6 Steps To Using An Employer of Record In The United Kingdom

An Employer of Record (EOR) is the legal employer for workers. It handles HR responsibilities like payroll, taxes, compliance, engineering, life sciences, and digital media graduates while the company directs the employees’ day-to-day tasks. This setup allows businesses to hire globally without establishing a local entity.

Hiring workers from the United Kingdom offers benefits due to the country’s deep talent marketplace in specific industries, including finance, banking, fintech, and technology. The UK is known for its highly skilled workforce, particularly in London, Manchester, and Edinburgh. The country’s universities and research institutions are renowned for producing top-tier engineering, life sciences, and digital media graduates.

Employment in the UK has been relatively stable, with the country’s job market showing resilience despite recent economic challenges. According to recent data, the UK’s employment rate remains high, with a diverse and skilled workforce across various sectors. The country’s focus on innovation and digital transformation has created numerous opportunities for businesses looking to tap into specialized talent pools.

To use an EOR in the United Kingdom, there are 6 steps to ensure you are set up properly:

1. Find talent to hire in the United Kingdom
2. Compare using an EOR to setting up a legal entity in the United Kingdom
3. Get the information needed from your talent
4. Choose an EOR provider with expertise in the United Kingdom
5. Communicate your hiring needs to the EOR
6. Have the EOR set up the contracts and hiring procedure

An EOR manages payroll, taxes, and benefits administration, ensuring compliance with local laws and regulations, thus simplifying the employment process for companies.

Different labor laws in the United Kingdom, such as those governing work hours, termination processes, and mandatory benefits, must be considered when hiring remotely. The hiring process in the UK involves identifying talent, ensuring compliance with local employment laws, and executing contracts, typically facilitated by an EOR for companies without a local presence.

1. Find talent to hire in the United Kingdom

Businesses should leverage a combination of local and international platforms to find talent to hire in the United Kingdom. LinkedIn remains a crucial tool for talent acquisition, allowing companies to search for candidates actively seeking opportunities and to headhunt passive candidates.

Local job boards such as Reed.co.uk, TotalJobs, and Indeed UK are popular among British job seekers and offer extensive listings across various industries. These platforms are particularly useful for finding candidates with specific skills and experience relevant to the UK market.

Industry-specific job boards and professional associations can be valuable resources for specialized roles. For example, the Institute of Chartered Accountants in England and Wales (ICAEW) is a good platform for finding finance and accounting talent.

Recruitment agencies with expertise in the UK market, such as Hays, Michael Page, and Robert Half, can provide tailored solutions for companies seeking to navigate the complexities of hiring in the UK, especially considering the country’s diverse talent pool and specific industry requirements.

2. Compare using an EOR to setting up a legal entity in the United Kingdom

When working with employees in the United Kingdom, you need to consider working with an EOR to set up your own legal entity. An Employer of Record offers a quicker, less complex route to hiring local staff, bypassing the need for a formal company presence. This approach suits companies looking to test the UK market or expand quickly without significant upfront investment.

An EOR manages all local employment laws, tax, and compliance issues, assuming responsibility for hired employees. This setup allows companies to start operations in weeks, compared to the months required to establish a legal entity.

On the other hand, setting up a legal entity in the United Kingdom offers greater control and the ability to customize business operations and policies. However, establishing a legal entity involves complex registration processes, significant upfront fees, and a deeper understanding of local laws and tax regulations.

Here’s a comparison of key factors:

Using an EOR in the United Kingdom offers a faster and more flexible solution for companies looking to hire a few employees or test the market before committing to a full-scale operation. It significantly reduces the complexity and risk of navigating UK labor laws and tax regulations.

On the other hand, setting up a legal entity in the UK provides greater control over operations. It may be more cost-effective in the long run for companies planning a significant, long-term presence in the country. It allows for more customization in employment terms and direct management of all aspects of the business.

The choice between an EOR and setting up a legal entity depends on factors such as the scale of your planned operations in the UK, your timeline for expansion, and your company’s resources for managing international operations. For many companies, starting with an EOR and transitioning to their legal entity as operations grow can be an effective strategy for entering the UK market.

3. Get the information needed from your talent

Information about employees is needed to ensure compliance with local labor laws and tax regulations when hiring in the United Kingdom.

