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Employing in South Africa

Known as the ‘Rainbow Nation’ due to its multiculturalism, South Africa is one of the most promising and vibrant emerging market economies across the world and has immense potential as a global expansion destination. Boasting one of the largest economies in Africa (second to Nigeria), South Africa is also one of the continent’s most industrialised countries, and many multinational companies have a South African branch — particularly in the populous urbanised areas of Cape Town, Johannesburg and Durban.

Thanks to its excellent infrastructure — including a modern transportation network, world-class telecommunication system and great tourism facilities — South Africa is an increasingly popular destination with investors. Plus, with a potential market of about one billion people, South Africa also serves as a gateway to the rest of the African continent, providing additional market opportunities for the countries along its borders. Several excellent seaports and other entry and access points also create opportunities to reach markets further afield, including South America, Central America, the Far East and South Asia.

If you’re looking to move existing employees over, South Africa won’t be a hard sell, either. The country has plenty to offer and an abundance of stunning landscapes and experiences, including panoramic views from the top of Table Mountain in the capital city of Cape Town, lush sandy beaches, safari trips at the world-famous Kruger National Park or even cage-diving with great white sharks (if they’re feeling adventurous!).

An employer of record, sometimes known as an international PEO can help you quickly hire and onboard workers in South Africa – often with just two weeks’ notice. Establishing your own local entity without risk and saving costs, this type of service makes an EOR in South Africa worth checking out!
PEO in South Africa

An overview of employing in South Africa

Salary Information

South African rand (ZAR).

The usual standard pay dates are either the 25th or the 28th of the month for monthly salaries.

There are no statutory annual increases. If the employee is entitled to a bonus or commission, their eligibility should be stated in the contract and amounts should be detailed in the offer letter.

The South African Social Security Agency (SASSA) is a public scheme independent of employment relationships. There are no monthly or annual contributions to this fund by the employer or employee.

Employer Information

Employers are required to register all employees with the Unemployment Insurance Fund (UIF). (Unemployment Insurance Act, 63, 2001). The monthly contribution for UIF is 2% of an employee’s gross salary per month.

The employer must deduct 1% of an employee’s gross salary per month and must match this contribution with an additional 1%. This is capped at R14, 872 per month or R178,464 annually. For employees who earn more than this amount, the contribution is calculated using the maximum earnings ceiling amount. Therefore, the maximum contribution which can be deducted for employees who earn more than R14,872 per month is R148.72 per month.

An employer is liable to pay 1% of an employee’s gross salary (including any leave or overtime pay, bonuses, commissions or lump-sum payments). This must be paid to SARS on submission of a monthly employer declaration (EMP201) within seven days after the end of the month.

Employer cost Employer contribution Employee contribution Monthly threshold Maximum monthly contribution
UIF 1% 1% R14,782 R148.72
SDL 1% – – –

South Africa operates a two-tier healthcare system: a large public sector (subsidising up to 40% of healthcare costs) and a private sector.

It’s recommended that all employees take out a private healthcare plan, as all medical expenses are payable upfront.

TopSource Worldwide can offer a range of coverage through a local provider. It should be noted:

  1. The medical aid policies are taken out in the employee’s name.
  2. If the client wishes to pay for the medical aid, it’ll be considered a benefit, and this will be taxed.
  3. With regard to covering the costs for dependents, there’s no particular standard in South Africa. However, it’s not uncommon for companies to cover 50% of the total medical aid  contribution.

Holiday Entitlement

An employee will accrue 1.25 days per month of paid holiday. This is calculated from the start of their employment and recalculated every 12 months. Employees are entitled to carry holiday forward to the following year. An employer must grant annual leave within six months after the end of the annual leave cycle.

South Africa has 12 public holidays as determined by the Public Holidays Act (Act No 36 of 1994). This act determines that whenever any public holiday falls on a Sunday, the Monday following it shall be a public holiday.

  • Saturday 1 January – New Year’s Day
  • Monday 21 March – Human Rights Day
  • Friday 15 April – Good Friday
  • Monday 18 April – Family Day
  • Wednesday 27 April – Freedom Day
  • Sunday 1 May – Workers’ Day
  • Thursday 16 June – Youth Day
  • Tuesday 9 August – National Women’s Day
  • Saturday 24 September – Heritage Day
  • Friday 16 December – Day of Reconciliation
  • Sunday 25 December – Christmas Day
  • Monday 26 December – Day of Goodwill

In the first six months of employment, an employee will accrue one day of paid sick leave for every 26 days of paid work. Thereafter, during each sick leave cycle of 36 months’ employment, the employee shall be entitled to an amount of paid sick leave equal to the number of days the employee normally would normally work during a period of six weeks. For the duration of sick leave, the employee is to be paid in full.

