Facing higher taxes and tighter employment rules, a growing number of UK businesses are rethinking how and where they hire. For many, the answer lies offshore, with South Africa emerging as an attractive source of skilled, English-speaking remote talent at significantly lower cost. As companies look for ways to protect their margins, this shift is reshaping recruitment patterns, fuelling the growth of outsourcing agencies, and raising fresh questions about the long-term impact on UK jobs and tax revenue.
The £20bn tax shake-up and stricter workers’ rights rules implemented by Chancellor Rachel Reeves have been the catalyst for many UK businesses to look offshore, where they don’t have to pay massive National Insurance Contributions (NICs). Many of the jobs being outsourced don’t even show up in official data, especially in sectors like customer service, IT and sales.
There is a dramatic difference between employment taxes in South Africa and the UK. South Africa charges just 1% in employment taxes for anyone earning over £20,700, while the UK charges 15% on earnings above £5,000. The Legends Agency has 1,000 staff working remotely and serving around 145 UK firms.
Remote South African IT and sales workers can cost up to 70% less than UK hires, mostly due to the cost-of-living gap. Even companies that don’t hire remote workers are noticing the shift. Tony Redondo, CEO of Cosmos Currency Exchange, said: “The feedback from many of my business clients is also to hire overseas remote workers when it’s feasible. It’s partly down to taxes, partially down to the new Employment Rights Bill.” His company has seen a 43% spike in cross-border payments in just six months.
New recruitment companies, like the Legends Agency, are booming by tapping into cheaper labour markets abroad. The Legends Agency hires South Africans and contracts them to UK businesses, and has seen its revenue jump from £300k to £7.2 million in just a year. Sauce, another recruitment agency, says it helped a content marketing agency hit $1 million in revenue by hiring talent overseas.
As mentioned earlier, The Legends Agency has 1,000 staff working remotely and serving around 145 UK firms. If those workers were UK-based, it would generate £9 million more in taxes, according to the Director of The Legends Agency, Alex Fenton.
If this trend keeps growing, it could hit London especially hard. Back in 2022, the ONS found that the capital made up 81% of the UK’s service sector, which itself makes up nearly 75% of the economy. Additionally, job growth in London already seems to be slowing. Data from HR platform Employment Hero shows just a 0.7% increase in payroll jobs in April.
The move toward offshore hiring reflects how strongly businesses respond to rising costs and regulatory pressure. While outsourcing to countries like South Africa may offer firms substantial savings and greater flexibility, it also points to deeper challenges in the UK labour market. If more companies continue replacing local hires with remote overseas workers, the consequences could extend beyond individual businesses to affect employment growth, tax income, and the wider economy, particularly in key service-sector hubs like London.
Read the full article on 2OceansVibe: “UK Firms Ditch Local Hires For Cheaper WFH Staff In SA To Dodge Tax Hike”
