South Africa

AVASO provides employer of record services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary in South Africa. Your candidate is hired via AVASO’ South Africa PEO in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.

Table of Contents

• Hiring in South Africa
• Employment Contracts in South Africa
• Working Hours in South Africa
• Holidays in South Africa
• Vacation Days in South Africa
• South Africa Sick Leave
• Maternity/Paternity Leave in South Africa
• Health Insurance in South Africa
• South Africa Supplementary Benefits
• Bonuses
• Termination/Severance in South Africa
• Paying Taxes in South Africa

Our comprehensive solution and Global PEO service enable customers to run payroll in South Africa while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in South Africa.

Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. AVASO allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.

South Africa is the most southern state in Africa and the Eastern Hemisphere. There are 11 official languages in South Africa, while English is the most commonly used in business, the most commonly spoken first language is Zulu, by about 23% of the population.

When negotiating the terms of an employment contract and offer letter with an employee in South Africa, it may be useful to keep the following standard benefits in mind:

Hiring in South Africa

South Africans tend to be very friendly people, but you will need to spend time establishing a rapport before getting down to business, and having a local business partner to smooth the way can be extremely helpful. Appointments should be scheduled far in advance, negotiations can take a long time, and you should not expect much movement in prices. Contracts should include deadlines, but South African often view them as changeable.

When negotiating the terms of an employment contract and offer letter with an employee in South Africa, it may be useful to keep the following standard benefits in mind:

Employment Contracts in South Africa

In South Africa, employment contracts can be oral or written, but it best practice to put a strong, written contract in place, in English, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Country should always state the salary and any compensation amounts in South African Rand (ZAR) rather than a foreign currency.   The employment contract template is part of the service with AVASO; no need to draft a separate template if you use our employer of record and PEO service in South Africa.

The general rule in South Africa is that employment contracts are executed for an indefinite duration. South African labor law prohibits the use of a fixed-term hiring contract for tasks that are permanent in nature. The duration of a fixed-term contract must be clearly specified between parties if a fixed-term contract is applicable.

It is legally required to put a strong, written employment contract in place in South Africa, in the local language, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in South Africa should always state the salary and any compensation amounts in South African rand rather than a foreign currency.

This information is provided as generally accepted information and is not intended as advisory services.

Working Hours in South Africa

The standard workweek in South Africa consists of up to 45 hours per week. If the employee works 5 days a week or less, then the employee can work up to 9 hours per day.  If the employee works more than 5 days a week, then the typical workday consists of up to 8 hours.

An employee is entitled to a lunch break of 60 minutes if they work more than 5 hours unless a written agreement stipulates that a 30-minute break can be taken, or the meal break can be eliminated for an employee that works up to 6 hours via written agreement.

Please note that the above does not apply to employees in senior management, sales employees who travel and regulate their own working hours, or employees who work less than 24 hours in a month.  Additionally, although an employee can work up to 45 hours per week it is customary for an employee to work Monday – Friday 9 AM – 5 PM.

Overtime must not exceed more than 10 hours per week and employees must not work overtime hours unless agreed upon.

• An agreement can be made to increase overtime hours to 15 hours a week only for a two-month period during a year.
• An employee cannot work more than 12 hours on any given day.
• Employers must pay employees overtime hours at a rate of 1.5 times the normal hourly wage, or alternatively, an employee may agree to receive paid time off in lieu of overtime pay or a combination of overtime pay and paid time off.
• Employees who do not typically work on a Sunday are entitled to double the normal hourly wage if they work Sundays.
• If an employee typically works on a Sunday, then they are entitled to 1.5 times the normal hourly wage.

Holidays in South Africa

South Africa celebrates 12 public holidays for which employees are given the day off, including:

• New Year’s Day
• Human Rights Day
• Good Friday
• Family Day
• Freedom Day
• Workers Day
• Youth Day
• National Women’s Day
• Heritage Day
• Day of Reconciliation
• Christmas Day
• Day of Goodwill

The Public Holidays Act determines that whenever any public holidays fall on a Sunday, the Monday following the holiday shall be a public holiday.

Vacation Days in South Africa

Employees in South Africa are entitled to a minimum of 15 business days off per year (21 consecutive days which totals 15 working days based on a 5-day week or 18 working days based on a 6-day week) or 1 day for every 17 days worked, or 1 hour for every 17 hours worked, in addition to the public holidays. The accumulation of paid time off is not prohibited, therefore, a “use it or lose it” policy would not be enforceable.

Employees also receive 3 days of Family Responsibility Leave for each 12-month period from the start of employment, if they have worked for their employer for more than 4 months, under the following circumstances:

• Birth of a child
• Sick child
• Death of a family member including a spouse or life partner, parent or adoptive parent, grandparent, child or adopted children, grandchild, or sibling.