Pregnant employees are required to take maternity leave by law. They may not return to work within six weeks after the birth unless cleared by a medical professional. Employees are entitled to four months’ (121 days) unpaid maternity leave in total.

Employers in South Africa are not legally obliged to pay their employees during maternity leave; however, it’s common practice for employers to provide some maternity benefits.

All employees who have contributed to UIF (Unemployment Insurance Fund) are eligible for maternity benefit to cover any shortfall from their salary. The UIF benefit is between 38–60% of an employee’s gross salary (up to a maximum of R14,872)

Parental leave entitles an employee to 10 days of consecutive leave for the purposes of birth, adoption and surrogacy.
This leave is unpaid from the date of birth or when an adoption order is granted. Employers are not obliged to pay their employees during this period. Employees will be able to claim UIF for the 10 consecutive days (eight working days) and are entitled to an amount up to 66% of their regular earnings, subject to the maximum income threshold as per the Unemployment Insurance Act.

It’s important to note that the new amendments as stated above are gender neutral (both male and female employees may apply for and be granted the leave).

Family responsibility leave covers special leave (to care for a child) and compassionate leave.

100% of the employee’s daily earnings is paid for up to three days each year.

To qualify for this leave, the employee must have been employed for a minimum of four months and must work more than four days a week for the same employer.

Contractual provisions

Termination

A contract may not be terminated without a justified reason as outlined by the Labor Relations Act (LRA). The Basic Conditions of Employment Act (BCEA – Section 37) outlines the minimum notice period based on the length of service.

Length of service Minimum notice period
> Six months One week
< Six months > one year Two weeks
One year + Four weeks

An employer may not require an employee to take annual leave owed during the notice period. This must instead be paid out as part of the employee’s salary.

Probationary period

There’s no prescribed time limit set for a probation period. The probation period must be reasonable, given the circumstances of the job.

The preferred practice in South Africa is six months probationary period for a new employee and three months probationary period for an internal transfer. Extensions to the probationary period are permissible if performance is not satisfactory.

Being on probation doesn’t give an employee any specific legal rights. An employee can be dismissed with one week’s notice while on probation.

Pension

There are no mandatory pension contributions in South Africa. The employee can choose to have a private pension which would be under their own personal remit and would remain separate to their employment.

Working hours

The maximum normal working time allowed (section 9 BCEA) is 45 hours weekly. This is nine hours per day (excluding lunch break) if the employee works a five-day week, and eight hours per day (excluding lunch break) if the employee works more than five days per week.

It’s important to note that employees earning in excess of the earnings threshold are excluded from the BCEA provisions which regulate ordinary hours of work, overtime, compressed working weeks, averaging of hours of work, meal intervals, daily and weekly rest periods, Sunday pay, pay for night work and pay for work on public holidays.

The current threshold in effect from 1 March 2021 is an annual amount of R211,596.30.

Rest breaks

Meal and rest breaks are unpaid and are, therefore, not included in the calculation of working hours. The statutory meal break is one hour, but by agreement between the employee and employer, this may be reduced to 30 minutes.

Overtime

Overtime can only be required when there’s an agreement between the employer and the employee, and such agreement may not require the employee to work more than 12 hours in any day. An employee may not work more than 10 overtime hours in a week cycle.

Workers’ compensation (employer liability)

Employers are required to pay into the Workers’ Compensation Fund once a month to provide compensation for workers who get injured at work, contract occupational diseases, or for death as a result of these injuries or diseases. The contribution is solely the employer’s responsibility and money mustn’t be deducted from a worker’s salary.

The annual assessment fee is calculated on workers’ earnings and an assessment tariff based on the risks associated with the type of work being done.
Assessment fee = total workers’ pay ÷ 100 x assessment tariff. Assessment tariffs, reviewed annually, are based on the risks related to a particular type of work.

The amount of R506, 473.00 per employee per annum is the maximum amount on which an assessment of an employer shall be calculated on with effect 1 March 2021.

Keen to engage an EOR in South Africa? At TopSource Worldwide, we work with local experts to help you navigate the various admin and cost obstacles you may come across along your expansion journey

To find out how we can help your business with our employment solutions, contact us today.

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