Effortless Hiring in South Africa

Employment Laws

The employment practices in South Africa are primarily governed by:

• The Labour Relations Act (LRA): This act regulates the relationship between employers and employees, including rights related to trade unions, strikes, and dispute resolution.
• The Basic Conditions of Employment Act (BCEA): This legislation outlines the minimum conditions of employment, including working hours, leave entitlements, and remuneration.

Onboarding Process

Employers typically require the following during the onboarding process:

• A valid ID or passport
• Tax Reference Number
• Banking details for salary deposits
• Proof of qualifications (e.g., certificates or degrees)
• Signed employment contract

Types of Employment Contracts

1. Permanent Employment:

• These contracts are for an indefinite duration and include full benefits such as annual leave, sick leave, and retirement contributions.

2. Fixed-term Employment:

• These contracts are for a specified period or project and automatically terminate upon completion of the contract.

3. Temporary Employment:

• Short-term assignments often facilitated through employment agencies. These contracts may not include all benefits provided to permanent employees.

4. Probationary Employment:

• An initial period to assess the employee's suitability for the role, typically lasting up to six months. During this time, either party can terminate the employment with shorter notice periods.

Payroll Frequency

Employees in South Africa are commonly paid monthly, although weekly or bi-weekly payments are also practiced. The specific pay frequency is typically stipulated in the employment contract.

Minimum Wage

• As of March 2023, the national minimum wage is set at ZAR 25.42 per hour. However, as of July 2024, this rate is expected to increase to ZAR 27.58 per hour. This minimum wage applies universally, with some exceptions for domestic workers and farm workers.

Payroll Deductions

Employers are responsible for deducting and remitting several statutory contributions from employees' salaries, including:

1. Pay-As-You-Earn (PAYE) Tax:

• This is a progressive income tax deducted from salaries based on various income brackets. Employers must calculate and withhold the appropriate PAYE amount from employees' wages and remit it to the South African Revenue Service (SARS).

2. Unemployment Insurance Fund (UIF):

• Both employers and employees contribute 1% of the employee's remuneration to the UIF, which provides short-term relief to workers who become unemployed or are unable to work due to maternity leave.

3. Skills Development Levy (SDL):

• Employers are required to contribute 1% of their total payroll to the SDL, which funds skills development initiatives in South Africa.

How Cadana Simplifies Payroll in South Africa

Cadana helps businesses navigate complex payroll regulations by:

• Offering centralized platforms for payroll data and secure management.
• Managing tax withholdings and overtime calculations.
• Ensuring accurate and compliant payroll processing.

Employee Income Tax

South Africa uses a progressive income tax system with brackets for the 2024 tax year (1 March 2023 - 29 February 2024):

• Up to ZAR 237,100: 18%
• ZAR 237,101 - ZAR 370,500: ZAR 42,678 + 26% on income over ZAR 237,100
• ZAR 370,501 - ZAR 512,800: ZAR 77,362 + 31% on income over ZAR 370,500
• ZAR 512,801 - ZAR 673,000: ZAR 121,475 + 36% on income over ZAR 512,800
• ZAR 673,001 - ZAR 857,900: ZAR 179,147 + 39% on income over ZAR 673,000
• ZAR 857,901 - ZAR 1,817,000: ZAR 251,258 + 41% on income over ZAR 857,900
• Above ZAR 1,817,000: ZAR 644,489 + 45% on income over ZAR 1,817,000

Employers withhold taxes and remit them to the South African Revenue Service (SARS).

Employer Contributions

Employers must also contribute to statutory funds:

1. Unemployment Insurance Fund (UIF):

• Both employers and employees contribute 1% of remuneration.

2. Skills Development Levy (SDL):

• Employers contribute 1% of total payroll to fund workforce skill development.

3. Workmen's Compensation Fund:

• Rates vary by industry and are based on occupational risks.

Types of Leave in South Africa

1. Annual Leave

• Employees are entitled to 21 consecutive days of paid annual leave per year. For employees working a standard five-day week, this equates to 15 working days of leave.
• The leave accrues at a rate of 1.25 days per month for a five-day workweek or 1.5 days per month for a six-day workweek.
• Unused annual leave can be carried over to the next leave cycle, but it must be taken within six months after the end of the leave cycle, or it may be forfeited.
• Employers must grant an additional day of paid leave if a public holiday falls during an employee's annual leave.