Family Responsibility Leave expires at the end of each annual cycle and unused family leave cannot be carried over into the following cycle.

Employers typically do not provide more than the minimum.

South Africa Sick Leave

The sick leave cycle is a period of 36-months of employment with the same employer following the employee start date or the completion of the previous sick leave cycle. Employees are eligible to take the number of days they would normally work in a 6-week period for sick leave on full pay within the 36-month cycle.

• During the first 6 months of employment, employees are only entitled to 1 day of paid sick leave for every 26 days worked.
• After 6 months, the balance of 30 days (based on a 5-day work week) or 36 days (based on a 6-day work week) will be available, less any sick days taken during the first 6 months of employment.
• At the end of the sick leave cycle, any unused sick leave will be forfeited.

If an employee is unable to work due to a work-related accident or occupational illness for 4 days or more but less than 3 months, the employer must pay the injured employee at a rate of pay of at least 75% from the first day of injury until the employee returns to work. If the employee is unable to work for a period longer than 3 months, the employee must claim compensation from the Compensation Fund.

Maternity/Paternity Leave in South Africa

Pregnant employees are entitled to at least 4 consecutive months of maternity leave. Employees can start their maternity leave up to one month prior to their due date, or earlier or later as agreed or required by health reasons. Employees may not go back to work within 6 weeks of giving birth unless their doctor says it is safe.

The Unemployment Insurance Act allows for benefits at a level contingent on earning, and can pay up to 60% of an employee’s salary during maternity leave.

As of January 1, 2020, a new law allowing for parental leave for parents who have not given birth went into affect. Fathers, adopting parents, and parents using a surrogate are entitled to 10 days of leave after the birth of their child. Employers are not required to pay but employees on parental leave can apply for Unemployment Insurance Fund benefits.

Health Insurance in South Africa

There is no public health system in South Africa. While the employer is not mandated to assist employees with health insurance, it is a common benefit. An employer can either provide a group plan or provide an allowance for an employee to purchase a plan. Currently, there are two types of insurances in South Africa, (1) medical aid schemes and (2) private health insurance.   South African professionals are used to one system or the other and know how to obtain the insurance.

A National Health Insurance (NHI) program is currently in the pilot phase and will be slowly implemented between 2016 and 2025. As this program is developed there may be employer contribution requirements in the future.

In addition to health insurance, personal accident coverage and retirement benefits are also typically covered through private policies in South Africa.

South Africa Supplementary Benefits

Meals, refreshments, and meal and refreshment vouchers are an optional taxable benefit in South Africa.

Bonuses

The 13^th month bonus (13^th check or Christmas bonus) in South Africa is considered a gratuity and is not required by local law. However, most employees see the 13^th check as a right or entitlement and it is common for this to be incorporated as a condition of employment.

A performance bonus is usually paid for good performance and should be based on a percentage of the employee’s salary. Additionally, it can be paid as a lump sum to a department and split equally among employees in that department.

Travel expenses should be recorded and can be claimed through the appropriate tax authorities for a period of up to 5 years.

Termination/Severance in South Africa

The employer can set a probationary period in the employment contract. Local labor laws do not specify the maximum probationary period, however, the probation period must be reasonable given the circumstances of the job.

Resignation or Termination Notice Period: Either party can terminate a contract by serving a notice or paying in lieu thereof.   The period of notice is at least::

• 1 week notice if the employee has been employed for up to 6 months
• 2 weeks’ notice if the employee has been employed between 6 months and 12 months
• 4 weeks’ notice if the employee has been employed more than 12 months

A collective agreement may permit the notice period of four weeks required once the employee has worked more than 12 months to be reduced to not less than two weeks.

Severance Pay: An employee who is dismissed for reasons based on operational requirements (retrenchment) or whose contract of employment is terminated on account of insolvency is entitled to severance pay at a rate of 1 week of pay for each year of service completed. No severance pay is required in cases of resignation, retirement, death, expiration of an employment contract, dismissal for misconduct, poor performance, illness or other reasons.

Paying Taxes in South Africa

South Africa does not have a state-sponsored social security system other than the following:

• Unemployment Insurance Fund (UIF): The UIF provides short-term relief to employees when they become unemployed or are unable to work because of illness, maternity or adoption leave, and to provide relief to the descendants of a deceased contributor. A 1% monthly contribution must be made by the employee based on the remuneration paid to the employee, while an employer’s social cost typically comes to 8.5% of gross remuneration.
• Compensation for Occupational Injuries and Diseases Act (COIDA): COIDA allows for compensation to be paid to employees who are partially or completely disabled as a result of their work. The rate paid varies by industry and typically ranges from 0.11% to 8.26%. The amount is to be paid annually.