The United Kingdom tops the choice of several business owners when things come to deciding upon the destination for business expansion. It is a bustling center boasting of rich, diverse talent pool. Thanks to a flurry of technological advancements, you can hire the best talent from the UK- irrespective of the original company location. Wondering what makes this otherwise complex thing an effortless, simple task? Well, that’s where tool of Employer of Record UK comes into the picture.
You can kick-start your business expansion by hiring independent contractors who are native to the UK. However, hiring will only be possible if you have a legal entity in the UK. Using an EOR eliminates all these painstakingly lengthy tasks of registering your business in the foreign land. Further, you won’t have to worry about grasping the complex concept of UK laws related to employment and tax. This is because, the EOR will act as legal employer on your behalf and streamline the entire hiring process. Moreover, you won’t have to be anxious about missing out on any compliances.
With an EOR solution, you can stay 100% compliant. The relief of staying assured that no penalties and legal conflicts can mess up your business is unparalleled. And, guess what? An Employer of Record- UK Solution helps you achieve peace of mind as you go on to focus on the core aspects of your business without worrying about any kind of violation of law.
In this detailed blog, we have covered every possible thing that you need to know before expanding your business in the UK. It is time to put all your worries to rest. Let’s get started to find out how you can partner with the best Employer of Record- UK service provider.
Table of Contents
- The UK: Get to Know About Your Next Business Expansion Destination
- Benefits of Hiring Employees in the UK
- What is an Employer of Record- UK?
- Benefits of Using Employer of Record UK
- Employer of Record- UK Pricing
- Hiring in the UK
- Contractors Vs. Full-time Employees- The Differences
- Employment Laws in the UK
- Crucial Provisions Concerning Employment in the UK
- Minimum Wages and Salaries in the UK
- Payroll & Taxes in the UK
- Probation & Termination Terms in the UK
- Frequently Asked Questions- Employer of Record UK
The UK: Get to Know About Your Next Business Expansion Destination
Capital: London
Population: 67.96 million [as of 2024 estimation]
Currency: Pound Sterling (£)
GDP: USD 3.070 Trillion
Language: English
Benefits of Hiring Employees in the UK
Hiring employees in the United Kingdom offers numerous benefits for businesses looking to expand their operations or establish a presence in the UK market. Some of the key advantages include:
1. Access to a Skilled Workforce
The UK boasts a highly skilled and diverse workforce, with individuals proficient in various industries and sectors. Hiring employees in the UK provides access to top talent, including professionals with specialized skills and expertise to drive business growth and innovation.
2. Global Business Hub
As a leading global business hub, the UK offers a favorable environment for companies looking to expand internationally. With its strategic location, well-developed infrastructure, and strong economic stability, the UK serves as a gateway to Europe and beyond, providing access to a vast network of markets and opportunities.
3. Cultural Diversity
The UK is known for its cultural diversity, with a multicultural population representing a wide range of backgrounds and experiences. Hiring employees from diverse cultural backgrounds can bring fresh perspectives, creativity, and innovation to your organization, fostering a more inclusive and dynamic work environment.
4. Business-friendly Regulations
The UK has a business-friendly regulatory environment, with well-established legal frameworks and policies to support entrepreneurship and investment. Employment laws in the UK are clear and comprehensive, providing protection for both employers and employees and promoting fair labor practices.
5. Government Support and Incentives
The UK government offers various support schemes and incentives to encourage business growth and job creation. This includes tax incentives, grants, and subsidies for businesses investing in research and development, training programs, and expansion initiatives, making it attractive for employers to hire and retain employees in the UK.
What is an Employer of Record- UK?
An Employer of Record (EOR) service refers to a company or entity that takes on the responsibility of being the legal employer for workers on behalf of another company or organization. EOR service providers, that have a legal entity of their own in the UK, extend their services to businesses that are planning to hire employees in the UK. The EOR service handles various aspects of employment, including payroll processing, tax compliance, benefits administration, and other HR-related functions.
Benefits of Using Employer of Record UK
Using an Employer of Record (EOR) in the UK offers numerous benefits for businesses looking to expand their operations or hire employees in the country. Here are some of the key advantages:
1. Compliance Management
The UK has complex employment laws and regulations that businesses must adhere to when hiring employees. An EOR in the UK ensures compliance with local labor laws, tax regulations, and employment standards, reducing the risk of legal issues and penalties for non-compliance.
2. Risk Mitigation
Engaging an EOR transfers certain legal and financial responsibilities, such as payroll processing, tax withholding, and employment contracts, to the EOR. This helps mitigate risks for the hiring company, as the EOR assumes liability for employment-related matters.
3. Speed to Market
Setting up a legal entity and establishing a presence in a new country can be time-consuming and costly. By leveraging an EOR, businesses can expedite the hiring process and enter the UK market quickly without the need for establishing a local entity.
