United KingdomDiscover an employer’s guide to employment laws, regulations, and Employer of Record (EOR) in the UK.
Looking to hire in the UK? An EOR can assist
Do you need to get up and running in the United Kingdom—and quickly?
An Employer of Record (EOR) offers a streamlined approach for companies looking to hire employees in the UK without setting up a local entity. Partnering with an EOR allows businesses to manage payroll, benefits, and other HR functions efficiently while ensuring compliance with local labor regulations.
Utilize the expertise of an EOR to ease your entry into the UK market and gain time to concentrate on your core business goals. You’ll retain control over your operations and employees’ day-to-day.
How to hire in the UK
Step 1: Choose between establishing a local entity and using an EOR
When expanding your business into the UK, you have two primary options: establishing a local entity or partnering with an Employer of Record (EOR).
Setting up a UK entity offers complete control over your business operations. However, this path is resource-intensive, requiring significant time, capital, and administrative effort. The process of incorporation, tax registration, and compliance setup can be lengthy, potentially delaying your hiring timeline. Additionally, you’ll assume full responsibility for managing HR functions, payroll, and adhering to UK employment laws.
By partnering with an EOR, you can quickly onboard employees without the complexities of entity setup. The EOR becomes the official employer, handling payroll, benefits, and compliance on your behalf. This allows you to focus on your core business while ensuring your UK operations are legally compliant.
If you anticipate long-term, large-scale operations in the UK, establishing a local entity might be suitable. However, for faster market entry, reduced risk, and fewer administrative burdens, an EOR is often the preferred option.
Step 2: Finding the right EOR
Choosing the right Employer of Record (EOR) for your operations in the UK is crucial. A poor choice can lead to compliance issues, unexpected expenses, and dissatisfaction among your employees.
Here are key factors to consider:
- Legal compliance. Ensure the EOR has a thorough understanding of UK labor laws, employee rights, tax obligations, and local benefits. Review their experience and track record, especially regarding industry-specific requirements.
- Customer service. Assess whether the EOR provides ongoing support. Multiplier, for example, offers 24/5 human help and dedicated account managers.
- Transparent pricing. Be cautious of EOR services offering low upfront costs, as they may have hidden fees or complex pricing structures. Make sure you understand all potential costs from the start before making a decision.
- Total cost of ownership. Evaluate whether the EOR offers a quality service that aligns with your budget and meets your needs. Ensure that you are getting value for your investment.
Step 3: Onboarding and employing in the UK
Send over the contract
After selecting your ideal candidate and the appropriate EOR, the next step is to provide a compliant employment contract.
An EOR such as Multiplier can draft contracts that meet UK labor laws, allowing you to customize terms such as job responsibilities, working hours, salary, and termination conditions. Once the contract is ready, your EOR will securely send it to the employee and ensure all required signatures are collected.
Enhance compensation with competitive benefits
To make your offer more attractive, an EOR can help you access a variety of local benefits without needing to work directly with UK providers. Additionally, the EOR can manage the provision of essential IT equipment and other resources needed for your new hire to start their role effectively.
Get all your documentation in order
You’ll need to gather the new employee’s tax and banking details, but if you’re working with an EOR, they will typically handle this for you during payroll setup.
With the right EOR, onboarding in the UK can be streamlined, making the process smoother and more efficient for both you and your new employees.
Step 4: Manage payroll for employees in the UK
Handling payroll for employees in the UK involves following local tax regulations and mandatory contributions. The UK has a progressive income tax system with rates ranging from 0% to 45% based on income levels.
It’s important to note that Scotland has different tax rates and bands for non-savings and non-dividend income, with rates ranging from 19% to 47% depending on income levels.
- National Insurance contribution. Employers must contribute to National Insurance, which provides for state benefits such as pensions, sickness pay, and unemployment benefits. Contributions are based on employee earnings and categorized into different classes.
- Income tax. Employers need to withhold income tax from employees’ salaries according to their income and tax code. The withheld tax is then paid to HM Revenue and Customs (HMRC).
- Pension contributions. Employers are required to make contributions to a workplace pension scheme. The minimum contribution rates are set by the government and may vary depending on the pension scheme.
Handling these payroll obligations can be challenging, especially for international companies operating in the UK. An EOR can simplify this process by managing accurate and timely salary payments, along with managing all local taxes, contributions, and withholdings.
With an EOR like Multiplier, you can streamline global payroll management for all your international employees through a single platform.
