The ripple effects of EORs on local economies, companies, and employees

EOR

Because we live in a global economy and our world today is so deeply interconnected, every choice we make has a ripple effect on the world around us.

Choosing an EOR to expand to a country in Africa has its own reverberations on the people and systems that frame our lives. Unbeknown to many, EORs have far-reaching societal, individual, financial, cultural, and economic impacts which are well worth looking into.

Beyond immediate functional and time gains for companies, EORs can impact individual employees, entire industries, and even local economies in Africa on a considerable scale.

EORs: a positive force for growth in Africa

Employers of Record are fully legal entities empowered by the local law to help companies expand to the African continent. As such, EORs are recognised by these states as a power for good and an enabler of business across the continent. After all, EORs allow companies to test new markets in an African country without incurring the significant financial and time costs of entity registration – a deterrent for many. Where before a company might not have given Africa a chance, EORs open the doors of opportunity for companies looking to expand – and for African countries looking to welcome such growth.  

All in all, any effects EORs have is overwhelmingly positive, which is partly why EOR structures are prominent across Africa.  

The ripple effects of EORs on local African economies:

Did you know? The work EORs do is so significant that it has the power to impact a country’s local economy. It’s true – EOR activity can affect local African economies in all these different ways:

1.     Brain drain mitigated and reversed

Brain drain is a major issue that African countries have been facing for decades now. Once they have gained professional skills, many African countries’ talented locals go in search of greener pastures and greater opportunities in other countries, leaving their homelands struggling with a lack of qualified professionals. Healthcare professionals, academics, teachers, engineers, IT professionals and more are missing from African societies, leading to poorer socio-economic development. In Nigeria for instance, at least 75,000 nurses and midwives had emigrated to other countries between 2017 and 2023, depriving local health services of much-needed skilled labour.

EORs have the capacity to mitigate and even reverse this mass exodus. This is because EORs enable foreign companies to expand to African countries, presenting local workers with the opportunities they normally seek abroad in their own countries. For example, software engineers wishing to pursue growth in their chosen field might not need to immigrate anymore if an EOR partnered with an international company offering them these same opportunities.

2.     Salaries and all payroll taxes paid in-country

EORs are structured in such a way that all salary and payroll taxes are paid in-country. What does this mean? Simply that the value created by a company operating through an EOR stays within the country of expansion. As such, African countries reap the financial benefits of EOR partnerships, allowing for greater revenue and economic growth.

3.     High value job creation boosts consumer spending

The jobs created by a company operating through an EOR are typically sought-after for being high value. They tend to pay significantly better-than-average salaries, offer international-standard employee benefits, and present more opportunities for growth and learning. When local employees earn more, they naturally tend to spend more – and increased consumer spending benefits local economies immensely.

4.     Transfer of skills, knowledge and technology from global companies stimulates local innovation

African EORs act as bridges between international companies with international know-how and African countries looking to upskill. EORs provide a secure and convenient platform for international companies to share skills and knowledge with African workers, training them and sharing the latest technologies and techniques with them. This exposure to new skills and technology not only creates a dynamic relationship between employers and employees – but it also changes the local scene and helps to fuel innovation in the industry.

5.     Foundation for sustainable increase in FDI

Simply put, EORs can significantly boost Foreign Direct Investment (FDI) by simplifying the process of compliance with complex local regulations. EORs like Africa HR Solutions also provide local expertise, reducing operational risks and enabling quicker market entry without the need to establish a legal entity. They facilitate access to local talent pools, ensuring fair and competitive compensation, which helps attract and retain skilled workers.

EORs also support sustainable development by promoting fair labour practices. Their effective understanding and management of local employment issues build investor trust, creating a stable environment for foreign businesses.

The ripple effects of EORs on companies

Naturally, EORs also impact the companies they partner with, sometimes in overt ways, other times in slightly more understated ones.

1.     Accelerated speed to market

When companies expand to Africa using traditional entity registration methods, they are typically looking at a few months or even years of waiting, on top of costly registration procedures and requirements (such as needing to have a physical address in the country). This wait can simply be too long in the business world, especially in industries reliant on technology, like fintech. During the wait for a local entity to be registered, companies may lose their competitive advantage. EORs cut this waiting time down, with market entry taking a few weeks instead of months.

EORs are also extremely helpful for companies looking to test new markets without the massive investment that entity registration requires. Because EORs also take on all the administrative burdens associated with expansion in an African country, companies are free to focus their resources on what they are the best at: business development.

2.     Compliance with local labour laws

Companies often underestimate the impact of non-compliance with the law. Not only can non-compliance result in hefty fines, but it can also lead to costly and time-intensive legal troubles. Whether a company receives a fine or is being sued in court, their professional reputation is certain to take some damage. While money can be recovered, reputational damage is much harder to shake off.

EORs take on the burden of compliance for companies, eliminating these risks.

3.     Streamlining payroll, benefits and cross-border payments across multiple countries

Multiple-country operations are challenging to say the least. But when companies need to coordinate with multiple HR partners to process payroll, employee benefits and cross-border payments accurately and on time, matters get significantly more complicated and the possibility of making errors grows.

