An Africa PEO, or Africa Employer of Record means a third party company that hires employees on behalf of a client company in Africa.
While Africa is a diverse continent, with few commonalities across it, there are some key benefits of an Africa PEO that apply to hiring in Africa, no matter which country you are focused on.
1. An Africa PEO or Africa Employer of Record solution allows expansion or hiring in any country in Africa, without the need to incorporate there.
2. Benefits of an Africa PEO solution include a faster and more cost-effective expansion, full compliance and payroll efficiencies.
3. The usual process for an Africa PEO is to agree on the expansion/employment solution, recruit and onboard employees, process ongoing payroll and benefits and ensure ongoing tax and employment law compliance.
What Is the Business Case for Expansion into Africa?
In the 20th century, wealth in Africa (and the capital associated with it) was primarily attached to narrow extractive industries such as oil and diamonds. But now, businesses are increasingly focused on Africa as a new consumer market for their products.
With a geographical vastness that is hard to grasp, it is only natural that economic power in Africa is clustered in certain regions where major urban centres are located.
We set out some key features of those regions below.
Why Hire in Africa?
Aside from the economic prospects of expanding into Africa, there are a few reasons why recruiting and hiring professionals in Africa could make sense for your business. Key reasons include:
What is an Africa PEO?
An Africa Professional Employer Organization (PEO) is an international expansion firm that supports businesses who seek to hire professionals in Africa.
As a PEO solution, an Africa PEO becomes the formal, legal employer of staff based in Africa, while the employees continue to work at the day-to-day direction of an international client company.
This means that the PEO takes care of all recruitment, contract drafting, onboarding, payroll, benefits administration, tax withholding and compliance.
As the PEO becomes the legal employer of staff in Africa, this is also known as an Africa Employer of Record solution.
An Africa PEO is a regional PEO, rather than a national PEO (that operates only in one country). It is common for an Africa PEO to also be a Global PEO (one that operates globally).
What Are the Benefits of an Africa PEO?
In order hire a workforce in Africa, a company could set up its own subsidiaries in each country it wished to operate in. What is then the advantage of engaging an Africa PEO?
How Does an Africa PEO Work?
While every Africa PEO will have a slightly different process, commonly the company will follow the following key steps:
1. Strategic discussion
The Africa PEO and the client company will discuss the best tools for expanding into or hiring in Africa. This may be an Africa Employer of Record solution in some cases, but in other cases the Africa PEO may advise on local company incorporation.
2. Engagement agreement
The Africa PEO and the client company enter into an agreement about the precise scope of services to be offered. This is often a full Africa Employer of Record solution, but may in some cases be a more narrow recruitment or payroll solution.
3. Talent acquisition
The Africa PEO will recruit appropriate talent for the client company in whichever African location it seeks to expand into. The client company will be consulted, and have final say on recruits.
All staff will be provided with local law-compliant employment contracts. Payroll and tax information will be obtained to ensure that the employee is ready to start work and receiving payment.
5. Payroll processing
Employee payroll is processed on a regular basis as specified in the employment contract.
6. Ongoing HR and Employment Compliance
The Africa Employer of Record deals with any employment issues (such as disputes) as they arise.
7. Contract renewal/termination
The Africa Employer of Record will renew contracts of employees when desired and oversee the termination or dismissal process where requested.
Frequently Asked Questions
No. Africa PEO and Africa Employer of Record solutions differ depending on the African country of expansion.
For example, in South Africa there are strict rules relating to PEOs that offer staff on temporary contracts. Under section Section 198A of the Labour Relations Act 1995, with certain exceptions and caveats (such as earning less than a basic threshold amount), an individual supplied by a ‘temporary employment service’ for more than three months, is deemed to be the permanent employee of the client company.
Yes. There are a range of differences in employment law, custom and employee expectations which make hiring different from elsewhere.
For example, performance-based bonuses for employees are particularly common in Africa. So too are extensive fringe benefits (such as use of a company car) and cash allowances.
This means that, in Africa more than other places, there can be a substantial disconnect between salary/wages and the total compensation package.
Yes. An Africa PEO will be able to help you transition to a local legal entity set up (such as a subsidiary), where that makes sense for your enterprise.
Contact an Africa PEO
An Africa PEO or Africa Employer of Record solution is usually the fastest, most cost-effective and most compliant option for hiring employees in Africa.
Get in touch with Horizons to see how they can support you in any African country which you wish to hire in.