Top talent is fleeing, but only virtually

Virtual emigration is on the uptick: here is how HR leaders can respond.

More and more South African professionals are finding fresh work opportunities that were not feasible just two years ago. Workers with the right skills have been able to take up international job opportunities without having to uproot themselves and their families, signalling a new era of virtual emigration.

The concept of “virtual emigration” refers to a cross-border relationship between where an employee performs employment services while not in the jurisdiction where the employer is located. Xpatweb’s managing director, Marisa Jacobs, says this should be distinguished from a home office arrangement, where an employee is allowed to work from home and not come into the office.

She explains that, “Examples of virtual emigration arrangements would be where a South African employee of a United Kingdom company moves back to South Africa and retains the employment relationship with the United Kingdom employer, remote working from Cape Town, or where a South African employee emigrates to Canada but still works for the South African employer, just based in Canada.”

She says this is distinct from a simple remote office or home office arrangement where an employee works for a Gauteng-based employer and is allowed to move down to the Garden Route with their family and perform employment services remotely. The critical distinguishing factor of virtual emigration is the cross-border component, which means that the laws and regulations of more than one country apply to the working arrangement.

A side effect of Covid-19
Head of human capital at Altron Karabina, Emma Durkin says virtual emigration is a direct result of the Covid-19 pandemic and the massive move to working remotely.

She says that in the technology space it became very apparent that teams could deliver on projects from wherever they were in the world. “What we have seen is a trend where international, mostly European based companies, are taking advantage of the gig economy. They recognise that South Africa has world-class skills, especially in the technology industry, and are relatively affordable due to the exchange rate. In addition, we have English speaking professionals who are able to communicate easily, and there is the time zone compatibility of South Africa in relation to Europe and the UK. For those reasons, South Africa is an attractive fishing pool for technology skills.”

She says that down the line, virtual emigration offers an easy exit out of South Africa with the promise of a relocation visa and costs by employers abroad.

Emma explains that during the Covid-19 lockdowns emigration halted, but now with borders open again, people are considering their options and international recruitment is firing up again. “This is cause for concern because we are heading towards a skills crisis in South Africa. If our top skills are being deployed on international projects and not contributing to local initiatives, it’s going to hurt the economy.”

Marisa explains that in the past decade we have already seen a year-on-year increased demand for skills ,and employers expanding their search for talent internationally. The latest Xpatweb critical skills survey shows that 76 percent of employers confirmed that an international search will assist the organisation in meeting its business objectives.

She adds that, “The growing trend of virtual emigration will also see South African employers making use of internationally based employees without necessarily physically relocating them to South Africa. Virtual emigration will further stimulate international work forces and the global search for talent to bolster local supply across the world.”

Marisa says earning in foreign currency is an attractive pull for South African employees to enter into virtual emigration employment relationships, but cautions that, “ensuring you know the do’s and don’ts of compliance is essential to ensure you do not get into hot water while maximising your earnings. The 30-day period to convert your earnings to rand, means that by planning your conversion optimally, you can receive maximum rands every month.”

The possibility then exists, with it becoming seemingly easier to work for an international employer with no need to physically relocate and uproot your family, that more and more skilled South Africans could enter the international job market, leaving local employers with a smaller pool of local talent available.

Implications of virtual emigration

Marisa explains that the principle of labour law is generally that the employee is entitled to the dispensation of the country where they are physically performing the employment services. “This creates unplanned risk for any international employer hiring a South African employee, as non-compliance with South African law comes with a disgruntled employee having strong recourse to the CCMA and labour court,” she explains.

South African labour laws are heavily employee-centric and far from the flexibility of a completely free market arrangement like the one that exists in the US, where hiring and terminating employment relationships is far easier. She says, “Any South African employment arrangement with a remote employee based in South Africa, whether the person in a South African or under work visa, requires specific attention by the employer to ensure compliance with South African labour law.”

This does not only apply to the terms and conditions of employment and policies, but also how the employee is treated, especially where the employee does not operate within the rules. The same principles apply to hires by South African companies of employees everywhere else in the world, and the labour laws of each jurisdiction must be considered.

She further explains that when an employee is located in a specific country, this creates an economic and tax presence for the employer in the country where the employee is based. For example, where a German firm hires a South African-based employee, the German country should consider the registration requirement as an “external company” in South Africa under the Companies’ Act as well as Income Tax registration requirement for the company as the employee in South Africa creates a “permanent establishment” for the employer in South Africa.

The same rules apply to South African companies hiring employees in India, for example: the rules are generally very closely aligned as international corporate tax is governed by Double Tax Treaties, which contains similar provisions across jurisdictions.

Demands for HR leaders
Aside from all the technical challenges, this phenomenon requires a shift in how leaders lead. Emma says HR leaders need to reinvent the way they manage people. She says, “It is a new world of work. To try and continue in the old way is fruitless; we will be left behind.” She adds that retention and talent don’t sit in HR only: “They can be driven by HR but it takes an entire leadership team to create an engaged workforce. This is true whether you are sitting in IT, or Finance or HR.”

She says at Altron they have invested in a different HR model: “It is more a people management approach that is people-centric, genuinely partnering with line managers in terms of retaining and engaging the people, and making sure their career journey is a good one.”
She advises HR leaders to invest in leadership training, because the remote way of work entails a different leadership style. “Leaders have to change their style to manage virtual teams: it’s a lot more complex. One of the disadvantages of remote is loss of connection, so we have to find ways around that, because that connectedness leads to more loyalty.”

She says flexibility in such an environment is key and expanding options is another thing Altron Karabina is doing. “In the South African context for example, it is casting our net across South Africa and recruiting talent outside of the major centres of Johannesburg, Cape Town and Durban. So, if talent lies in Limpopo and Mpumalanga, we are willing to tap into it and employ remote or hybrid work models.

She says the company has also changed its mindset in regard to resignations. “We don’t see them as the end of a relationship. Instead, we aim to make the exit of top talent a good one. We expect an increase in boomerang hires, where old employees return. We want them to be able to come back, especially since they may have new experiences, skills, clients and exposure that they can bring back to the company.”

Time for a mindset switch
Emma insists that we have to pay attention and that the appetite for remote work is huge. There has also been an uptick in freelancing and contract positions. She says, “Previously professionals needed a certain mindset to embrace the risk that goes with not having a permanent position. Covid-19 taught people that there is uncertainty everywhere, so permanent positions don’t guarantee security.”

She says that the appetite to consider more flexible options, such as freelancing, contracting, etc. is strong. “In the ICT space, flexibility has always been more desired. Covid-19 confirmed that we can go remote and proved how versatile and resilient people can be.”

She says the impact of the virtual emigration trend goes beyond one company, and industries have to come together to think of programmes to fill the gaps we have, so the economy thrives. “If an industry can come together, with competitors, partners, and stakeholders talking, they can invest in solutions. For instance, we have a high unemployment rate, and we need to get unemployed graduates to the pipeline. However, we need people to get relevant, sought-after skills. We need the right people upskilled in the right areas to keep us globally competitive.”