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Remote work is on the rise and Africa is a continent where people are most willing to work remotely. However, legally hiring workers in Africa without a local entity is challenging. One solution is to use an Employer of Record (EOR) service, which handles employment contracts, tax treatment, and other legal duties on behalf of the hiring company.
Remote work has seen an impressive increase in demand among job seekers. Some even prioritize it over salary because of the many benefits. Companies recognize this, prompting them to seek talent from other countries. Research shows that Africa is one of the continents where people are most willing to work remotely.
However, legally hiring workers in Africa without a local entity is challenging. It is why more companies are turning to Employer Of Record (EOR) services. EOR services are an effective solution to employing workers legally without having to set up a local entity.
So what exactly does an EOR service do? And is it truly better than setting up a local entity? The information below provides answers to these and related questions. Let’s dive in.
An employer of record or EOR is a service provider that handles employment contracts, tax treatment, and other duties on behalf of the hiring company. They become the total legal employer of the company’s distributed workforce. EOR responsibilities often fall under the functions of human resources and legal teams. It can include:
● Payroll processing and benefits.
● Tax deposits and filings.
● Developing and posting job descriptions.
● Handling employee contacts and work permits.
● Health insurance maintenance.
● Employment termination.
● Timesheet maintenance (tracking).
● Employee onboarding for new employees.
● Conduct background screenings.
● Dealing with unemployment.
Companies that hire outside the parent company’s country use employer of record services for legal purposes. Tax laws differ between countries. Significant differences exist between how the US and UK handle taxes and how African countries do. So companies hiring from, say, South Africa should follow their tax laws for compliance.
The same applies to labour laws (e.g., minimum wage and working hours)– they differ, and the legal employer must ensure to follow them to avoid the consequences.
An employer-of-record solution is an alternative to creating a local entity in the new country. Therefore, these services are helpful to companies that rely on outsourcing, contracting, and hiring part-time employees from other countries. It is a global employment solution that saves time and money.
There are many benefits companies, and employees enjoy through EOR services, as listed below. But first, learn the difference between EOR and PEO services.
A Professional Employer Organization or PEO is a service provider that partners with small and medium-sized businesses to provide comprehensive HR services related to taxation and payroll, often for full-time employees.
So how does PEO differ from EOR services?
● PEOs require the employer to have their local entity in the country or region, while EORs do not.
● PEOs offer a co-employment arrangement where they and the company have various responsibilities. On the other hand, EORs are the legal employers of workers on paper.
● Working with PEOs means the company is solely responsible for full compliance with local labour laws. They only share in the liability. However, EORs take over these and other legal responsibilities, reducing the company’s liability.
Companies with a local entity in the employees’ country will benefit more from PEO services. They share responsibilities, making running payroll and maintaining tax compliance more manageable. On the other hand, EOR services are better suited for employers with no local entity.
EOR services are highly beneficial in Africa. Here’s how.
Hiring employees in African countries means employers must deal with the hassle of complying with tax laws, payroll, and labour regulations. One slip-up could mean a hefty fine and other legal consequences. EORs take the burden of compliance, reducing the company’s liability.
EOR services allow companies to tap into new markets. Companies can easily access top talent through EORs, simplifying global expansion. In addition, companies benefit from hiring workers already used to working in the local market.
Recruiting from African countries takes time–up to months at times. In addition, setting up a local legal entity for the sake of recruiting is costly. EORs cut the time and money required for these tasks. Companies can have new hires working within a week post job advertising.
In-house HR and managers will be free to allocate time to other tasks while EOR services handle global recruitment, payroll, tax filing, etc.
EORs help to reduce unemployment in African countries by breaking down barriers to international recruitment. Workers across the globe can safely and legally work for global companies.
Successful EORs know what job seekers in the local country need for employee satisfaction. Therefore, they can offer better employee benefits tailored to their needs.
EORs are experts in local employment laws and workers’ rights in African countries. Therefore, employees are guaranteed that their rights will be protected as they work.
African employees feel more confident working for foreign companies when they know a legal EOR is in charge of minding payroll.
EORs will provide a conducive working environment more suited to the local people because they understand their needs better.
● Growth. A large workforce can comfortably accommodate a more significant workload. Hiring more people can propel company growth significantly.
● Diversify skills. Hiring more employees introduces a new set of hard or soft skills needed to keep the company running.
● New perspectives. New talent brings creative and innovative ideas. They can address existing problems and maximize opportunities.
● Productivity. Releasing the burden on overworked staff increases productivity levels.
● Cost-saving. The average salary in South Africa is 31,100 ZAR (South African rand) per month, which equates to 1,997 USD. Labour expenses are cheaper in South Africa and can significantly benefit US companies.
● Language. English is a well-spoken language in South Africa. Much of the job-seeking community population can communicate in English. Therefore, language is less likely to be a barrier.
● Large talent pool. The South African labour market is enormous. Potential employers have a great chance of finding the right talent in the country.
Let Workpay provide an EOR solution that ensures employee satisfaction and compliance. Our EOR function lets globally-located companies hire top talent from the ‘Rainbow Nation’ and other African countries. Reach out to start your global expansion.
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