Hiring Remote Employees in South Africa – What International Employers Need to Know

The Covid pandemic caused seismic shifts in the way we work. For one, the rise in remote work has brought about a whole new world of possibilities when it comes to hiring. Employers are not limited by geography in their search for the best talent. They now recruit and employ from around the world. South Africans have proven to be particularly sought after as remote-working employees. Employing remote workers in South Africa has seen a sharp increase in the last 2 years, especially in the financial, legal and administrative sectors.

Even though there are lots of good candidates, care should be taken in making sure you comply with local HR and tax laws, it is therefore very important that you ensure you take the proper tax advice.

Here are the different ways of paying employees and contractors working remotely in South Africa for overseas companies:

• Simply pay as a Subcontractor (if country, contract and local tax laws allow this)
• Set up a subsidiary in South Africa – this can take longer to set up depending on the specific circumstances.
• Set up a branch for the overseas company

Each option needs to be considered on a case-by-case basis depending on factors like:

• Are you looking to expand your business in South Africa or are you simply looking to employ someone?
• Does the employee have a South African passport or South African ID number?
• Do you need to or want to set up a South African subsidiary or a branch?
• Transfer pricing will need to be considered if a South Africa subsidiary is set up.
• If it is a UK company, then careful consideration should be given to Reverse Charge VAT. If the overseas company is a financial services company that supplies exempt services, then the company can be hit with a 20% VAT charge paying contractors in South Africa, due to the rules. In case the overseas company wants to terminate its contract with the employee, notice of termination should be issued, this can range from one week to four weeks depending on the employee’s time of services.

Employers need to give employees notice of termination, which ranges anywhere from one week to four weeks depending on the employee’s time of service. Severance pay is also required based on the reason for termination.

Our accountants in Cape Town can help with the following:

• Setting up a subsidiary
• Setting up a branch for your overseas company
• Setting up payroll and assist with payroll and HR submissions
• Providing employment contracts
• Issuing a bank account within 48 hours after receiving all documents
• Considering transfer pricing, when applicable

Careful consideration should be taken and all options should be considered making sure you comply with overseas and South African local HR and tax laws. But if you take the right amount of care, hiring remote employees in South Africa is a great way of adding highly-skilled, ambitious employees to your team.

Get in touch with EOAC if you’d like to find out more – we’re happy to answer any questions you may have.