EORs like Africa HR Solutions support companies through 46+ African countries, offering them a single point of contact through which they can streamline payroll, employee benefits and more.

4.     Cost-effective solution

Compared to entity registration and its associated costs, EORs are cost relatively less and do not require as significant a sum of money to get started. Besides, any costs associated with EORs is likely to get absorbed rather quickly when one considers that operational costs in Africa are often lower than in other regions of the world.

5.     Sustainable access to globally distributed, remote workforce

EORs ensures sustainable access to a remote workforce through:

1.      Payroll and Tax Management

EORs like Africa HR Solutions help businesses attract top talent by managing payroll in multiple currencies, taxes, and benefits in compliance with local legislation. EORs can also negotiate better rates for medical and life insurance cover, enabling companies to offer competitive and equitable compensation packages to attract top talent.

2.      Local Market Knowledge

Since local African EORs have in-depth knowledge of the regional employment market, it makes it easier for businesses to find and hire competent applicants.

6.     Levelling the playing field in the global war for talent

As talent becomes more and more sought-after, EORs increasingly prove themselves to be allies for companies looking to onboard top candidates. For instance, EORs allow companies to scale their workforce up or down quickly in response to business needs, all without the administrative burden of managing local employment contracts directly.

Once again, EORs’ cost-effectiveness comes in handy. Because EORs can often negotiate better rates for services and benefits, the companies they partner with can offer attractive employment packages to potential employees.

7.     Greater protection for intellectual property

EORs, being fully legal structures and being tasked with compliance, can help companies protect their Intellectual Property while in an African country. EORs do this through the following:

Understanding Legal Frameworks

EORs ensure that employment contracts include clear IP protection clauses that comply with local laws while also aligning with international standards.

Monitoring and Enforcement of IP protection

EORs can monitor compliance with IP protection policies and take swift action if there are breaches, using their local legal expertise to intervene when needed.

8.     Ability to consolidate workforce planning during M&A process

During cross-border M&As, especially in the case of a carve-out deal – which happens when a parent firm sells a minority stake in a subsidiary to outside investors as part of the partial divestment of a business unit – many buying companies do not yet have a legal entity in the country they are expanding to. Unfortunately for these organizations, it takes months and even years in some cases for legal entities to be registered.

Entity registration requires time as well as the fulfilment of several criteria, namely: opening a bank account, with all the paperwork this entails, having a physical address to serve as an office in the country, and even at times, earning the seal of approval of numerous government agencies.

This is where EORs come in. On behalf of the purchasing firm, EORs can hire M&A staff and handle compliance, payroll, tax, and benefits duties. Without having to worry about meeting and missing tight deadlines, the buying company can begin the legal process for the establishment of a new, local entity.

9.     Access to ancillary services on the ground

Some EORs offer ancillary services on top of traditional EOR services. At Africa HR Solutions, we provide an extensive list of additional services that many other EORs do not. Among other things, we provide health and life insurance, cross-border payments, work permits and immigration services, independent contractor solutions, car rentals, employee meet and greets…and a lot more.

The ripple effects of EORs on employees

EORs can make companies more attractive to top talent in several ways.

1.     Access to global jobs

Workers in African countries get the opportunity to work in international roles and companies they would not otherwise have had access to in their own countries.

2.     Career development and growth prospects

Because they often get access to global jobs, workers employed through an EOR tend to have better professional growth prospects. This means that they are given opportunities to learn and grow their skills, and eventually take on more responsibility. The exposure to a global work culture further improves their professional skills.

3.     Higher earnings and access to world-class employee benefits

Local African workers employed through an EOR may be better remunerated than their counter parts. On top of this, they may receive world-class employee benefits, in alignment with a company’s global employee benefits policy. This can mean generous health and life insurance covers, leave allowances that go above and beyond statutory requirements, and performance bonuses among other benefits.

4.     Full employee rights, including statutory entitlements and legal protections

EORs are always striving to be fully compliant with the law. Naturally, it follows that they would pay special attention to respecting workers’ rights. This implies adhering to the minimum requirements of a country’s labour law, making the correct contributions on their behalf, calculating their leave as required, and creating a safe environment for them to work and grow in, among other things.

Workers who are employed through an EOR will have their needs met and their rights respected consistently and will not fear for unjust or unlawful treatment.

Why Africa HR Solutions is your #1 partner in Africa

Africa HR Solutions is an African EOR serving over 46 African countries. So who best to help you navigate the complex regulatory landscapes of each African country than an EOR deeply rooted in Africa? With a track record spanning over 14 years, and with a portfolio of 400+ NGOs, Fortune 500s and FTSE 100s, Africa HR Solutions has made its mark in Africa by continuously going above and beyond for our clients.

Our secret is that we care: we are not merely EOR providers. We are partners.

To learn more about how our partnership benefits you and your company, please reach out to us.  