This process is crucial for both the employer and the employee, as it forms the basis of the employment relationship and ensures all legal requirements are met. Typically, you’ll need the following essential personal information:

• Employee’s full name
• National Insurance number
• Address
• Date of birth
• Bank account details for salary payments

To begin with, you’ll need to gather basic personal information from your prospective employee. This includes their full legal name, date of birth, nationality, and contact details. In the UK, it’s common for individuals to have multiple given names, so ensure you capture the complete name as it appears on official documents.

Next, you must collect the employee’s National Insurance (NI) number. This number is used for social security contributions and benefits. Foreign workers without previously worked in the UK must apply for an NI number.

For tax purposes, you’ll need the employee’s tax code, which determines how much income tax should be deducted from their salary. This information is typically provided on their P45 form from their previous employer or can be obtained from HM Revenue & Customs (HMRC).

You’ll also need to gather information about the employee’s qualifications and work experience. This includes educational background, professional certifications, and previous employment history. In the UK, requesting copies of degree certificates and professional qualifications is common.

For payroll purposes, you’ll need the employee’s bank account details for salary payments. In the UK, paying salaries via bank transfer is standard practice.

You must verify the employee’s right to work in the UK if the employee is a foreign national. This may involve collecting information about their visa status or work permit. The UK government provides a detailed checklist for right-to-work checks on its official website.

Lastly, it’s important to gather information about any specific employment terms agreed upon, such as salary, working hours, job title and description, and any special arrangements like remote work agreements.

Remember, when collecting and storing this personal information, you must comply with data protection regulations, including the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018.

4. Choose an EOR provider with expertise in the United Kingdom

When choosing an EOR provider to work within the United Kingdom, selecting a partner with deep expertise in the country’s employment laws, tax regulations, and business culture is crucial. This expertise can significantly impact the success of your operations and ensure full compliance with local requirements.

First and foremost, look for an EOR provider with a strong track record in the UK. They should have experience working with companies in your industry and be able to provide references or case studies of successful partnerships. A provider with a physical presence in the UK, rather than just a network of partners, can often offer more direct and responsive service.

Consider the range of services offered by the EOR provider. In the UK, a comprehensive EOR service should include payroll processing, tax withholding and reporting, social security contributions, and management of mandatory benefits such as pension auto-enrolment and statutory sick pay. The provider should also be well-versed in UK employment law, including regulations around working time, annual leave, and employee rights.

The EOR provider should demonstrate a thorough understanding of UK labor laws. This includes knowledge of working hour regulations, leave entitlements, termination procedures, and anti-discrimination laws. They should be able to guide you through the nuances of UK employment contracts, which, while not always legally required to be in writing, are strongly recommended.

Technology and data security are also crucial factors. Look for an EOR provider that uses modern, secure systems for managing employee data and payroll. This is particularly important given the stringent data protection requirements under the UK GDPR.

Customer support is another key consideration. Choose a provider that offers responsive, multilingual support. Given the time difference between the UK and many other countries, 24/7 support can be valuable.

What are the best EOR providers to use in the United Kingdom?

Here’s a table listing the top EOR providers for the United Kingdom and why each was selected:

These providers have been selected based on their expertise in the UK market, range of services, technological capabilities, and customer reviews. However, it’s important to evaluate each provider based on your specific needs and circumstances.

5. Communicate your hiring needs to the EOR

It is important to communicate your hiring needs to the EOR to ensure a smooth and effective hiring process in the United Kingdom. This step is crucial as it sets the foundation for a successful employment relationship and helps the EOR accurately represent your company’s interests.

Start by providing a detailed job description for the position you’re looking to fill. In the UK, job descriptions typically include the responsibilities and qualifications required and information about the company culture and values. This is important as UK workers value the work environment and company ethos.

Clearly outline the terms of employment you’re offering. This should include the proposed salary, which should be stated in British pounds (GBP), the local currency. Be aware that it’s common practice in the UK to discuss salaries in annual rather than monthly terms. Communicate whether you plan to offer any additional benefits or bonuses.

Specify the working hours and any flexibility options. The UK has specific regulations regarding working hours, with a standard workweek typically ranging from 35 to 40 hours. If you’re offering remote or hybrid work options, which have become increasingly popular in the UK, make this clear.

Discuss any benefits you wish to offer beyond the statutory requirements. While the UK has a comprehensive National Health Service (NHS), many employers offer private health insurance as an additional benefit. Other common benefits in the UK include pension schemes, life insurance, and additional annual leave above the statutory minimum.

