Employer of record in South Africa: what section 198A means for foreign companies
In South Africa, an employer of record is usually treated as a temporary employment service under the Labour Relations Act. For employees earning below the threshold set under the Basic Conditions of Employment Act, placements longer than three months can make the client the deemed employer. Foreign companies should take local legal advice before relying on an EOR there. > Legal note: This is general information, not legal advice. How sections 198 and 198A apply depends on the facts, so take South African legal advice on your own situation.
What the law says
- Section 198 of the Labour Relations Act 1995 regulates temporary employment services (labour brokers): the service is usually the employer, but it and the client can be jointly and severally liable for some breaches.
- Section 198A, in force since 1 January 2015, provides that for employees earning below the threshold, a placement is usually “temporary” only for up to three months (with limited exceptions). After that, the employee can be deemed to be employed by the client for purposes of the Act, and is usually entitled to be treated on the whole no less favourably than the client’s comparable employees.
- The earnings threshold is set under the Basic Conditions of Employment Act and was adjusted to R269,600.90 a year from 1 May 2026.
What this means for a foreign company
- For higher earners above the threshold, section 198A deeming generally does not apply, but section 198 joint liability can.
- For employees below the threshold on long assignments, the client may be treated as the employer, even without a South African company.
- Separate questions arise for tax: whether the foreign company has a permanent establishment or must register with SARS.
Other payroll points
Employers withhold PAYE for SARS, contribute 1% to the Unemployment Insurance Fund alongside the employee’s 1%, and pay the skills development levy where annual payroll exceeds R500,000.
UK tax angle (general information, not advice)
The UK and South Africa have a double taxation convention in force from 17 December 2002, amended by a 2010 protocol and modified by the Multilateral Instrument. Tax treaties do not cover National Insurance, and the UK has no social security agreement with South Africa. If a UK employer sends one of its own employees there, UK Class 1 National Insurance may continue for the first 52 weeks if the conditions are met, and UIF contributions may also be due. Whether a foreign company has a permanent establishment in South Africa depends on the facts, including whether it has a fixed place of business there and whether anyone habitually concludes contracts on its behalf; using an employer of record does not by itself prevent one. Under the convention, a construction or installation project is a permanent establishment only if it lasts more than 12 months, and a separate rule applies to an individual performing independent professional services there for more than 183 days in a 12-month period. UK income tax depends on residence under the Statutory Residence Test.
How we can help
We don’t offer employer of record in South Africa at present. Any support we arrange there is delivered through local implementing partners, and we can help you think through structure and connect you with local legal advice through SLONEC Advisory Group.
Frequently asked questions
Is employer of record legal in South Africa?
EOR providers usually operate as temporary employment services under the Labour Relations Act, with the limits in sections 198 and 198A.
What is the section 198A threshold?
R269,600.90 a year from 1 May 2026, under the Basic Conditions of Employment Act.
What happens after three months?
For employees below the threshold, the client can be deemed the employer for purposes of the Act.
Does this apply to high earners?
Deeming under section 198A generally doesn’t, but joint liability under section 198 can.
Does SLONEC offer EOR in South Africa?
Not at present.
Is there a UK tax treaty with South Africa?
Yes, in force from 17 December 2002, as amended.
Talk to SLONEC Advisory Group about structure
Planning work in South Africa or elsewhere in Africa?