4. Flexibility
Hiring employees through an EOR allows businesses to scale their workforce up or down quickly in response to changing business needs or market conditions. This flexibility is particularly beneficial for companies operating in dynamic and competitive industries.
5. Access to Talent
The UK has a diverse and skilled workforce, and hiring employees through an EOR provides businesses with access to top talent in the country. Whether hiring locally or internationally, an EOR can help businesses attract and retain the talent they need to succeed.
6. Cost Savings
Outsourcing employment functions to an EOR can be more cost-effective than hiring and maintaining an in-house HR team. Businesses can avoid the overhead costs associated with payroll processing, benefits administration, and compliance management.
7. Focus on Core Business
By outsourcing employment-related tasks to an EOR, businesses can focus their time and resources on core business activities and strategic initiatives, rather than administrative and HR functions.
8. Professional Expertise
EORs have expertise in employment law, tax regulations, and HR management, allowing businesses to benefit from their knowledge and experience. This ensures that employment practices are compliant and aligned with best practices.
Employer of Record UK- Pricing
The cost of using an Employer of Record (EOR) service in the UK can vary depending on several factors, including the specific services required, the number of employees, the complexity of employment arrangements, and the duration of the engagement. Some common factors that can influence the cost of using an EOR in the UK are as follows:
1. Number of Employees: The more employees you have under the EOR arrangement, the higher the overall cost is likely to be. Some EOR services may offer volume discounts for larger numbers of employees.
2. Services Included: The scope of services provided by the EOR can affect the cost. Basic services such as payroll processing and tax compliance may have a lower fee compared to comprehensive services that include benefits administration, HR support, and legal compliance.
3. Complexity of Employment Arrangements: If your employees have complex employment arrangements, such as multiple compensation structures, international assignments, or specific industry requirements, the cost may be higher to accommodate these complexities.
4. Duration of Engagement: EOR services may charge fees based on the duration of the engagement, such as monthly or annual fees. Short-term engagements or project-based work may have different pricing structures than long-term arrangements.
5. Additional Services: Some EOR services offer optional add-on services, such as visa sponsorship, relocation support, or customized HR solutions. These additional services may incur extra costs.
6. Geographic Location: The cost of EOR services can also vary based on the geographic location within the UK. Major cities or regions with higher living costs and business expenses may have higher service fees.
7. Compliance and Risk Management: EOR services often include compliance and risk management measures, which can contribute to the overall cost but are crucial for ensuring legal compliance and mitigating employment-related risks.
Also Read: Hire Independent Contractor in the UK- A Comprehensive Guide
Hiring in the UK
Hiring an employee in the UK entails providing an employee with a document that would clearly lay down all the essential particulars related to employment conditions. A written employment document constitutes two broad components: Principal Statement and a further Written Statement.
1. Principal Statement
The principal statement in an employment document to be handed over to an employee in the UK, at the time of hiring, needs to include the following details:
- Name of the employer
- Name of the employee
- Job title/designation
- Job description and day-to-day responsibilities
- Date of Joining
- Compensation and frequency of disbursal of payment
- Work hours
- Available holidays and leaves
- Work location along with shedding clarity if relocation in future would be necessary
- End date (only applicable if it is a fixed-term contract)
- Probationary terms
- Perks
- Any training or courses that the employer needs to attend and whether the employer will be financing these programmes
2. Written Statement
Within two months of an employee’s start date, employers need to provide them with a detailed written statement that would include the following:
- Information about pensions
- Collections agreements
- Grievance-redressal procedure
Contractors vs. Full-time Employees: The Differences
|
Parameters |
Employees |
Contractors |
| Employment Nature | Employees work under the supervision and direction of the employer and are subject to the employer’s policies and procedures.
