Employer of Record in South Africa: what one employee really costs

Questions people ask before booking a demo

How much does an employer of record cost in South Africa?

The statutory employer charge is about 1.6% of gross pay at this salary: UIF at 1% but capped at R17,712 a month, the Skills Development Levy at 1% uncapped, and a COIDA assessment at the Class A office tariff of 0.18% up to R668,000 a year. On a US$35,000 salary that is roughly US$45 a month on top of pay. Published EOR fees then run from about $199 to $699 per employee per month, so the all-in cost lands near $3,160 to $3,660 a month and the fee is far larger than the tax.

Why is the South African employer cost so much lower than 2%?

Because two of the three lines are capped and the caps are low. SARS states that UIF does not apply to remuneration above R17,712 a month, and that the most an employer contributes for such an employee is R177,12 a month - a figure unchanged since June 2021 while salaries have risen. COIDA is assessed only up to R668,000 a year. Only the Skills Development Levy runs on the whole salary. On a professional wage the UIF line is worth about 0.37% rather than 1%, so reading the three rates as uncapped gives 2.2% against the 1.6% actually owed.

Would my own South African entity pay the Skills Development Levy?

Possibly not, and it is the one line of this ledger where the provider route costs more in statutory terms than a small entity of your own. SARS exempts any employer whose total leviable payroll over the next twelve months will not exceed R500,000, and says such employers need not register for SDL at all. One or two hires through a company of your own could sit under that line. An employer of record's South African payroll is far past it, so the 1% is always charged on an EOR hire. On this salary that is about US$29 a month - real, but small against the fee difference.

Who bears the COIDA rate under an employer of record?

The provider. The Compensation Fund assesses the legal employer, applying the tariff of the subclass that employer's business falls into and adjusting for its own claims record, so the rate on an EOR hire reflects the provider's operation rather than your industry. The Minister also sets a minimum assessment - R1,621 a year for employers - which the provider's payroll clears many times over. Ask which subclass your provider is registered under if you want to check the 0.18% office tariff used here against its actual tariff.

What leave, public holidays and notice apply in South Africa?

Section 20(2) of the Basic Conditions of Employment Act requires 'at least 21 consecutive days' annual leave on full remuneration in respect of each annual leave cycle', which is fifteen working days on a five-day week. The Public Holidays Act 36 of 1994 lists twelve public holidays in its Schedule 1, including Human Rights Day on 21 March, Freedom Day on 27 April and the Day of Reconciliation on 16 December. Notice under section 37 is one week in the first four weeks, two weeks up to a year and four weeks thereafter. There is no statutory maximum probation period; the Labour Relations Act's Code of Good Practice requires it to be of reasonable length for the job.