Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in South Africa can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in South Africa, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for South Africa.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in South Africa is not the same as paying workers in your own country. Employees have to be paid using South Africa's employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
Full-time employment is considered 45 hours weekly, and 9 hours daily.
Up to 10 hours overtime per week is permitted. Employees earning below the threshold (R 205,433.30 per year) must be paid 150% of their normal wage for overtime worked on weekdays and 200% for Sundays.
Employees who earn in excess of the threshold (R 205,433.30 per year) are not subject to overtime pay. However, the employer cannot force employees to work overtime without compensation unless the employee agreed to this.
There is no set pay date in South Africa, this typically is something that the employee and employer come to an agreement on. The payroll cycle can be done monthly, weekly, or bi-weekly.
There is a 13th salary in South Africa, paid in December.
The minimum mandatory annual leave in South Africa is 15 workdays and it is accrued monthly at a rate of 1.25 days per month.
There are 13 public holidays in South Africa.
In South Africa, sick leave is based on a 36–month cycle.
For the first 6 months of employment, the employee is entitled to 1 day of sick leave for every 26 days worked. From the first day of the 7th month, the employee receives:
The number of sick days taken is subtracted from these amounts to come up with the total number of sick days the employee is able to take.
At the end of the 36–month cycle, the number of sick days resets.
If the employee is absent for more than 2 consecutive days, they must produce a medical certificate. However, if the employee is sick from Friday to Monday, this is not considered consecutive days of sick leave, and are not obligated to produce a medical certificate.
During a leave due to illness, the employee is entitled to full pay and cannot be terminated so long as they have a medical certificate.
In South Africa, a woman is entitled to 4 months of unpaid maternity leave.
This entitlement can begin from at least 4 weeks before the birth. However, If the woman is not able to work due to her medical condition, it is possible to begin the leave earlier.
The employer is not obligated to pay the employee for maternity leave. Instead, a claim can be made from the Maternity Benefit Fund if contributions have been made to the Unemployment Insurance Fund (UIF). The maximum the employee is able to receive from this benefit is 60% of their regular pay and are paid for 121 days.
Paternity falls under Parental leave.
Fathers are entitled to 10 days of parental leave, paid by the UIF at a rate of 66% of the regular pay. For the father to exercise parental leave, they must inform their employer in writing at least one month before the expected due date of the child. This leave also applies to adoptive fathers
In South Africa, employers are not able to terminate an employee at will, but can be dismissed for the following:
When the employee and employer would like to separate amicably, a separation agreement is common.
Both the employee and employer must follow the same notice period based on the length of the employment relationship:
For farm and domestic employees, the above notice periods must be followed and may not be shortened.
It is possible, however, to shorten the notice of 4 weeks to no less than 2 if stated under a collective bargaining agreement for other types of employees.
If the employee is terminated due to poor performance or misconduct, the employee is not entitled to provide severance pay.
If the employee is terminated due to operational requirements, the company is obligated to pay the employee one week’s severance pay for every year employed.
3 months is the common practice.