Regardless of size, global companies need help to secure in-country expertise for localised payroll service. This is where a partner like Workforce Africa provides significant value in supporting global firms to maintain compliance when handling payroll in South Africa, addressing every intricate detail, including;

• Salary computation requirements,
• Taxation legislation specifics (social security, employee income tax, corporate tax, VAT and other employee deductions.
• Benefits administration, and more (health insurance, pension, paid leaves, holiday compensation.

Workforce Africa simplifies hiring and payroll compliance for offshore talent management in South Africa. No need for a subsidiary or entity setup. From contracts and onboarding to taxes, payroll, and admin tasks, partnering with us – a payroll firm in South Africa will help you focus on growth for greater levels of success.

Employment Contract Termination

In accordance with the laws of South Africa, employment contracts may be terminated in line with section 37 of the BCEA. Subject to corrective and progressive discipline, the employer may also terminate an employee’s contract without notice if there is just cause, such as gross misconduct or breach of contract. Conversely, an employee may terminate their contract by resigning in writing, which must be acknowledged by the employer. It is essential to follow the proper procedures for terminating an employment contract to avoid any potential legal disputes or penalties

South Africa Country Overview

The Republic of South Africa is predominantly an English-speaking country, although with other several local languages spoken across different regions. Two critical cities in Cape Town and Johannesburg, these urban centres act as transit points to ecotourism destinations and beach resorts. With a population exceeding 64.1 million people, South Africa boasts a significant demographic presence on the continent.

In recent years, key industries experiencing growth include energy, tourism and manufacturing. South Africa boasts a market-based, diversified economy comprising transport, coal, gold, mining, and services. Considerations such as the low labour cost and abundant natural resources make South Africa attractive for businesses seeking expansion opportunities. 

Although South Africa possesses a highly skilled workforce, hiring and establishing a team can be time-consuming and challenging. However, partnering with an Employer of Record (EOR) or Professional Employer Organisation (PEO) in South Africa facilitates swift market entry. It manages all legal complexities associated with operations in the country. 

Payroll Processing in South Africa

Local labour laws in South Africa govern payroll processing, with each employee’s salary potentially calculated differently. Due to compliance concerns, processing payroll at scale can become complex, cumbersome, and risky. Here are the phases of payroll processes global businesses should understand-:

Pre-payroll Phase

Your organisation’s unique approach to payroll compliance shapes its policies and processes, including payroll preparation. Global firms must prioritise essential business elements in the pre-payroll phase, such as accurate business profile documentation and tailored work location policies, which is crucial. Customise leave and work policies to align with local standards in South Africa to ensure compliance and transparency while collaborating closely with compliance teams or partners to help adhere to statutory requirements throughout the payroll management process for your remote team. In this phase also, standardising compensation packages to conform with local payment norms, such as payment cycles, which enhance compliance and meet employee expectations, is necessary.

Payroll Calculation Phase

Streamlining input collection and validation processes ensures accurate wage calculations in this phase of payroll processing. This phase involves the actual calculation of wages, with a primary focus on this task. Utilising software automation and digital document submission tools makes payroll calculations efficient and reduces the risk of human error in this process.

Post-payroll Phase

The post-payroll phase in South Africa refers to the period after payroll processing, where employers review and settle any outstanding issues related to employee compensation, benefits, and taxes. This phase typically includes: salary payment, compliance reporting, benefit administration, audit and reconciliation. The post-payroll phase is crucial in South Africa as it ensures that employers comply with regulatory requirements, maintain a good employer-employee relationship, and reduce the risk of penalties or fines associated with non-compliance.

Payroll Components in South Africa

Here are some aspects comprehensively needed to navigate South Africa’s payroll compliance:

• Salary/Wages
• Overtime benefits
• Social security contribution
• Paid leaves
• Paid holidays
• Payroll taxes
• Other laws

Navigating South Africa Payroll Compliance

South Africa’s employment regulation primarily revolves around The Basic Conditions of Employment Act (BCEA), along with pertinent sections of other laws and acts. The Labor Law outlines critical aspects of payroll processing and compliance with crucial employment practices-:

Salary/ Minimum Wage

The current minimum wage set on March 1, 2024 is ZAR 27.58 per hour.

Overtime Benefits

Employees below threshold may work a maximum of 45 hours a week (excluding lunch hours) at a normal rate of pay. That is 9 hours per day for a 5-day week and 8 hours a day for a work week of more than 5 days. Employees may work a maximum of 3 hours overtime per day or 10 hours in any one week. Overtime is calculated at x1.5 normal rate and x2 for Sundays and public holidays.

Social Security Contribution

In South Africa, there isn’t a traditional social security system like some other countries. However, there are optional contributions made by both employers and employees towards benefits like pensions and healthcare. Here’s a breakdown:

• Pension Contributions: Unlike some countries, South Africa does not have a mandatory national pension system. However, many employers offer retirement fund options as part of their employee benefits packages.
• Types of Retirement Funds:
  • Pension Funds
  • Provident Funds
  • Retirement Annuity Funds
• Contribution Rates: Contribution rates can vary depending on the specific fund and employer. Typically, they range from:
  • Employee contributions: 5-7.5% of pensionable salary
  • Employer contributions: 5-10% of employee’s pensionable salary

Payroll Taxes

Paid Leaves

• Annual Leave: an employee is entitled to a minimum of 21 consecutive days paid annual leave (15 working days) in respect of each annual leave cycle, being a period of 12 months’ employment with the same employer.
• Sick Leave: an employee who works 5 days per week is entitled to 30 days every 36 months. This is dependent on medical certificates being provided.
• Maternity Leave: 4 consecutive months unpaid but benefits can be claimed for the Unemployment Insurance Fund (UIF).
• Parental Leave: This 10 consecutive days unpaid leave
• Family Responsibility Leave: 3 days of full pay per year and is non-accumulative. Only available to employees who have been in employment with the same employer for longer than 4 months and who work more than 4 days per week for the employer.

In South Africa, employees may be granted compassionate/ special leaves on some family events. Such leave shall be paid within the limits and deadlines specified.

Paid Public Holidays

In South Africa, the paid holidays are as follows:

• January 1: New Year’s Day
• March 21: Human Rights Day
• Good Friday: The Friday before Easter
• Family Day: The Monday after Easter
• April 27: Freedom Day
• May 1: Workers’ day
• June 16: Youth Day
• August 9: National Women’s Day
• September 24: Heritage Day
• December 16: Day of Reconciliation
• December 25: Christmas day
• December 26: Day of Goodwill

Payroll Outsourcing in South Africa

Payroll outsourcing in South Africa also encompasses termination and probationary periods law. Notice is subject to Section 37 of the BCEA: one week if the employee has been employed for six months or less, two weeks if employed for more than six months but not more than one year, and four weeks thereafter. In the event of termination for operational reasons, severance pay is one week’s salary for every completed year of service.

Collaborate with an Africa employer of record and payroll solutions provider such as Workforce Africa to strategically outsource your payroll operations while ensuring compliance with local labour regulations. Additionally, leverage our flexible service offerings to expand your international teams as needed.