The Real Cost of Getting It Wrong Let’s talk numbers. Setting up your own legal entity in South Africa to employ just one or two people can easily cost $15,000– $25,000 in legal and accounting fees, not to mention months of delays and ongoing compliance management. On the other hand, ignoring local rules can be far more expensive. Backdated tax and social security contributions Penalties from SARS or the Department of Labour Legal costs and reputational damage Disruption to operations if an employee takes the case to the CCMA
You provide tools, systems, or software They cannot substitute someone else to do their work They’re paid a fixed, recurring amount rather than per project They derive the income
Monthly payroll and PAYE deductions Statutory contributions like UIF, Skills Development Levy (SDL), and COIDA Benefits administration, onboarding, and compliance You still manage your team members’ daily work and performance, but your EOR partner ensures everything behind the scenes is compliant, transparent, and legal. This structure eliminates the grey area. The worker isn’t “sort of” a contractor; they’re properly employed under local law. For companies, it means peace of mind, and for the team member, it means protection.
from a single source If any of that sounds familiar, you’re likely
not working with a true freelancer.
You’re engaging in a relationship that should fall under a formal employment arrangement, and that’s where an Employer of Record (EOR) comes in. How an Employer of Record Solves Misclassification Risk An EOR is a locally registered company that becomes the legal employer of your remote team member on your behalf – for global companies. They handle: Employment contracts
The worker isn’t “sort of” a contractor; they’re properly employed under local law. For companies, it means peace of mind, and for the team member, it means protection.
aligned with South African labour law
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ISSUE 19 GLOBAL PAYROLL MAGAZINE
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