2. Parental Leave

• Maternity Leave: Female employees are entitled to four months of unpaid maternity leave. They can claim benefits from the Unemployment Insurance Fund (UIF) during this period, which may provide up to 60% of their regular salary for a maximum of 121 days. Maternity leave can start four weeks before the expected due date, and employees must not return to work until at least six weeks after childbirth.

• Paternity Leave: Male employees are entitled to ten consecutive days of unpaid paternity leave, which can also be claimed from UIF.

3. Sick Leave

• Employees are entitled to 30 days of paid sick leave over a three-year cycle. During the first six months of employment, employees accrue sick leave at a rate of one day for every 26 days worked. After six months, they can access the full entitlement.
• A medical certificate is required for absences longer than two consecutive days.

Public Holidays

• South Africa observes 12 public holidays annually, including:
• New Year's Day (January 1)
• Human Rights Day (March 21)
• Good Friday (date varies)
• Family Day (date varies)
• Freedom Day (April 27)
• Workers' Day (May 1)
• Youth Day (June 16)
• National Women's Day (August 9)
• Heritage Day (September 24)
• Day of Reconciliation (December 16)
• Christmas Day (December 25)
• Day of Goodwill (December 26)

If any public holiday falls on a weekend, it is typically moved to the next working day.

Mandatory Benefits

1. Unemployment Insurance Fund (UIF):

• The UIF provides short-term relief to employees who become unemployed, as well as benefits for maternity leave and illness. Both employers and employees contribute 1% of the employee's remuneration to the UIF. This fund is crucial for supporting workers during periods of unemployment or when they are unable to work due to maternity or illness.

2. Workmen's Compensation:

• The Workmen's Compensation Fund covers occupational injuries and diseases. It provides compensation to employees who are injured or contract diseases while performing their duties. Employers are required to register with the Compensation Fund and pay contributions based on their payroll, which varies by industry and risk level. Employees can claim for medical expenses, temporary disability, and permanent disability resulting from work-related incidents.

Supplemental Benefits

While not mandated by law, many employers offer additional benefits to attract and retain talent, including:

• Medical Aid Schemes: Employers often provide access to private health insurance plans that offer enhanced medical coverage beyond what is provided by the UIF.

• Retirement Funds: Many organizations contribute to retirement savings plans, helping employees save for their future.

• Group Life Insurance: Employers may offer life insurance policies that provide financial support to employees' beneficiaries in the event of death.

• Performance Bonuses: Additional financial incentives based on employee performance can be offered to motivate and reward staff.

• Transportation Allowances: Some employers provide allowances to assist with commuting costs.

Process

Termination of employment in South Africa must be based on fair reasons and follow fair procedures, as outlined in the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA). Acceptable grounds for termination include:

• Misconduct:

• Requires a disciplinary hearing where the employee is given an opportunity to present their case. The employer must provide evidence of the misconduct and follow a fair procedure.

• Operational Requirements:

• This may involve retrenchment procedures due to economic challenges or organizational restructuring. Employers must consult with affected employees and consider alternatives to avoid dismissals.

• Poor Performance:

• Employers must provide prior counseling and support to the employee, allowing them a chance to improve performance before termination is considered.

Notice Period

The notice period for termination is determined by the employee's length of service:

• Less than 6 months: 1 week’s notice.
• 6 months to 1 year: 2 weeks’ notice.
• More than 1 year: 4 weeks’ notice.

Employers have the option to pay employees their wages for the notice period instead of requiring them to work through it.

Severance Pay

Employees dismissed due to operational requirements (e.g., redundancy) are entitled to severance pay:

• The minimum severance pay is calculated as one week’s remuneration for each completed year of continuous service.
• Employees with less than one year of service are not entitled to severance pay.

For example, if an employee earns ZAR 20,000 per month (approximately ZAR 4,620 per week) and has served for five years, they would be entitled to ZAR 23,100 in severance pay (ZAR 4,620 x 5).

Just Cause Dismissal

In cases of serious misconduct (e.g., theft, violence), employers may terminate employment without notice or severance pay, provided that the misconduct is substantiated. Even in such cases, employers must follow a fair procedure, ensuring that employees have a chance to respond to allegations.

Legal Framework

The termination process is governed by both the LRA and BCEA, which ensure that dismissals are conducted fairly and legally. Employers must also provide a Certificate of Service upon termination, detailing the employee's employment history.