While Remote’s guide on hiring remote workers in South Africa covers all the basics of South African employment, paying remote workers can be tricky in any country. Whether you already have a team in South Africa or you’re looking to make your first hire, this guide will help you understand how to pay employees in South Africa.
To pay your employees in South Africa, you can open a legal entity, work with an employer of record like Remote, or pay your workers as contractors. Each option has advantages and disadvantages.
To open your own legal entity within South Africa, you must find your own local attorneys, payroll providers, benefits managers, banks, and more. This may make sense if you plan to establish a strong presence in the country with dozens of employees, but if you only want to hire a few team members, establishing an entity is likely overkill.
With an employer of record, or EOR, you can hire and pay your workers in South Africa without opening an entity. Remote owns our own legal entity in South Africa, so we take on all the legal risks and responsibilities that would normally fall to you. In addition, we handle payroll processing, benefits management, and taxes, so you don’t have to worry about finding your own providers for those services in the country.
You can also pay employees in South Africa as contractors. Be careful before choosing this option, though. If you misclassify an employee as a contractor, your company could be subject to penalties and fines.
Foreign nationals living in South Africa are only responsible for paying taxes to the South African government on income they earn while working in the country. For remote workers, any income earned while physically residing within the country qualifies as taxable income, even if the employer operates in another country. Many expats qualify for exemption from taxes, though.
South African citizens must pay taxes on all their income to the South African government, even on income earned in other parts of the world.
South African employers are required to register with the South African Revenue Service, or SARS, unless working with an EOR.
Employees are responsible for registering themselves with SARS. If you have employees in South Africa, Remote can help with this process.
Employers in South Africa must withhold taxes and social contributions from the pay of their full-time employees.
Employers withhold a few types of taxes and social contributions from employees in South Africa. Income taxes in South Africa range from 18% for earnings up to R205,900 to 45% for earnings beyond R1,577,300 in the 2021 tax year. South African tax years run from March 1st to the end of February. Find more information on individual income taxes in South Africa on the SARS website.
For social security purposes, employers must deduct 1% of each employee’s taxable income up to a maximum of R148.72 per month. This money goes toward South Africa’s UIF benefit, which covers payments for individuals with disabilities, on unemployment, or on maternity leave. Employers also contribute to the UIF separately from employees, usually in greater percentages.
Employers who provide employees with stipends for health insurance coverage (and the employees who receive the stipends) may qualify for South Africa’s MTC, Medical Scheme Fee Tax Credit. This rebate can affect the tax liability of both employer and employee, including withholding rates. Rebates are set at R310 per month for both the primary policyholder and first dependant, then R209 for each additional dependant.
The SARS collects taxes through South Africa’s PAYE (Pay as You Earn) system. Payments are due by the 7th day of each month or the preceding Friday if the 7th falls on a weekend.
Yes. Most employers pay employees a bonus equivalent to an extra month’s salary at the end of the year, although the government does not mandate such a benefit. When deducting payroll taxes throughout the year, employers need to account for this bonus as part of the employee’s compensation.
Companies in South Africa pay employees in the South African Rand, ZAR. Contractors may receive payments in other currencies, if the payment processor allows it, but will be responsible for converting their income to ZAR and paying appropriate taxes.
The minimum wage in South Africa is R20.76 per hour, which is equivalent to about USD $1.26. Workers in certain industries, including farming and domestic work, may be subject to lower minimum wages.
Employees in South Africa earn 150% of their usual pay rate for every hour of overtime worked. Employers may only ask employees to work 10 hours of overtime per week and three hours of overtime per day, but may extend that limitation to 15 hours per week for up to two months per year. Employees may refuse requests to work overtime at their discretion.
People in South Africa who work on Sundays are eligible to receive 200% of their normal wages if they do not regularly work Sundays. Workers who usually work Sundays earn the standard overtime rate of 150% for all hours worked on Sundays.
Employees can choose to accept paid time off in lieu of overtime wages if they desire. PTO earned in this way accumulates at a rate equal to the pay rate for the hours worked. So, an employee who does not normally work on Sunday would earn two hours of PTO for every overtime hour worked, while an employee working after hours during the week would earn 1.5 hours of PTO for every hour worked.
Foreign employers of contractors in South Africa may pay their contractors directly using a tool like Remote’s free contractor payments platform. In general, paying contractors in South Africa works the same way as paying contractors anywhere else.
Regarding misclassification, courts in South Africa do not consider the labels that companies, employees, and contractors attach to themselves. Courts only look at the nature of the relationship to determine the status of an employee or contractor. Independent contractors in South Africa must be free to work with multiple companies at once, and contractor relationships must generally focus on the scope of individual projects.
Because South Africa frowns upon fixed-term employment contractors, employers should be careful not to misclassify. Full employment is often the safer choice, especially for companies looking to protect their intellectual property and invention rights.
Contractors in South Africa are liable for paying their own taxes. Employers do not withhold any taxes from payments made to contractors in South Africa.
As one of Africa’s largest economies, South Africa is booming with top talent in a host of industries. If your business has found the perfect candidate in South Africa, Remote makes it easy to onboard, employ, and pay that candidate in minutes
Remote’s global employment and free global contract solutions allow businesses from around the world to pay workers in South Africa without opening a legal entity or paying unnecessary fees. Our complete employer of record solution keeps your company compliant while providing a first-class experience for your South African employees. Remote never charges a percentage of salary or hidden fees: one low flat rate takes care of everything. Contact us today at sa[email protected] to learn more about our South Africa global employment and South Africa payroll solutions.
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