Outsourcing Guides
Hiring independent contractors can be a great way to optimise costs and broaden your talent pool. Here’s how to do it.
In a global marketplace more and more companies are hiring independent contractors in South Africa and other countries. Digital technology has made international communication as simple as a click of the mouse. Today you can quickly set up a conference call including many different professionals, each of whom is based in a completely different country. When hiring independent contractors there’s no reason why your business should limit itself to its own locality or even country.
Why South Africa
Businesses face many challenges in today’s competitive high–tech marketplace. At any one time you may have multiple projects ongoing all of which need professional skills that aren’t included in your core team. Digital transformation is a particular case in point. Today almost every business has a website, but in a world governed by digital technology businesses often have to become more ambitious adopting complex IT project to bolster their back office and customer service operations. These can transform their businesses but require specialist software developers who may not be available within their internal team.
Businesses will therefore regularly have a team of contractors and freelancers on tap ready to offer services as and when needed. However, skills may not always be readily available within their local area. Top talent can be expensive and may be beyond reach of most small and medium sized enterprises.
Sourcing contractors overseas in countries where the cost of labour is much lower, therefore, makes perfect sense. Not only does it help optimise costs, but it enables you to connect with people and businesses anywhere.
So, why are people are hiring independent contractors in South Africa? In short, the country offers an unusual combination of quality and affordability that represents an extremely compelling option for businesses.
The cost of living is much lower in South Africa which means wages tend to be between half and 70% the level of the UK.
Furthermore, the country’s education system is steadily improving and is churning out young professionals across all industries eager for work. The problem for South Africa is that there isn’t always enough work within the country to support this upwardly mobile workforce. As such South Africa suffers from a familiar problem for all developing countries – the drain of top talent overseas. Encouraging foreign companies to hire its young people as contractors is a great way to bring jobs into the country and keep people working at home.
Where to find contractors in South Africa
Contractors can be found across all industries but some of the most common include marketing, financial services, web design, software development, IT and customer services.
Freelancer jobs boards allow businesses to engage with freelancers from all over the world including South Africa. Hiring in this way is simple – you simple communicate directly and when the job is completed they send an invoice and you pay in whichever way you like.
Common options include direct bank transfers, which can attract a fee or money transfer sites which can offer lower or zero fees and friendlier exchange rates. Some freelancers may prefer to be paid by ash in which old fashioned money orders may still be the best way to go. It all depends on the individual freelancer’s preference.
Technology allows you to collaborate quickly and easily with your chosen freelancer. Video conferences have become second nature in business, over the past few years, with multi–disciplinary and multi–location teams often working directly together.
Cloud computing and instant messaging also allow instant collaboration with your freelancers. By sharing documents, multiple people in different countries can collaborate on the same document simultaneously. In practical terms working with contractors in South Africa can be as quick and easy as working with freelancers in the UK.
However, going direct can be an inexact way to finding the best talented, especially for a company not based in South Africa. To help you with recruitment, it can be worth working with a locally based recruitment agency. They will have established contacts with some freelancers and will be able to support you in sourcing new people with the skills you need.
Building your team
When hiring contractors, it’s important to make sure you are clear about the working relationship and how they should be classified. This is particularly important if you start to work regularly with any contractors as the boundaries between freelancer and full–time employee can quickly become blurred.
South Africa’s government has clamped down in recent times on practices it feels could amount to disguised employment – classifying defacto employees as contractors in order to avoid PAYE obligations.
Fines for non–compliance can be high and, for severe or repeat offenses, it might even amount to criminal prosecution, so it pays to understand where the line should be drawn.
A contractor is someone who works on an adhoc basis working from one project to another. They should be hired to perform a certain role – such as designing a website – and once that’s completed and the invoice is signed there is no ongoing connection until the next assignment.
Freelancers have control of their own working hours and movements. When you hire a freelancer for a job, therefore, you will have to work around their schedules and availability.
With full time employees, you have control over where and when they work. They have a regular salary and set working hours.
Classification problems can arise as the working relationship evolves. A content writer, for example, might start out working on individual projects but if work becomes regular, they may start to look more and more like an employee. They may have a desk in the office and come into work in much the same way as any other employee.
To help you identify when a contractor becomes an employee it’s useful to use a local entity such as an Agent of Record (AOR) or an Employer of Record (EOR). They handle the administrative details of all your contractors. They help with talent sourcing, onboarding, payment and most importantly classification.
Once you decide to switch the relationship to full time employment, they can help you manage duties such as PAYE, annual leave and entitlements. With an EOR, there is no need to have a legal entity as they will be the legal employer for tax purposes and will pay your employee directly.
Hiring contractors in South Africa, therefore, can be a valuable source of affordable, high quality, talent. However, when working in a foreign country it’s important to understand the local regulations.
For more information or to find out more, feel free to download our handy guide.
