How to Find and Pay Contractors in South Africa
If your company is interested in hiring a team in South Africa, you may consider different types of remote contracts. In this article, we will provide some information about the different types of workers available to you, with a focus on independent contractors.
Published on August 26, 2022
How to find and pay contractors in South Africa 🇿🇦South Africa is famous for its varied landscape and incredible wildlife, but its cities are just as remarkable, particularly for business. International hubs like Cape Town and Johannesburg are notable gateways to global markets, and South Africa itself is host to many corporate subsidiaries. Some of these subsidiaries include big hitters like IBM, Microsoft, Intel, and Dell.More than that, South Africa serves as a supply base for neighboring IT industries. Not surprisingly, many foreign companies see South Africa as a notable player in the international tech scene.If your company is interested in hiring a global team, you may consider different types of remote contracts. In this article, we will provide some information about the different types of workers available to you, with a focus on independent contractors. Next, we will provide tips for hiring and paying contractors.
Options for hiring workers in South Africa 🧑A global business hiring in South Africa has a few options for hiring remote workers. Who you hire will depend on your company's needs.Some businesses will want to hire remote employees. Under South African employment legislation, employees are considered persons (not including independent contractors) who assist in or conduct the business of the employer.Even if a person is not formally employed by an employer, they may still be considered an employee. Written employment contracts may be on a fixed term basis or contracts for an indefinite period, but the term must be stipulated in the contract.Here is a short list of fixed-term workers to consider when hiring in South Africa.
Temporary workersTemporary workers may work a maximum of three months unless there is a justifiable reason for fixing the term of the contract beyond three months. After three months, temporary workers are entitled to the same conditions as permanent workers.
Agency workersAgency workers are considered to be permanently employed after working for a client for three consecutive months unless there is a justifiable reason for different treatment.
Part-time workersPart-time workers may work for multiple employers simultaneously, especially when they are providing services to multiple groups within a larger company.
Independent contractors 👩💻Employers may decide to hire an independent contractor instead of an employee because they may be uncertain about how long it will take to complete a job, or how much work is available.Hiring contractors also typically reduces payroll taxes, too. For tax purposes, employers are not responsible for withholding a contractor's income tax from their paychecks. Instead, the South African Revenue Service (SARS) requires that tax liability fall to the contractor instead.
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Determine if your worker is an employee vs. an independent contractor 🆚Each type of worker has different requirements under South African laws. Typically, the Labour Relations Act of South Africa does not protect independent contractors in the same way they do employees. Contractors are not entitled to statutory benefits but are entitled to minimum safety requirements.How do you know whether the person you employ is an independent contractor or an employee?Unlike in an employment relationship, independent contractors in contractor relationships
- Provide services and be paid for that specific service and
- Work with a client instead of for an employer
Dominant impression testA person's employment contract may state that they are an independent contractor or non-employee, and not an employee, but South African labor courts do not simply rely on the contract's wording to determine worker classification. Instead, they use a “dominant impression test."If one or more of the following are present, then the dominant impression is that the person is an employee:
- the person’s hours of work are subject to the control or direction of another person, organization, or company;
- in the case of a person who works for an organization or company, the person forms part of that organization or company;
- the person is economically dependent on the other person, organization, or company for whom he or she renders services;
- the person is provided with tools of trade or work equipment by the other person, organization, or company; or
- the person only works for or renders services to one person, organization, or company.
Protection from terminationIn an employment relationship, the employer must provide justifiable cause for dismissal of an employee, and follow a fair procedure for termination of the employment relationship. Justifiable cause for employee dismissal includes misconduct, inability to perform the work due to illness or poor performance, or operational requirements of the employer.
Notice periodEmployees must be given a minimum notice period for termination, except in the case of gross misconduct.
- For employees with less than six months of continuous service, the Basic Conditions of Employment Act (BCEA) requires at least one week of notice.
- Employees with six months to a year of continuous service must be given a minimum of two weeks' notice
- Employees who have worked for a year or more for the same employer must give a minimum of four weeks' notice.
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Severance payIf an employee is dismissed for gross misconduct or poor performance, they are not entitled to severance pay. An employee is entitled to compensation if they were dismissed for operational reasons, however.Independent contractors, on the other hand, are only allowed general protections against a breach of contract and common law unlawful termination. Typically, in an independent contractor relationship, the details of the contractor's termination are determined by an agreement between the contractor and their client.
Finding an independent contractor 🔎If you have decided that an independent contractor suits your company's needs for remote work, next you will need to find the proper foreign contractors. But where to start? Here are a few tips for zeroing in on the best person for the job.
Job search sitesTo get started on finding talent, you will need to find reputable job search sites in South Africa. Many of the popular online job portals in the US are also popular in South Africa. They include LinkedIn, Indeed, Glassdoor, and Google Careers.
