What’s the Cost of Hiring Employees in South Africa

The cost of hiring in South Africa can vary depending on the location and industry, but in almost all cases, it offers excellent value for money.

South Africa is a rising name in the world of outsourcing. Some of the largest corporations from around the globe have shifted operations into this growing economy, drawn by a combination of excellent infrastructure, a commitment to quality and affordable labour costs. If you’d like to follow in their footsteps, the first thing you need to know is the cost of hiring employees in South Africa.

What’s the cost of hiring in South Africa

The cost of outsourcing to South Africa depends on many things, including:

• The job functions you’re looking to outsource: South Africa offers opportunities for job roles at all levels, from simply call centre staff to more advanced software development or financial roles. The cost of wages in comparison to their counterparts in your home market will vary from role to role.

• The location of your outsourcing operations: The cost of living varies from city to city. Economic hubs such as Johannesburg tend to attract higher wages, but also have access to state-of-the-art infrastructure and some of the most talented workers. Other cities, such as Durban, have a reputation for lower costs, so if you can source employees with the skills you need there, it might be a more affordable option.

• The type of contract: Hiring contractors and freelancers can be relatively straightforward and affordable. They handle all their tax obligations, so you can simply hire them directly and pay their invoice by whatever transfer method you choose. The only additional costs here will be in transfer fees and exchange rates. If you’re hiring employees, additional costs can come through the need to set up a foreign subsidiary or work with a local partner to manage your South African-based employees. This will involve an additional fee, but will avoid the need to set up a legal entity. An employer of record (EOR), for example, will be the technical employer for your staff, so it can handle all the administrative and practical duties.

• Legal risks: One further cost you might want to consider is the risk of legal fees and costs. Remember, you’ll be working in a foreign country with its own set of laws and compliance expectations. It can be easy to make an error in reporting that attracts a fine from the regulators. Again, working with local experts such as an employer of record can help to mitigate these risks and limit your exposure. As the legal employer for your local employees, and EOR will have all legal liabilities, so if there is a problem, you’ll be protected.

On top of this, of course, costs will depend on the number of employees you hire. The more you work with the greater the possible overheads you might incur in order to provide support and comply with all regulations.

Each case will be different, and when deciding whether or not to hire employees in South Africa, it makes sense to run a comparative analysis factoring all direct and indirect costs. Generally speaking, though, wages in South Africa are between 50 and 70% of levels in the UK.

In terms of the business process outsourcing market, it puts it somewhere in the middle ground. Costs are higher than in the traditional BPO hubs such as India, so from a purely bottom line perspective there might appear to be more appealing options elsewhere. However direct labour costs only tell part of the story.

Depending on your strategy outsourcing can also have other associated costs through lost business or poor customer service. As business outsourced call centres into low cost countries, the BPO sector became associated with cost cutting at the expense of quality.

Customers became frustrated listening to thick, hard to understand foreign accents, when making an enquiry. Many of them voted with their feet and opted for alternative providers who kept their operations close to home. PlusNet for example, makes a major point in its marketing of keeping call centres local.

Poorer customer satisfaction levels cost money in several ways.

A lack of trust: Cutting corners on your customer service operations is never a good look for any company. It sends a signal to your customers that they aren’t fully value or respected. Problems have been exacerbated in recent years by the number of scam operators based in foreign countries pretending to be outsourced customer service agents. When customers start to lose trust in your business things can go downhill very quickly.

Poor customer engagement: Businesses are starting to wake up to the financial benefits of good customer service. Engaging proactively with customers can build long lasting customer relationships which can lead to ongoing customer retention and increased revenue per customer. Businesses that build long term relationships with customers will identify new ways to offer them value and to sell other services. Retaining existing customers is much less expensive and takes much less time than finding new ones.

Lost business: It’s a competitive world out there and customers have more choice than ever. They generally have multiple options for all services and can pick and choose who they work with. Customers are increasingly willing to switch providers on the back of poor customer service and there are plenty of companies out there eager.

As so often, therefore, choosing the lowest cost option is often a false economy. When factoring in the costs of hiring employees in any country you have to factor in the risks of lost business.

It’s something that the South African BPO sector has recognised. It places great emphasis on quality and reliability in everything it does. The fact that English is widely spoken in a clear,

easily recognisable accent is a major help and removes many of the communication barriers that have plagued other BPO strategies.

South Africa’s culture is also a good match for western countries with plenty of the same referencing points making it easier for customer service agents to build a rapport with customers.

Furthermore, when considering costs it’s also work thinking about the attitude of the authorities. South Africa’s government is focused on growth and sees the BPO sector as being an excellent source of revenue. As such they have sought to encourage this sector with grants, tax credits and other incentives for companies that create jobs within South Africa.

These incentives can potentially greatly reduce the overall cost of hiring employees in South Africa to such an extent that in many cases the cost of hiring in South Africa might be every bit as low as anywhere else.

Moving into the future the market is evolving. Technology is improving making it easier than ever to work with people in any country. South Africa has set itself up to cater to the growing outsourcing demand and offers a host of different ways to help you build your strategy.

For further information feel free to download this PDF guide.