Hiring in Africa presents challenges across the board. That means 54 countries, each with its own currency, with roughly 2,000 different languages, and a myriad of distinct customs, and each with its separate set of labor laws. For example, in South Africa minimum wage is 3,500 ($236.45) Rand a month with employees receiving 21 days of continuous paid leave, whereas in Botswana, monthly minimum wage is 1,000 ($92) Botswana pula, with employees receiving 15 days annual leave.
Finding which country has labor laws and employees that best suit your organization is only the start. The process of finding the highest talent, vetting that talent, onboarding, managing payroll and payments, while staying compliant are the greatest challenges a company will face.
Although so many challenges arise when hiring abroad, having a global workforce provides a range of benefits. One of the biggest advantages is being able to find top talent at the price you want; there are skilled workers all over the world, no need to hire them in the most expensive cities. Beyond this, having a workforce that can speak a myriad of languages, understand multiple cultures, and have the ability to be present in different time zones, generates multiple business solutions.
Options for hiring abroad
When hiring in Africa, companies have three viable options; Employer of record (EoR), contract worker, or a local entity with a payroll worker. Each option of hiring presents their advantages and disadvantages, and choosing the right method is determined by company and market needs, and the number of required employees.
EoR – An EoR gives companies the ability to hire without a local entity but with the ability to maintain full compliance. Not requiring a local entity provides the advantage of entering a new market much faster; so, for companies needing to hire and on-board employee ASAP, an EoR can make this happen in days of a few short weeks. EoR is also valuable for companies that prefer to test a market and see if it provides value, as it’s a low-risk method that avoids a long-term commitment.
Contractors – Self-employed workers that allow for employers to be exempt from many typical obligations that come from regular employees. Employing a contract worker means no employee taxes, no social security payments, and no mandatory benefits such as health insurance and pension contributions. Also, contract workers do not have the same entitlement and requirements in regard to standard labor protections, minimum wage and overtime pay. Because common withholding taxes aren’t necessary, payroll to contractors is easier to administer. However, it is important to ensure that contract workers are not misclassified. The mistake of misclassifying a regular worker as a contractor can end in serious fines.
Local Entity – A local entity provides maximum agility for a company’s operations overseas. Once a company has tested a market and has evaluated that the country provides benefits, local entity becomes a more viable option. With a growing workforce in the country, local entity creates a more cost-effective solution by cutting out EoR fees which are typically dependent on the number of workers and allowing the company to take advantage of the better local tax rates.
Once hiring is complete, managing your workforce and implement compliant payroll and payment solutions becomes the next task and old HR solutions aren’t reliable enough to handle cross-border payments.
Fintech solutions generated to manage cross-border payment and for payroll
Handling payroll and payments needs to meet country standards and expectations, be paid in local currency on time, and adhere to local labor and tax laws; for each country a company branches out to, an additional layer of liability and chance of error is presented, especially if the methods are done manually.
That’s why automated solutions for hiring, onboarding, managing and paying employees in order to create seamless solutions for cross border payments and payroll may be the way forward. These systems are allowing for total workforce solutions covering all types of employees, workers, and contractors and ensuring %100 compliance.
By implementing a system that is capable of managing a whole company’s workforce needs and the full range of payment processes, minimizes friction between all the moving pieces, creating a smooth cycle that mitigates error and liability.