|
Contractors are self-employed individuals or businesses engaged by a company to perform specific tasks or projects for a defined period. They work independently and are not considered employees of the company. |
| Tax and National Insurance Contributions | Employers are responsible for deducting income tax and national insurance contributions from employees’ salaries and remitting them to HM Revenue & Customs (HMRC) on their behalf. | Contractors are responsible for managing their own tax affairs and paying their own income tax and national insurance contributions. They may be subject to different tax rules and allowances, such as the flat-rate scheme for VAT and the IR35 rules for determining employment status. |
| Employment Benefits | Employees are entitled to various employment rights and benefits, including the national minimum wage, paid annual leave, statutory sick pay, maternity and paternity leave, and protection against unfair dismissal. | Contractors do not have the same employment rights and benefits as employees. They are not entitled to the national minimum wage, paid leave, or statutory employment protections. |
| Control | Employees work under the direction and control of the employer. They may be subjected to performance reviews, disciplinary procedures, and company policies. | Contractors work independently and have control over how, when, and where they perform their work. They are responsible for managing their own workload, schedule, and methods of working. |
| Duration | Employment contracts for employees are typically ongoing and may be terminated by either party with notice or payment in lieu of notice, subject to statutory requirements and contractual terms. | Contractor engagements are usually for a fixed term or project-based and may be terminated upon completion of the project or expiration of the contract. |
Employment Laws in the UK
| Act | Description |
| Employment Rights Act 1996 | Lays down the rights of employees related to termination, dismissal, and leaves |
| National Minimum Wage Act 1998 | Establishes the minimum wage of employees, as established by the government |
| Employment Relations Act 1999 | Formalises the establishment of Trade Unions in the UK |
| Maternity, Paternity Leaves, etc. Regulations 1999 | Outlines the rules related to maternity and paternity leaves |
| Part-time Employees (Prevention of Less Favourable Treatment) Regulations 2000 | Provides part-time workers with the right to be treated equally as their full-time counterparts. In no way can part-time workers be treated less favourably as compared to full-time employees while being employed by the same employer. |
| The Equality Act, 2010 | Prohibits discrimination in the workplace on the basis of protected characteristics such as age, sex, race, disability, religion or belief, sexual orientation, and gender reassignment. |
| IR35 | Tax legislation in the United Kingdom designed to prevent tax avoidance by workers who provide their services to clients through an intermediary, such as a limited company, but who would be considered employees if they were directly engaged by the client. |
With an Employer of Record- UK, you won’t have to take the stress of attempting to understand the various employment laws and tax norms prevailing here. Partnering with an excellent EOR will reduce your workload and help you focus on things that are integral to your business.
Crucial Provisions Concerning Employment in the UK
Employment laws in the UK are designed to regulate the relationship between employers and employees, ensuring fair treatment, protection of rights, and compliance with legal obligations. Here are some of the key employment laws in the UK:
1. Working Time Regulations: In the UK, the standard work hours is set at a maximum of 48 hours per week, with the average working hours accounted over a 17-week period.
2. Maternity and Paternity Rights: Employees are entitled to maternity leave, statutory maternity pay (SMP), and additional rights such as the right to return to work after maternity leave. Similarly, eligible employees are entitled to paternity leave and statutory paternity pay.
5. Flexible Working: Employees have the right to request flexible working arrangements, such as part-time work, job sharing, or remote working, provided they meet certain eligibility criteria.
6. Dismissal: Employers must follow fair procedures when dismissing employees or making them redundant. This includes providing written notice, conducting consultations, and offering suitable alternatives where possible.
7. Statutory Sick Pay (SSP): Employees who are unable to work due to illness or injury may be entitled to SSP from their employer for up to 28 weeks. SSP is paid at a set rate and is subject to certain qualifying conditions.
8. Health and Safety at Work: Employers have a legal duty to ensure the health, safety, and welfare of their employees in the workplace. This includes providing a safe working environment, conducting risk assessments, and implementing measures to prevent accidents and injuries.
9. Trade Union Rights: Workers in the UK have the right to join trade unions and participate in collective bargaining. Trade unions play a key role in representing workers’ interests and negotiating with employers on issues such as pay, working conditions, and job security.
Minimum Wages and Salaries in the UK
In the UK, adhering to the National Living Wage (for employees who are 23 years old or above) and National Minimum Wage (for employees who are below 23 years of age and works as an apprentice) is a must. Employers need to offer their employees the right compensation on the basis of the average number of hours worked. Interestingly, the wages vary- depending upon the age of employees.
|
Age Range (in years) |
Wage (as of April 2023) |
|
23 or above |
£10.42 |
|
21-22 |
£10.18 |
|
18-20 |
£7.49 |
|
Below 18 |
£5.28 |
| Apprentice |
£5.28 |
Payroll & Taxes in the UK
Whether you are hiring a British contractor or a full-time employee, checking if you are staying compliant with the UK taxation rules is important to prevent any sort of legal conflicts with the authorities. This once again makes the use of the services of Employer of Record UK a must. In that way, you won’t have to worry about getting into the nitty-gritty of complex tax regulations.
Taxation Rules for Employees
Employee income tax in the UK varies, depending on the extent to which their income surpasses the Personal Allowance. As a standard, the Personal Allowance in the UK is £12,570. For employees whose income is over £100,000, the Personal Allowance is lower. However, if employees claim Marriage Allowance and Blind Person’s Allowance, their allowance will be higher.
Note: Income tax band in the UK is dynamic and in states like Scotland, Wales, England, and Northern Ireland.
Taxation Rules for Employers
Employers in the UK have specific taxation rules that they must adhere to. It’s time to figure out what these are:
1. Employer’s National Insurance Contributions (NICs): Employers are required to pay National Insurance contributions (NICs) on their employees’ earnings. The NICs rates and thresholds depend on the employee’s NICs category (e.g., Class 1 for most employees).