Communicate any specific skills or qualifications essential for the role, such as professional certifications or language requirements. While English is the UK’s primary language, specifying the proficiency level needed in any additional languages is important.

If there are any unique aspects of your company culture or working style that you want to maintain, communicate these to the EOR. This could include things like regular team-building activities or specific communication practices.

Provide information about your timeline for hiring and onboarding. UK business culture values punctuality and clear planning, so setting clear expectations about timeframes is important.

Lastly, be open to guidance from your EOR provider. They may have insights into local market conditions or cultural nuances that could affect your hiring strategy in the United Kingdom.

6. Have the EOR set up the contracts and hiring procedure

Once you have chosen which provider to work with and communicated your hiring needs, the EOR will set up the contracts and manage the hiring procedure according to UK labor laws and regulations.

The EOR will draft an employment contract that complies with UK law. While verbal contracts are technically valid in the UK, written contracts are strongly recommended and mandatory for certain employment arrangements. The contract will typically be in English, though translations may be provided for non-native English speakers if necessary.

Key elements that the EOR will include in the contract are:

• Job title and description
• Start date and, if applicable, end date for fixed-term contracts
• Salary and payment schedule
• Working hours and location
• Probationary period (which is typically between three to six months in the UK)
• Leave entitlements (including the statutory minimum of 28 days of paid annual leave, which can include public holidays)
• Notice periods for termination

The EOR will also ensure that the contract complies with any relevant collective agreements, although these are less common in the UK private sector compared to some other European countries.

Next, the EOR will handle the registration process. This includes registering the employee with HM Revenue & Customs (HMRC) for tax purposes and setting up PAYE (Pay As You Earn) for income tax and National Insurance contributions. They will obtain the necessary National Insurance number if the employee doesn’t already have one.

The EOR will also set up the payroll system to ensure timely and accurate payment of salaries, including the correct withholding of income tax and National Insurance contributions. In the UK, employers deduct these amounts from the employee’s salary.

The EOR will assist with necessary work permit applications if the new hire is a foreign national. The UK has different procedures for EU/EEA citizens and non-EU/EEA citizens post-Brexit, and the EOR will navigate these requirements accordingly.

Finally, the EOR will manage the onboarding process, ensuring that all necessary documentation is completed and the employee is properly integrated into your company’s systems and procedures. This may include setting up mandatory pension auto-enrollment, which most UK employees require.

Throughout this process, the EOR acts as the legal employer, taking on the associated risks and responsibilities while allowing you to manage the employee’s work daily.

What help does an EOR provide in the United Kingdom’s payroll, taxes, and benefits administration?

The EOR will support the entire United Kingdom’s payroll, tax, and benefits administration, ensuring full compliance with local regulations and timely execution of all required processes. This comprehensive service is crucial for navigating the complexities of the UK employment system.

Regarding payroll, the EOR typically handles the calculation and disbursement of salaries every month. They manage the PAYE (Pay As You Earn) system, the UK’s method for collecting income tax and National Insurance contributions from employment. The EOR ensures these payments are correctly calculated and distributed.

For taxes, the EOR takes care of income tax withholding and remittance to HMRC. They calculate the correct amount of tax based on the employee’s tax code and personal circumstances, applying the progressive tax rates set annually by the UK government. The EOR also handles the monthly and annual tax reporting required by UK law, including P60 forms (end-of-year tax summaries) and P11D forms (benefits and expenses).

Regarding social security contributions, the EOR manages the employees’ and employer’s national insurance contributions. These are calculated based on government-set earnings thresholds and can vary depending on the employee’s age and earnings.

The EOR also administers mandatory benefits as stipulated by UK labor law. This includes managing annual leave entitlements (minimum 28 days per year, which can include public holidays), statutory sick pay, and maternity/paternity pay. They ensure compliance with the UK’s robust worker protection laws, including regulations on working hours, overtime, and rest periods.

In addition, the EOR can help administer any supplementary benefits you offer, such as private health insurance or additional pension contributions. They can guide competitive benefit packages in the UK market, including the mandatory auto-enrollment pension scheme.

The EOR stays updated on changes to UK labor laws and tax regulations, ensuring ongoing compliance. This is particularly important given the UK’s evolving regulatory landscape post-Brexit.

