A Comprehensive Guide to Employee Benefits & Payroll in South Africa

South Africa is not only distinguished as the southernmost country in Africa but also as the continent's second-largest economy, following Nigeria. This makes it a great area to experience territorial growth. Its culturally diverse nature, and robustly surging economy makes it a sustainable place for global expansion.  

This blog discusses the key aspects of employment benefits, payroll cycle, employment law that functions in South Africa. It also evaluates for you the intricacies of South African landscape to help foster a productive and compliant work environment. 

Understanding the Employment Laws: 

Employment Law: 

South Africa has nine provinces which is governed by their respective provisional governments, yet the employment law is managed by the central government only. Key laws include: 

• BCEA (Basic Conditions of Employment Act): This law overviews everything that falls under employment terms like salary, employee benefits, working hours, leave, notice period and others. BCEA usually does not enforce employees who work less than 24 hours a month. 

• LRA (Labor Relation Act): LRA discusses and regulates labor relations. It covers everything from unfair dismissal, labor practices, trade unions to strikes and contract teams.  

Besides, there are other functional laws like National Minimum Wage Act, Employment Equity Act, Occupational Health and Safety Act, and many others for the South African employees. 

Employment Contract:  

A document that binds the employee and employer with certain terms outlining the benefits and regulations of either party is the employment contract. It can be written or oral considering the South African rule, considering that an employee who fall under BCEA employment law must be provided with the job details that covers: 

• Employer’s full name and address 

• Employee’s name 

• Employee’s job role and responsibilities 

• Employment start date 

• Days and Hours of work 

• Rate and method of wage payment 

• Rate to be offered for overtime hours 

• Mode of payment  

• Deductions to be made for remuneration 

• Leave entitlement 

• Notice period, termination, or other off-boarding related aspects 

Employers must be clear about their policies and ensure that the employee is well-versed with the same, not only this, but the employer is bound to provide the written details to the employee and affirm that their employees understand it. In the case where the employer has less than five employees, they are not required to include the last three listed details in the mandatory information they must provide. 

There are certain pre-employment checks that are required and advisable on an administrative level. Usually, the employees need to undergo three major checks: 

• Medical Examination 

• Criminal Background Check 

• Reference And Education Check 

Probation Period: 

There is no defined probation period for the South African employees subjected to the notice period should be of reasonable duration. If under any circumstance the employee is terminated, then the employee is conditional upon a contractual notice period which is ideally not more than one week. 

Working Hours: 

Employees in South Africa are required to work not more than 45 hours, weekly with 8 hours for 5 days or 9 hours if the employee is working for less than 5 days a week. An employee can take 60 minutes of ‘meal interval’ after 5 hours of continuous work. 

Besides, the South African employment law also discusses the rest period of the employees. Ideally, an employee must be granted a daily rest period of 12 hours and 36 hours weekly. The week's rest hours must include Sunday. 

Overtime: 

Employees in South African can work overtime provided if the collective agreement allows. If the organization/employer allows their employee to work overtime, they must ensure that the employee does not work more than 10 hours a week.  

The agreement can permit employees engage themselves in overtime hours, but not more than 15 hours for up to 2 months. The agreement also specifies that the compensation for overtime must be supplemented by at least 50% on top of their normal wage. However, by agreement employee can be compensated with: 

1. Normal pay for overtime hours worked, plus 30 minutes of time off as compensation for each hour of overtime. 

Record Keeping: 

 As per the Unemployment Insurance Contributions Act and the Income Tax Act, the employers are required to maintain records of employee compensation, tax deductions, and unemployment insurance fund contributions and pay. The South African law asks the employers to preserve this detailed record for minimum five years from the date of last entry and make it accessible for inspection by officials from the South African Revenue Service and Unemployment Insurance Fund. 

Bonus and 13th Month Pay 

There are three prevalent types of bonuses, these include: 

• Christmas or 13th cheque 

• Annual Performance Bonus 

• Production Bonus 

Although the practice of bonuses is not a prominent consideration for employment or a legal obligation, the employee has certain expectations set in terms of bonuses. Considering that, the employer must notify the staff at least six months in advance about the bonus not being paid. Failing to do could be a part of unfair labor practice. 

To mitigate this risk and maintain employee satisfaction most of the employers opt to eliminate standalone Christmas bonuses instead of incorporating the amount into the employee’s basic salary. Employees often consider bonuses mandatory despite not being guaranteed. Thus, even employers should encourage direct and transparent communication with the employees to avoid further misunderstandings. 

Termination 

South African employers are obligated to act in a fair fashion. Considering, the law does not aid the idea of “at will” or “without a cause” termination. The termination procedure must be substantively and procedurally justified.  

There are certain defined grounds for dismissal that are considered fair, and the employer must adhere to the specific provisions. 

• Misconduct: The employer must conduct a prior inquiry and investigate the matter if there is any misconduct.  

• Operational Requirements (Redundancy/Retrenchment): Both the parties must engage in consultation process to reach mutual agreeable outcome.  

• Incapacity (Ill Health, Poor Performance, Incompatibility): This may consider involvement of employee support, PIP, or improvement time, and exploring alternative solutions.   