Employment laws and regulations in the UK
UK employment laws are designed to protect employee rights and ensure fair labor practices. Here are the key aspects:
- Employment contracts. Employers can issue either fixed-term or permanent contracts. Although written contracts are not legally mandatory, they are strongly advised to prevent disputes. These contracts should clearly outline job responsibilities, salary, working hours, and termination conditions.
- Working hours and overtime pay. The standard working hours in the UK are 37 to 40 hours per week, usually spread across five days. Employees are entitled to overtime pay for hours worked beyond the standard workweek. Employees must also receive a minimum 20-minute break if working more than six hours a day.
- Flexible working: Employees now have the right to request flexible working arrangements from the first day of their employment. This includes requests for part-time, term-time, flexitime, compressed hours, and varied working locations.
Employ top talent in United Kingdom through an EOR
Onboard, pay, and manage all your international employees
Employee benefits and compensation in the UK
Minimum wage in the UK is currently set at £11.44 per hour for workers aged 23 and over, under the National Living Wage (NLW) scheme. For younger workers, the National Minimum Wage (NMW) applies, which is £8.60 for those aged 21-22, and lower for younger workers and apprentices.
The UK also has various requirements for employee benefits and compensation. This includes:
- Paid annual leave. Employees are entitled to a minimum of 28 days of paid annual leave, which includes public holidays. This entitlement is pro-rated for part-time employees and may increase with length of service or according to company policies.
- Paid sick leave. Employees are eligible for Statutory Sick Pay (SSP) for up to 28 weeks if they are unable to work due to illness. SSP is paid at a standard rate, and employees must provide a medical certificate for absences longer than seven days.
- Paid maternity leave. Female employees are entitled to up to 52 weeks of maternity leave, with the first 39 weeks eligible for maternity pay at varying rates. Shared Parental Leave allows parents to share up to 50 weeks of leave and 37 weeks of pay. Paternity leave is generally two weeks with Statutory Paternity Pay available during this time.
To offer a comprehensive and competitive local benefits package, consider leveraging a global benefits administration solution.
Termination and offboarding procedures
When ending employment in the UK, employers must follow specific rules. This includes:
- Following a notice period. Typically, one week’s notice is required for employees with less than two years of service. This can be longer based on the contract or employee’s tenure
- Issuing severance pay. This is not always required but may be outlined in the contract or necessary in redundancy. Severance pay is usually calculated based on length of service and pay.
- Payment in Lieu of Notice: Employees might be paid instead of working their notice period if agreed upon in the contract.
By managing the offboarding process, an EOR ensures compliance with local laws and provides a smooth transition for both employers and employees.
Visa and work permit assistance
Foreign workers in the UK must obtain the appropriate visas and work permits. The type of visa required depends on the job, duration of stay, and the employee’s nationality.
Here are the main visa categories for working professionals:
- Skilled Worker Visa: For foreign nationals with a job offer from a UK employer approved by the Home Office. The job must meet specific skill and salary thresholds. It is generally issued for up to five years and can be extended.
- Intra-company Transfer Visa: Usually issued for the duration of the transfer, up to a maximum of five years, depending on the employee’s role and seniority, for employees of multinational companies who are being transferred to a UK branch.
- Health and Care Worker Visa: For individuals offered a role in the health or social care sector. The job must meet specific salary and skill requirements and is typically issued for up to five years but can be extended.
- Global Talent Visa: For individuals recognized as leaders or emerging leaders in fields such as science, humanities, engineering, arts, or technology. This visa is issued for up to five years and can be extended.
- UK Start-Up Visa: For entrepreneurs looking to establish a new business in the UK. This visa requires endorsement from an approved UK body.
- UK Graduate Work Visa: This visa allows international students who have completed a degree in the UK to stay and work for up to two years (three years for PhD graduates).
- High-Potential Individual Visa: For graduates from top global universities. This visa allows them to work in the UK without needing a job offer.
- Temporary Worker Visas: These include several subcategories for short-term work, such as Creative Worker Visa, Seasonal Worker Visa, Charity Worker Visa, and Government Authorized Exchange Visa.
Expert assistance can help streamline applications and renewals. An EOR can provide comprehensive support for managing visas and work permits as part of its services.
For more information on managing global immigration for your employees in the UK, explore our Global Immigration Services.
Get started with Multiplier’s EOR services
Multiplier offers a comprehensive Employer of Record (EOR) solution to streamline your expansion into the UK.
By partnering with us, you gain access to a suite of services designed to ensure full compliance with local labor laws while optimizing your HR operations. Navigate complex employment regulations, manage payroll, and administer benefits without hassle.
Book a demo today to find out more.