Finally, the EOR provides regular reporting on payroll and tax matters, giving you clear visibility into your employment costs and obligations in the United Kingdom.

What labor laws do you need to consider when hiring in the United Kingdom?

When hiring in the United Kingdom, there are a few key labor laws to consider. The UK has a comprehensive employment legislation framework, primarily governed by the Employment Rights Act 1996, the Equality Act 2010, and various other statutes and regulations. The UK tends to have strong employee protections, and employers must be aware of these regulations to ensure compliance.

Employment contracts

Employment contracts in the UK can be permanent (open-ended) or fixed-term. While verbal contracts are legally recognized, written contracts are strongly recommended and mandatory for certain employment arrangements. The contract must specify key details such as job title, duties, salary, working hours, and place of work.

Working hours and paid holidays

The standard workweek in the UK is typically 35 to 40 hours, with a maximum of 48 hours per week averaged over 17 weeks unless the employee opts out. Employees are entitled to a minimum of 28 days of paid annual leave per year, which can include public holidays. There are usually 8 public holidays annually in England and Wales, with slight variations in Scotland and Northern Ireland.

Taxes

Employers in the UK are responsible for operating the PAYE (Pay As You Earn) system, deducting income tax and National Insurance contributions from employees’ salaries. The tax rates are progressive, with different bands for different income levels. Employers also have to make their own National Insurance contributions.

Severance pay

In the UK, statutory redundancy pay is available to employees working for their employer for at least two years. The amount depends on the employee’s age, weekly pay, and number of years in the job. Specific procedures must also be followed when making redundancies.

Pension auto-enrolment

UK employers must automatically enroll eligible workers into a workplace pension scheme and make contributions. The minimum contribution is 8% of qualifying earnings, with at least 3% from the employer.

Equality and discrimination laws

The Equality Act 2010 protects employees from discrimination based on protected characteristics such as age, gender, race, disability, religion, and sexual orientation. Employers must ensure their practices and policies do not discriminate against these groups.

Key Labor Laws in the United Kingdom

How does the hiring process work in the United Kingdom?

When hiring staff in the United Kingdom, the process typically involves several steps and considerations unique to the UK labor market. Initially, job openings are often advertised through various channels, including online job portals, company websites, and professional networks. Many UK companies also work with recruitment agencies, especially for specialized or senior positions.

The application process usually requires candidates to submit a CV (curriculum vitae) and cover letter. Unlike in some countries, photos are not typically included on CVs in the UK. British employers often value education and professional qualifications, so detailed documentation is important.

Once applications are received, the screening process begins. Depending on the role, this often involves multiple rounds of interviews, including technical assessments or presentations. UK business culture values punctuality, professionalism, and thorough preparation, so these qualities are often assessed during the interview process.

Reference checks are standard practice for many positions, especially in larger companies or regulated industries. Some employers may also request a criminal record check in the UK, known as a DBS (Disclosure and Barring Service) check.

The next step is a job offer and contract negotiation if a suitable candidate is identified. This is where the EOR can be particularly valuable, ensuring that all terms comply with UK labor laws and industry standards.

Once an agreement is reached, the formal hiring process begins. This includes registering the employee with HMRC, setting up payroll, and completing all necessary paperwork. The EOR handles these administrative tasks, making the process smoother for the employer and the new hire.

Finally, the onboarding process is crucial in UK work culture. This often includes a thorough introduction to the company, its policies, and the specifics of the role. Many UK companies have structured onboarding programs to ensure new employees integrate well into the organization.

Is the United Kingdom a relatively easy country to hire employees remotely through an EOR?

Yes, the United Kingdom is a relatively easy country to hire employees remotely through an Employer of Record (EOR). The country’s well-developed legal framework, advanced digital infrastructure, and business-friendly environment make it an attractive destination for remote hiring.

The UK’s business-friendly environment and openness to international trade contribute to a relatively straightforward hiring process. The country’s strong infrastructure and high internet penetration rates facilitate remote work arrangements. However, some complexities exist, particularly around employment law and tax regulations.

In conclusion, while there are some complexities to navigate, particularly around employment law and tax regulations, using an EOR service can significantly simplify the hiring process in the United Kingdom.

The country’s numerous advantages, including its talented workforce and stable business environment, make it an attractive option for companies looking to expand their remote workforce in Europe. An experienced EOR can navigate the complexities while allowing you to benefit from the UK’s many strengths as a business location.