Read Our 51 Reviews >

Employer of Record (EOR) Cost and Pricing Guide in South Africa

Employer of Record (EOR) Cost and Pricing Guide in South Africa

As business continues to trend on a global scale, the concept of an Employer of Record (EOR) is becoming increasingly popular. EORs offer a way for businesses to legally employ workers in overseas locations without needing to incorporate there. Business owners who are looking to expand in South Africa real estate can gain advantages of this service. This post will cover the costs and models of EOR services, and will draw from the experience of myself, Gloroots, and other industry sources.

EOR Costs Explained

EOR costs can differ greatly depending on a few factors. Major factors determining EOR pricing and what they are made up of:

Setup Fees

These are one-time fees levied by EOR providers for every new employee. This fee includes contract drafting, employee onboarding, and setting up payroll. This charge can vary depending on the provider ($200 to $500 per employee).

Security Deposits

To make sure that an employee abides by their contract (or if the employee decides not to join last minute), an EOR provider may insist on the fact that they should be reimbursed with a security deposit, which could be anything up to an employee’s notice pay. This deposit is refunded at the end of the employment contract without outstanding dues.

An employee's wage & the contribution

The employer will settle the salary and the related employer costs including social security, unemployment insurance, and retirement fund contributions, etc. The nature of these contributions can change per country and are required to operate legally on local soil.

Service Fees

EORs require a service fee for administering payroll, benefits, and compliance. The levy is payable either as a set monthly figure or as a percentage of the gross salary of the employee. You will want to talk with your EOR provider to know the exact billing format.

When the companies also provide some more benefits spread beyond those statutory might include meal vouchers, and subscriptions to the software. These benefits are included in the whole compensation that will add to the total EOR costs.

Costs associated with currency exchange fees

EORs handle exchange rate issues, so that workers can be paid as planned, which can – but not necessarily must – include additional expenses.

When tackling South Africa, there are two classic options available for businesses constrained by time, funding, or other resources – establishing a local entity or electing to have an EOR. Costs and trade-offs:

Time & Capital

It could take 2–6 months, with huge capital outlay for registration, legal compliance, consulting services, etc. Conversely, an EOR can hire employees in days with almost no upfront costs.

Legal and tax compliance

A local entity makes a compliant solution to all the local laws and tax regulations. The EOR where all compliance obligations lie with the EOR, so the employer is not unduly burdened by legal obligations.

Scalable and flexible

EORs give uncommon adaptability, particularly for organizations trying to find the business, or vegetation out ventures for the short term. These offer flexible support for small and large volumes of production, thus can be scaled according to the need of workforce size.

The Right EOR Pricing Model

EOR providers typically provide 2 types of pricing models:

Percentage-Based Pricing

This pricing model charges a fixed percentage on the total cost to the company (CTC) of the employee. Great for businesses with low budgets or testing new markets. This cost also increases when the total number of full-time employees and total annual gross compensation increase.

Scaled Pricing

This model enables businesses to pay a set amount per employee (typically calculated biweekly) or groups of employees. This is a good choice for businesses with ambitious hiring goals and fast-growing businesses.

The Myths of EOR Costs

One of the biggest myths around EOR services is how much it costs. Clarified are a few:

EORs Cost More Than Local Entities do

As you would expect, EOR Services come with monthly charges, though in many cases that added expense of handling all compliance responsibilities can be more cost-effective than setting up and maintaining a local entity in a given country.

Pros

Transparent pricing with the cost breakdown, no hidden charges. All other costs, such as those from third-party consultants, are provided on a case-by-case basis prior to commencing.

Long-Term Projects

EOR services can quickly provide the technical resources you need for long-term projects.

Only MNCs

EOR services are used by big companies – both multinational corporations (MNCs) and small and medium-sized enterprises (SMEs). These EORs are designed with scalability and cost-efficiency that are accessible to businesses regardless of size.

Oversea hiring while EORs are primarily applicable for hiring overseas workers, there are instances where EORs manage payroll and compliance for local employees, making them an all-encompassing workforce solution for businesses.

Conclusion

Businesses in South Africa can leverage an EOR, such as DNA EOR, to facilitate the hiring process, guarantee compliance, and minimize administrative burdens. Companies can make decisions that align with their growth objectives when they understand the costs and pricing models for different EOR services. Whether you are a small business evaluating new markets, or a large corporation ready to go to market quickly, using an EOR can be a quick and cost-effective solution for your workforce.

Let DNA EOR take you into the future of global hiring and tap into the power of a compliant and productive global hybrid workforce.

FAQS

In general, EORs have in place advanced HR and payroll software through which they manage employee data, process payroll, file taxes, and carry out benefit administration. All these are built on purpose to meet the details of international employment and ensure data safety and compliant.

Data security is an area EOR companies take very seriously and impose strong measures on, such as encryption, secure storage of data, and observance of international regulations regarding data protection. They safely and confidentially secure employee data.

They handle all onboarding processes related to everything, starting from the creation of contracts and tax registrations to benefits and payrolls. Meanwhile, in offboarding, they handle the termination process so that it’s professionally completed and that all local labor laws’ requirements are met, including final payrolls and benefits.

Call Now!