2. PAYE System: Employers must operate the Pay As You Earn (PAYE) system, which involves deducting income tax and employee NICs from employees’ salaries and paying these deductions to HM Revenue and Customs (HMRC) on behalf of their employees.
3. Employer’s Responsibilities: Employers have various responsibilities related to payroll and taxes, including registering with HMRC as an employer, providing employees with payslips detailing earnings and deductions, reporting payroll information to HMRC in real time (Real Time Information, or RTI), and issuing P60 forms at the end of each tax year.
5. Tax Year and Deadlines: Employers must meet various deadlines throughout the tax year for submitting payroll information, filing tax returns, and making payments to HMRC. The tax year in the UK runs from 6th April to 5th April the following year.
8. HMRC Compliance: Employers must comply with HMRC regulations and guidance regarding payroll, taxes, and reporting requirements. Failure to comply can result in penalties, fines, and legal consequences.
Probation & Termination Terms in the UK
Period of Probation in the UK
As a standard, the probationary period in the UK is 3 months from the employee’s joining date. However, this rule is applicable in case of internal switch or move. The general probationary term is for 6 months from the joining date of the employee. However, it is crucial to note that probation in the UK is not a statutory regulation by law.
Termination and Notice Period in the UK
In the UK, it is mandatory for employers to give employees a notice period between 1 to 12 weeks, hinging on the total time of service of employees. The statutory notice periods in the UK work this way:
- 1 week’s notice ought to be given to employees having years of experience ranging from 1 month to 2 years
- An additional week’s notice needs to be given to employees for each year of service completed, till a maximum period of 12 weeks
Further, employers also need to give employees the reason for which they are being terminated, at least 14 days before asking them to leave the organisation.
An employee, who has been consistently employed by an employer for a continuous period of 2 years, owns the right to receive Statutory Redundancy Pay or SRP along with payment through the notice period.
If these termination rules wracked your mind, don’t worry. An ideal Employer of Record UK solution will help you take care of all the rules related to any employment segment. With a remarkably good EOR partner, your business will be safeguarded from any kind of legal issues.
Frequently Asked Questions- Employer of Record UK
1. What is an Employer of Record UK?
An Employer of Record (EOR) in the UK is a company or entity that takes on the responsibility of being the legal employer for workers on behalf of another company or organization. The EOR manages various aspects of employment, including payroll, taxes, benefits, and compliance with labor laws.
2. Why would a company use an Employer of Record UK?
Companies may use an EOR in the UK for several reasons, such as entering new markets without setting up a legal entity, managing international employees, accessing local expertise and compliance support, and reducing administrative burdens and legal risks associated with employment.
3. How does using an Employer of Record benefit businesses in the UK?
Using an EOR in the UK provides businesses with streamlined access to talent, efficient payroll and HR management, compliance with local employment laws and tax regulations, risk mitigation, flexibility in workforce management, and cost-effective solutions for international expansion.
4. What services does an Employer of Record offer in the UK?
An EOR in the UK offers services such as payroll processing, tax compliance, benefits administration, employment contracts, HR support, legal compliance, risk management, and regulatory filings on behalf of the client company.
5. What are the costs associated with using an Employer of Record in the UK?
The cost of using an EOR in the UK can vary based on factors such as the number of employees, services required, complexity of employment arrangements, duration of engagement, geographic location, and additional services. It’s important to discuss pricing and fee structures with EOR providers.
6. How does the EOR handle payroll and taxes for employees in the UK?
The EOR manages payroll processing, including calculating and deducting income tax, National Insurance contributions (NICs), and other deductions from employees’ salaries. They also handle employer NICs contributions, reporting to HM Revenue and Customs (HMRC), and ensuring compliance with tax regulations.
7. What are the compliance and legal aspects of using an Employer of Record UK?
An EOR in the UK ensures compliance with employment laws, tax regulations, immigration requirements, and other statutory obligations. They handle employment contracts, workplace policies, employee benefits, and regulatory filings to ensure legal compliance.
8. How can businesses find and choose a reliable Employer of Record UK?
Businesses can find EOR providers through research, referrals, industry associations, and online directories. It’s essential to evaluate providers based on their experience, reputation, services offered, pricing transparency, customer support, and compliance expertise before choosing one.
9. What is the process of engaging an Employer of Record UK?
The process of engaging an EOR in the UK typically involves initial consultations, discussing services and pricing, signing contracts or service agreements, onboarding employees, providing necessary documentation, and ongoing communication and collaboration for HR and payroll management.
10. Can businesses switch or terminate their relationship with an Employer of Record UK partner?
Yes, businesses can switch or terminate their relationship with an EOR in the UK based on the terms outlined in the service agreement. It’s important to review contract terms, notice periods, termination procedures, and any financial implications before making changes.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