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GRANT GERAGHTY - Africa HR Team

GRANT GERAGHTY

HEAD OF CLIENT RELATIONSHIP

Grant Geraghty is the longest-serving member of the Africa HR team. This resident subject matter expert and client champion is responsible for gaining a deep understanding of our clients’ unique HR needs in Africa and providing tailored solutions that align with their business objectives. Grant collaborates closely with our clients to ensure that their requirements are properly implemented, providing ongoing support and guidance throughout the process.

Grant brings a wealth of experience to his role, having served as Africa HR’s longest-serving employee. He holds a Bachelor of Commerce degree, with a major in Economics and Business Finance, from the University of Natal in South Africa. Additionally, he has completed a certification program in Payroll and Tax Administration from the University of Cape Town, further enhancing his expertise in HR operations and compliance.

His commitment to delivering exceptional service and his extensive knowledge of HR in Africa make him an invaluable member of the Africa HR team.

KEVINA TAKOORDYAL Africa HR Team

KEVINA TAKOORDYAL

HEAD OF OPERATIONS

Kevina Takoordyal has a BA Hons Business Management from the University of Glamorgan, UK, with MBA in leadership and Innovation, MBA General, PMP Certified, and Agile Scrum Master. She currently works as the Head of Operations at Africa HR Solutions Ltd with more than 20 years of proven leadership capabilities in Operations, Business Development, People Management, Process Optimization, and Project Management in the Financial Services, BPO, Banking Industry, and Heath Care Industry. In Senior leadership roles with an international footprint across Europe working and extensive Pan- African experience from a compliance, finance, and operations angle, Kevina comes across with a panoply of cross-functional skills. Kevina also serves on a few Boards, Non-Independent Executive at MioD and for NGOs on a voluntary basis, a coach and mentor to aspiring female leaders across Africa and Mauritius.

Kevina is a firm believer in Servant Leadership with a strong focus and commitment to uplifting others, with the ability to deliver through a highly engaged – diverse team, and works towards consistently synergistic value creation. While being a focused and adaptive thinker and Kevina is actively participating in panel discussions on Innovation, CX, Digital transformation.

Kevina serves as Project Assessor for the National Youth upskilling program. She has been recognized as Global Talent in a few companies, Ceridian, and International SOS Ltd whereby she has been awarded a few scholarships and had the opportunity to be mentored by Senior Vice President in the US. Award Winner in various fields and at a national level and recognized including Super Achiever Leader Award in Africa in 2016, Awarded Africa Women Leader 2018.

VILOSHNA PACKIRY POULLE​

VILOSHNA PACKIRY POULLE

Head of Finance & Business Support

Viloshna is an experienced finance professional with 18 years of expertise in strategic financial planning, financial analysis, cash flow management, systems and controls implementation, financial reporting, and continuous process improvements. She currently serves as Head of Finance & Business Support, where she has successfully automated and leveraged the financial reporting system capabilities to ensure efficient company operations.

Viloshna’s background includes senior roles in a multinational pharmaceutical company and a large listed Mauritian conglomerate. Her meticulous attention to detail and strategic thinking have streamlined financial processes, making her a valuable addition to any finance team. Viloshna is a qualified finance professional with an FCCA qualification and an MBA, bringing valuable expertise to any organization.

In her current role, Viloshna leads the company’s Treasury and Payments function, including the fulfillment of the company’s cross-border payments into Africa. With her strong educational background and extensive experience, Viloshna consistently demonstrates her ability to optimize financial operations, minimize risks, and improve profitability. Her expertise in financial reporting and process improvements make her a valuable asset to any organization.

MARK DU PREEZ​

MARK DU PREEZ

Head of Legal & Compliance

A qualified lawyer who joined Africa HR Solutions in July 2020, Mark Du Preez has experience working in private practice for a reputable law firm in South Africa. He also played commercially focused roles at a leading private bank, wealth management company, and outsourcing firm in South Africa and Mauritius.

Mark has played a pivotal role in Africa HR Solution’s risk mitigation strategy, which positively impacted P&L performance over the years.

He currently leads the Partnerships function of the company including relationships and oversight with in-country partners (ICPs) across Africa.

Alex Daruty - Africa HR Team

ALEX DARUTY

Head of Commercial

Alex has more than 15 years of experience in the global, strategic development of both enterprise and consumer brands in categories including technology, transport, enterprise software, entertainment, and travel.

With experience in roles on both agency and corporate side, he has worked across international brands and has led the development and execution of multi-discipline campaigns across EMEA, NORAM and Asia Pacific.

His focus is on driving meaningful business impact through brand differentiation and building high-functioning, digitally oriented, and analytically driven capabilities. He is motivated by working with, and developing dynamic people, teams, and organizations.

He leads, manages, develops and mentors the Key Account Management department, including line management responsibility for the team of Key Account Managers and Key Account Administrator who represent the Company as the primary communication link between all relevant stakeholders, including clients, third party in-country partners and internal functions.

Originally from Mauritius, he holds bachelor’s degrees in International Business, Finance and Management from the University of Nevada, Reno.