Compensation and benefits are crucial considerations when building a team in a new country. Finding a balance between statutory benefits and supplemental offerings adds an additional layer of complexity to the hiring process — and noncompliance with any of South Africa’s compensation laws can lead to fines and other sanctions for your company.
Let G-P guide you in navigating these intricacies. Here are a few things you should know about compensation and benefits in South Africa.
South Africa compensation laws
As of March 2023, the minimum wage is ZAR 25.42 an hour. Keep in mind that individual industries or locations often have other minimum wage regulations.
The nation’s compensation laws also outline overtime wages. Employees cannot work more than 10 hours of overtime per week. Overtime rates are typically 1.5 times an employee’s regular hourly pay. Employees can also opt to receive paid time off or a combination of overtime pay and paid time off instead.
Guaranteed benefits in South Africa
Employers must provide certain guaranteed benefits to employees as part of a South Africa benefits management program. For example, employees are entitled to at least 15 business days of paid vacation each year. This setup is in addition to the country’s 12 public holidays.
After working for an employer for more than 4 months, employees also get 3 days of Family Responsibility Leave for every year from the start of their employment. This leave is available under certain circumstances such as the sickness of a child or death of a family member.
South Africa benefits management
Supplemental benefits play a vital role in any South Africa benefits management plan. The country has a public health insurance system, but employers often choose to assist employees with private health insurance even though it is not mandated. Employers can provide a group plan or give employees an allowance to purchase their own plan.
Although not required by law, employees often expect a 13th-month bonus. Performance bonuses based on a percentage of the worker’s salary are also standard practice.
Restrictions for benefits and compensation
Before hiring employees, employers need to research any benefits and compensation restrictions for employees in South Africa. Although Collective Bargaining Agreements (CBAs) are not as common in South Africa as they are in other countries, employers should always double-check as these could outline additional restrictions.
South Africa competitive benefits planning
Benefits planning is one of many tasks employers handle as their company grows globally. While employers need to familiarize themselves with new laws, they’ll also have to research the labor market to develop a competitive offering.
South Africa employee benefits plans
Creating a competitive benefits plan will help you stand out among other businesses and encourage jobseekers to apply to your open roles. Beyond capturing attention in the labor market, competitive benefits can improve employee morale and retention.
Perks and supplemental benefits can include:
- Health insurance
- Pension schemes
- 13th-month bonus
- Meal allowances
- Housing stipends
- Additional leave
- Transportation allowances
Legal obligations for benefits
Employers are legally obligated to provide specific benefits in South Africa, which include:
- Paid annual leave
- Sick leave
- Parental leave
- Public holidays off
- Unemployment insurance
Designing employee benefits plans in South Africa
When you design your benefits plan, keep 2 goals in mind — stay within your company’s budget and meet your employees’ needs. It may feel like these goals oppose each other at times, but with the right approach, you can find a sustainable balance. Follow these 3 basic steps to develop your plan.
1. Review company resources and goals.
Your company needs profit to succeed. If you allocate too much money to your benefits, you may overextend your business. Start the planning process by assessing your resources and creating a budget for your benefits.
During this step, you might also consider your goals and how your benefits packages can help you achieve them. For instance, if you want to focus your efforts on recruiting, you may be able to attract more candidates by offering a particular benefit that other companies don’t. If your goal is to improve retention, you might choose to keep hiring to a minimum and offer more robust benefits to your core team.
2. Look into market standards and employee needs.
To create a competitive plan, you’ll need to understand the labor market and what other companies are offering. Research businesses in the area that are similar to yours to find out what benefits they provide. If you find commonalities across companies, you’ll get a clear picture of what employees expect from your business and industry.
It’s also helpful to research employees’ needs by conducting interviews or distributing surveys in the area.
3. Create a benefits plan for your business.
With the information you’ve gathered, you can design your plan. Start by allocating funds to the required benefits first. Then, you can apply the rest of your budget to the most sought-after perks you discovered in your research.
Average cost of benefits
Since every company offers unique benefits at different scales, knowing the average cost per employee might not be a helpful parameter.
How to calculate benefits
Your cost calculations will vary based on the types of benefits you offer. While you can incorporate provisions like annual leave into employee payroll, other benefits will require an actual calculation. For example, employers and employees must contribute to an unemployment insurance fund. Employees contribute 1% of their paycheck, and employers contribute an additional 1% for each worker.
How are employee benefits taxed in South Africa?
Most forms of remuneration count as taxable income, including benefits. Benefits in kind come with various regulations regarding the value and income calculation. For example, 80% of a company car’s value is taxable income. If an employee feels certain they will use the car for 80% business purposes, taxable income reduces to 20% of the car’s value.
Employee health benefits
The Department of Health funds the public healthcare system in South Africa, and care is available to any person regardless of citizenship status. However, public healthcare is underdeveloped compared to private options.
Employers are not obligated to provide private health insurance schemes to their employees. That said, many companies offer it as a supplemental benefit.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.