Role descriptionYou're not looking for just anybody, and providing a detailed job description tends to optimize your company's applicant pool. In your job posting, be sure to include the job's specific duties, the ideal candidate's skillset, the wages or salary, and benefits. You should also clarify the contract being offered, and whether it's for a fixed term or a specific task.South Africa recognizes 11 official languages: Sepedi (also known as Sesotho sa Leboa), Sesotho, Setswana, siSwati, Tshivenda, Xitsonga, Afrikaans, English, isiNdebele, isiXhosa, and isiZulu. IsiZulu is the most commonly spoken language, with 23% of the population identifying as IsiZulu speakers. Only 10% of the population speaks English, so if you plan to create a job posting in South Africa, you will likely need to translate the job description into both English and IsiZulu.There are a few translation services to choose from. Better Language Company (BLC) is one translation service that is popular in South Africa, in addition to Signature ZA.
InterviewsThe most convenient method of interviewing job candidates these days is virtually on Zoom or other video conferencing platforms. Make sure you take note of the time difference! South Africa uses both South Africa Standard Time and East Africa Time. South Africa Standard Time is nine hours ahead of Pacific Standard Time (PST) in the US, and East Africa Time is 10 hours ahead of PST.
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How to pay independent contractors 🤑Your company has a few options for paying remote contractors. Here are some popular methods of payment.
Bank transfers using SWIFTSWIFT stands for The Society for Worldwide Interbank Financial Telecommunications. SWIFT is a trusted network of banks used by financial institutions around the world, and many companies depend on it to wire electronic funds to contractors. This is because SWIFT guarantees a secure process, with little risk that the international money transfer will not arrive in the recipient's bank account.Fund transfers with SWIFT are conducted through a standardized system of codes. Every bank or financial institution within SWIFT is assigned its own, unique code, called a SWIFT code or a Bank Identifier Code (BIC), that is either eight digits or 11 digits long. These codes transmit different instructions for electronic fund transfers.A major downside of SWIFT is that a fee is often deducted each time there is a transfer. These fees can add up, and ultimately reduce the final amount that foreign contractors receive. Not only that, but the fees add more to your company's payroll expenses. Unfortunately, SWIFT fees are also unpredictable: banks may charge a different fee for every transfer, even if the transfers have been routed through that bank previously.
Money transfer companiesRemitly, Xoom (owned by PayPal), and Wise (formerly Transferwise), are just a few of the international wire transfer companies that operate online. Some transfer companies require company-issued debit cards to access funds, and, like SWIFT, a fee is typically charged every time the debit card is used. Sometimes, a withdrawal fee is included if the payee uses the service to withdraw funds.Money transfer companies often charge percent-based fees or add markup fees when transferring a payment. These fees can actually be less costly than other transfer services, but it's nevertheless a nuisance for payers and payees.
Traditional money transfer servicesWestern Union and MoneyGram are a few well-known money transfer services that are conveniently found online as well as in most major cities. These services often have better markups on currency rates, but just like some other payment options we mentioned, these companies often charge percent-based fees or add markup fees for currency exchange.
CryptocurrenciesCryptocurrency has been in the news lately for its volatility in the markets. While there is still debate over whether companies like Bitcoin can rally after their downward spiral, the bottom line is that cryptocurrency is not always practical. Not everyone has a system to use cryptocurrency as payment, for instance. And although South Africa is currently looking into regulating crypto, digital currency will still be subject to currency fluctuations and possible bank fees.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Money ordersMoney orders are a paper form of payment and can be used to pay foreign contractors. Sending a check through the mail may seem outdated, given all the options for digital payment. Unlike personal checks, however, a money order can’t bounce the way a personal check can. The payer must guarantee the payment with some other form of payment, like a debit card, cash, or traveler's check.A money order is required to have both the name of the payee and the financial institution issuing the check, posing a big obstacle for potential thieves to intercept the order and cash the payment. The payer and payee still assume some risk in using money orders, however. A payer should keep the receipt for a money order in case the order is lost or stolen.
Compliance and labor laws ✅International labor laws can be complex, and it's important that your company has the expertise to stay compliant as you hire abroad, especially in the case of hiring contract workers. There are many tax and labor laws to keep track of when you hire internationally. Without proper attention paid to compliance, companies might overlook critical details in contract laws, and misclassify a worker. Oversights like this may result in legal trouble and fines for your business.Many businesses choose to hire HR experts who specialize in international compliance in order to mitigate the risk of worker misclassification.
Pilot can help you work with talent from anywhere 👥Our HR experts at Pilot can help your business stay organized and compliant with local laws as you hire an international team. Our platform also supports payments to contractors in over 240 countries, so you can hire the best talent, wherever they are.Contractors love us, too: unlike other payroll platforms, Pilot doesn't charge markup fees or require an e-wallet or debit card to access funds. Instead, your contractors can get their payments transferred directly into their bank accounts.Interested in learning more about Pilot? Schedule a demo with one of our experts.
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