Besides, termination notices issued by employers must not coincide with any period of leave the employee is entitled to, except for sick leave. Employees, however, have the courage to resign anytime with appropriate notice. Employees can resign even without serving a notice if the employer has created conditions that render continued employment intolerable or unsafe. 

Notice Period 

The South African law encourages employers to provide notice periods to the employees based on the tenure of their work. 

These notice periods apply to employee resignations if their employment contract does not specify those. However, the employees and employers can come to a mutual agreement over the notice periods. Employers may offer payment in lieu of notice where applicable. 

Tax and Social Security 

Taxation procedure and social security accommodates salary payments, annual leaves and other benefits look at the same:  

Personal Income Tax 

Depending on the income bracket, taxation system in South Africa is ranged from 18% to 45%. Their progressive system taxes the non-residents and residents with the same tax rate. Employers are required to withhold the applicable income tax from employees' salaries and remit it to the tax authorities under the Pay-As-You-Earn (PAYE) system. 

Social Security 

The SASSA or South African Social Security Agency administrates social security payments within the country. The SASSA grants are managed with insurance-based schemes that provide coverage for areas such as unemployment and child benefits. Employment-related social security benefits include unemployment, sickness, maternity leaves and are even linked to insurance-based schemes. Employers are not legally obligated to offer pension related benefits to employees. 

Salary Payment 

As per BCEA, the South African employers are allowed to pay their employees on daily, weekly, fortnightly, or monthly basis, most commonly by bank deposits. Employers are mandated to pay their employees no less than seven days after the end of the applicable pay period even if the employment is terminated. These rules and regulations, along with the provision of pay slips, do not apply to employees who work less than 24 hours a month. 

Annual Leave 

Employees in South Africa are entitled to 21 consecutive days for paid annual leave. These leaves can be taken in one go or shorter periods based on the agreeable terms. The accrued leave must be used within six months of continuous employment. These leaves do not apply for contractual or part-time employees. Statutory leaves can overlap with sick, maternity, paternity, family responsibility or notice periods. Public holidays during annual leave grant employees an additional leave day. 

Sick Leave 

Sick leave for employees in South Africa is granted in 36-month cycles wherein 30 days (about 4 and a half weeks) for a 5-day week, 36 days (about 1 month 11 days) for a 6-day week. During the first 6 months, employees get 1 day of sick leave for every 26 worked days. If the statutory sick leave is used up, then the additional sick leave is often unpaid. Normal pay is provided during sick leave unless agreed otherwise, with a minimum of 75% of normal pay. At 75% pay, sick leave entitlement increases to 37.5 days (5-day week) or 45 days (6-day week). 

Sick Leave system in South Africa is calculated as follows: 

Family Responsibility Leave 

As per the South African law, the employees who are working at least 4 days a week and are working with the organization for at least four months can leverage up to 3 days of paid family responsibility leave per year. This leave can be taken in cases like child’s illness, death of a close knit and kin. These leaves are usually not carried over for the next year.  

Maternity Leave 

New mothers can leverage up to 4 months of maternity leave, starting from 4 weeks before the due date or earlier if necessary. Work is prohibited for 6 weeks after childbirth unless medically certified. If the employee encounters miscarriages in the third trimester or in case of still births, she is qualified for 6 weeks (about 1 and a half months) of leave. Employers are not required to pay during maternity leave, but employees contributing to UIF for at least 13 weeks (about 3 months) can claim benefits (capped at ZAR 17,712/month). Employers may top up UIF benefits, up to 100% of regular pay. Breastfeeding employees are entitled to two unpaid 30 minutes break daily. 

Parental Leave 

Parents are entitled up to 10 days (about 1 and a half weeks) of leave from the child’s birth 

Adoption & Surrogacy Leave  

Parents who are adopting or planning surrogacy can leverage 10 consecutive weeks of leave starting from the day of adoption or child’s birth. Although in such cases only one parent can leverage 10 weeks (about 2 and a half months) of leave while the other parent can take the 10-day parental leave. UIF contributors with 13 weeks of employment can claim 66% of normal pay, supplemented by employers up to 100%.  

Public Holidays 

Employees in South Africa are entitled to 12 public holidays annually. If the public holiday falls on Sunday, then the employees can take the following Monday off as per the regulations. The employees can substitute a public holiday with another day off provided both the parties agree to this term. 

Final Thoughts: 

Employers in South Africa take a meticulous approach towards taxes, laws and employee benefits and considering that it is pertinent to gain thorough understanding on the same. Since global expansion is the need of the hour, it is important that we as an organization dive deeper into the practical details of understanding employee benefits, hiring, and payroll cycle in the region where we are planning to expand business. 

South Africa, with a growing economy, offers significant opportunities for many organizations to achieve with their business goals. While we navigate the employee benefits, leaves, and other aspects of employment, partnering with a global expansion service providers like TopSource Worldwide would be invaluable. 

Why TopSource Worldwide? 

With over 20 years of experience, TopSource Worldwide helps organizations to grow in over 180+ countries. We not only understand your concerns but also provide pragmatic solutions that cater to each one of them precisely.  

Planning for global expansion? Worry not, we got you covered! Contact us today and let us know how we can assist you achieve your business goals.