to benefit South African employees required.
- Non-renewable visa valid for up to four years.
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Corporate Work Visas
- Issued to a corporate applicant to employ foreigners for specific projects or positions.
- Requires Department of Labour certification confirming no suitable local candidates available.
- Requires proof that 60% of staff are South African citizens or permanent residents.
- Must conduct business in specified sectors listed in the Government Gazette.
- Conditions include compliance with immigration laws and financial guarantees.
General Requirements and Responsibilities
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Employment Conditions
- Foreigners must work only for the employer listed on their visa.
- Changing employers or terms of employment requires prior immigration approval.
- Non-compliance with visa conditions or immigration laws can lead to penalties or classification as an undesirable person.
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Employer Responsibilities
- Employers must ensure no illegal foreigners are employed.
- Keep employment records for up to two years after a foreigner's termination.
- Report terminations and visa breaches to immigration authorities promptly.
- Penalties, including fines and imprisonment, apply for employing illegal foreigners.
Employee Benefits in South Africa ▶
In South Africa, employee benefits encompass a range of entitlements and supplementary benefits designed to support workers' well-being and financial security. These benefits include leave entitlements, healthcare, retirement funding, and various wellness programs.
General Exclusions
- Employees working less than 24 hours per month and independent contractors are not covered by the Basic Conditions of Employment Act (BCEA).
- Employees earning above a certain threshold are not entitled to overtime pay unless specified in their contract.
- Employers can offer benefits exceeding the minimum requirements, and collective agreements can sometimes reduce benefits within BCEA limits.
Annual Leave and Holidays
- Employees are entitled to 21 consecutive days of paid annual leave per year.
- Alternatively, leave can accrue as one day for every 17 days worked or one hour for every 17 hours worked.
- South Africa recognizes 12 statutory holidays, with paid leave on these days. Special overtime rates apply if employees work on a holiday.
Sick Leave
- Employees are entitled to paid sick leave equivalent to the number of days worked in a six-week period for every 36-month cycle.
- During the first six months of employment, sick leave accrues as one day's paid leave for every 26 days worked.
Rest Periods
- Employees can work up to 45 hours per week.
- They are entitled to a minimum of 36 consecutive hours of rest weekly and 12 consecutive hours daily.
Maternity Leave
- Employees are entitled to four months of unpaid maternity leave.
- Partial payment may be claimed from the Unemployment Insurance Fund (UIF), but it may be less than the normal remuneration.
Family Responsibility Leave
- Employees are entitled to three days of paid leave annually for specific family responsibilities. This leave cannot be accrued.
Parental Leave
- Parents are entitled to 10 consecutive days of unpaid leave upon the birth or adoption of a child.
- Payment for this leave can be claimed from the UIF.
Adoption Leave
- Adoptive parents of children under two are entitled to 10 consecutive weeks of unpaid leave.
- Payment can be claimed from the UIF if the employee has contributed for at least 13 weeks.
Commissioning Parental Leave
- Commissioning parents in surrogate motherhood agreements are entitled to 10 weeks of unpaid leave.
- Payment can be claimed from the UIF if the employee has contributed for at least 13 weeks.
Unemployment Insurance Fund (UIF) Contributions
- Employers and employees each contribute 1% of the employee's salary to the UIF.
- The maximum earnings ceiling for contributions is R17,712 per month or R212,544 annually (as of June 2021).
Supplementary Employee Benefits
Retirement
- Government-funded old-age grants are insufficient, so employer-based retirement funds are encouraged.
- Membership in employer-established retirement funds is compulsory for eligible employees.
- Defined contribution funds are the most popular, covering risk benefits, admin fees, and other costs.
Healthcare (Medical Aid & Medical Insurance)
- Due to the inadequacies of the public healthcare system, private healthcare cover is highly valued.
- Medical Aid provides comprehensive private healthcare access and is community-rated and legislated.
- Medical Insurance offers lower-level cover and is typically for lower-income earners.
Life & Disability Insurance
- Group life insurance schemes often include lump sum benefits for death and disability, usually based on a multiple of the employee’s salary.
Health and Wellness Benefits
- Employee Assistance Programs (EAP) offer services such as trauma counseling, financial management, legal support, and stress management.
- Healthy Lifestyle and Rewards programs encourage better health, safety, fitness, and financial management, offering rewards, discounts, and cashback. These are usually voluntary and paid for by the employee.
South Africa Overview ▶
| Overview | |
| Continent | Africas |
| Country | South Africa |
| Capital | Pretoria, Cape Town and Bloemfontein |
| Time zone | UTC+02:00 (South African Standard Time) — main territory of South Africa |
| Total Time zones | 2 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | The date for the filing of returns is fixed each year by government notice. |
| Financial Year | 1 March 2021 – 28 February 2022 |
| Date format | yyyy-mm-dd |
| Currency | South African Rand (ZAR) |
| VAT | the standard rate is 15% |