Author: Marisa Jacobs, Director – Head of Immigration and Mobility at Xpatweb
When you employ a foreign national in South Africa, the rules and best practice are significantly different for them than normal employees. One can always fit foreign nationals into an existing human resource structure, but there is either a significant and unnecessary cost thereto, or plenty of administration. Here are some pointers to ensure you make the correct start:
Expatriate selection and preparation
The journey starts with sourcing the correct resource for the job, which is of critical importance and must be given the necessary thought. These considerations would include the emotional and psychological effects on an expatriate employee and their family and whether their family is accompanying the expatriate on the assignment or remaining behind.
Psychometric assessment that focuses specifically on a candidate’s ability to adapt to different people and situations as well as their ability to cope with pressures and set-backs can offer significant and useful insight to employers as to the suitability of a candidate and their likelihood to be successful on assignment.
Immigration and work visas
The work visa process needs to be tackled as soon as possible after a suitable candidate has been chosen. There are several steps to follow, which include identifying the correct category of visa for both the expatriate and their family, determining whether the applicant must apply in their home or host country, and then, most importantly, the process of collecting the necessary documents from both the employee and the employer.
This can be quite a lengthy process, especially where poorly managed and the sooner it gets underway the better. Work visas are easy to understand if you know what you need and how to go about it, but near impossible where you are inexperienced.
Tax planning and compliance
When employing expatriates, specific tax planning is required to ensure that, amongst other things, a non-residency tax status is secured and solely South African source (as opposed to world-wide) income is taxable and employee benefits such as housing exemptions are optimally structured.
Likewise, applying for SARS waivers on items such as home leave exemptions on rotational home leave trips can save companies large amounts of money. Obviously, of utmost importance is to ensure home and host country compliance at all times.
Expatriate remuneration can be a highly sensitive and contentious issue. It is therefore crucial that an objective and consistent methodology is used when adjusting an expatriate’s salary to the specific assignment for which they have been selected.
Employment contracts or secondment agreements must be setup to ensure correct wording from a work visa perspective, optimal tax planning and compliance as well as addressing standard expatriate items, i.e. aligning your agreement to leading market practice.
It is vital that an international mobility policy is formulated, taking into account market best practice, local laws and current business affordability. Companies would often make use of an “Assignment Cost Calculator” calculating the total assignment costs, including home and host country taxes.
Where employers bring in a group of expatriates for a fixed term period project, they often utilise an outsourced vehicle through which to employ professionals. Should it be a business consideration, one of the main benefits of this type of structure is to ensure complete confidentiality of remuneration. It also lessens the administrative burden of, for example, setting up a split payroll and administering offshore payments and Reserve Bank approval processes.
Other benefits ensure the correct bank account setup with exchange control, social security clearances and expatriate specific benefits. No expatriate should be forced to contribute to a South African based retirement scheme, as they do not plan to retire in South Africa (if they do, we are in breach of tax and exchange control).
Expatriates who are correctly selected and integrated deliver exceptional value to an organisation. However, end up with unhappy employees and there will be layers of frustration, as any human resource administrator who has been through this process can vouch.