Top 5 Considerations When Hiring Talent in the UK Through an Employer of Record

Hiring international employees can give companies the chance to access a wider pool of talent and build a highly skilled and diverse workforce. Building a team of talented workers from around the globe can also help companies scale operations and experience significant productivity gains. 

With regulation and incentives that help international businesses thrive, the United Kingdom allows organizations with a local presence the ability to grow. However, when recruiting global talent, companies should understand how to navigate the complexities of hiring talent in the UK, along with all relevant local labor laws to remain compliant. Understanding the challenges associated with hiring in the region, such as UK employment law, business standards, and more can help you efficiently plan for the future. 

Fortunately, companies can utilize certain services to simplify the hiring process. An Employer of Record can support companies trying to build a presence in the United Kingdom’s market by acting as the legal employer for UK-based hires.

This guide will tell you about some of the most important considerations before hiring talent in the UK, and how an Employer of Record can help you compliantly hire skilled British workers. 

Hiring in the United Kingdom

The United Kingdom has the sixth-largest global economy in terms of annual GDP as of 2024 and held the same ranking in 2023, allowing companies to build a presence in a robust and stable market with ample growth opportunities. Additionally, the United Kingdom ranks as the eighth easiest country in the world to do business in, which provides an ideal environment for growing businesses to thrive. 

Along with the United Kingdom’s optimal location and access to other major European markets, the region is also home to a talented and well-educated workforce. The UK has several top-ranked schools such as the University of Oxford and boasts the second-best education system in the world. This allows international companies to choose from a diverse pool of talent and access cutting-edge ideas that can facilitate growth. 

Hiring in the United Kingdom can present overseas companies with several notable benefits and growth opportunities. These benefits and opportunities include the ability to build a presence in major economic centres such as London or Manchester, access to four major regions, business-friendly regulations that promote expansion, and the chance to tap into government incentives such as tax credits or research and development (R&D) grants. 

Partnering with an employer of record UK can significantly streamline the entire expansion process without increasing your business’s administrative and legal workload. However, there are some important considerations global organizations should keep in mind to ensure compliance at all stages. Aligning your business strategy with these five considerations will help ease the transition into the United Kingdom’s market. 

1. Employment Standards in the UK

International companies will need to have an understanding of the UK’s local employment standards and practices to remain compliant. 

Wages

Legally employees in the UK are entitled to a minimum wage. The current minimum wage for employees is based on their age. 

The current minimum wage for employees is based on their age. 

• Employees aged 21 or over are expected to receive £11.44 per hour. 
• Employees aged 18 to 20 are expected to receive £8.60 per hour.
• Apprentices and employees under 18 are expected to receive £6.40 per hour.

Companies with a workforce in the United Kingdom will need to ensure all employees receive the minimum wage. The average median annual salary for employees in the UK is roughly £35,000 and companies will need to match this salary to remain competitive when recruiting skilled workers. International companies should also consider additional lifestyle costs when negotiating wages, as inflation is currently outpacing wage growth.

Overtime Laws

Companies should also be aware of other employment-related standards when hiring talent in the UK. A standard workweek in the United Kingdom is 40 hours, typically from Monday to Friday with a one-hour lunch break per day. Unless specifically stated in the employment agreement, employers are not required to pay workers for overtime, though the employee’s total pay for worked hours cannot fall below the statutory minimum wage. In the UK, tasks considered work can include:

• Job-related training
• Travel time as a requirement of the job
• Paid and unpaid overtime
• Working lunches
• Time spent working abroad

In some cases, employees may work for more than the standard 40 hours in a week. Reasons for working more than 40 hours can include taking on additional work for overtime pay if stipulated in the employment contract, professional development, or other financial needs. Generally, overtime pay is calculated as 1.5x the employee’s wage for each additional hour of work, but there is no statutory minimum overtime pay rate. Employers should also know that employees cannot work more than 48 hours per week on average without signing an opt-out agreement. 

2. Taxation and Payroll Administration

Companies that want to grow in the United Kingdom’s market should also be aware of the region-specific taxation laws and international payroll requirements. Income tax must be remitted from each employee’s paycheck, and failure to withhold the correct amount can result in strict penalties. An employer of record in the UK can help your company navigate complicated international payroll and any other associated costs of hiring an employee. 

Taxes

Income tax in the UK is calculated on a progressive scale based on the employee’s annual wages. In 2024, the United Kingdom’s income tax brackets are:

• 0% for incomes up to £12,570 (Personal Allowance)
• 20% for incomes between £12,571 and £50,270 (Basic rate)
• 40% for incomes between £50,271 and £125,140 (Higher rate)
• 45% for incomes over £125,140 (Additional rate)

Employers will also need to consider corporate tax rates in the United Kingdom. In 2024, the corporate tax rate is 25% for a company with taxable profits above £250,000. Taxable profits can include revenue, investments, and selling assets at a higher price if the gain took place within the UK. Companies must pay tax to the relevant authorities if the organization is:

• A limited company
• A foreign company with a UK branch or office
• A club or other incorporated association

Payroll

International employers will also need to withhold social security contributions from every UK worker’s paycheck. Employers are responsible for deducting:

• A minimum of 3% towards the Pension Fund
• 15.05% towards National Insurance
• 0.5% for certain workers as a Monthly Apprentice Levy

It’s also important to consider that the amount an employee contributes to social security programs such as National Insurance is generally dependent on the worker’s salary. Additionally, payroll is typically processed monthly or weekly, and there is no statutory requirement for additional bonus pay. 

3. Employment Contracts

Companies hiring talent in the UK will also need to draft compliant employment contracts to abide by all local labor laws. In the United Kingdom, employment contracts are mandatory to legally hire an employee, and employers can issue various types of contracts depending on the organization’s needs. 

Employment contracts in the UK are not legally required to be in writing, meaning an agreement can be made verbally or through implied actions such as acceptance, receiving compensation, or utilizing the company’s property to complete work. This grants employees and employers greater flexibility when entering into an agreement and helps protect workers by defining certain employment-related terms that constitute a working relationship. However, providing a written document can help companies avoid potential misunderstandings. 

Employers are also legally required to provide a written statement of particulars to each employee when they start working outlining important or key terms of employment, though employment contracts tend to include more comprehensive information regarding the employment agreement. This helps companies remain compliant with relevant regulations and sets clear expectations for each new hire. 

Employment Contract

Both parties must follow the conditions defined in the employment contract until the agreement ends. An employment agreement must set out certain terms for the employee, including:

• Employment conditions
• Working hours and start date
• Compensation and applicable additional benefits
• Termination procedures and probation
• The job’s duties or responsibilities
• Leave entitlements
• Other relevant information or procedures

Documentation

Employers are also responsible for ensuring that new hires are legally allowed to work in the United Kingdom. An employer of record can help you navigate these complexities and conduct thorough right-to-work checks, which are required before an employee can begin work. This is a particularly important consideration in post-Brexit Britain, as companies will need to ensure citizens from EU nations in the UK have the correct documentation. However, a UK employer of record can help you obtain the necessary visas, sponsor licenses, or work permits for EU workers in the region. 

4. Employee Rights

Hiring through a UK employer of record can also ensure that all statutory employee rights are adequately met. For example, the UK’s Equality Act 2010 is robust legislation that protects workers from discrimination based on factors such as race, gender, and disability in the workplace and defines various types of discrimination. Overseas companies must abide by all the requirements to avoid sanctions or penalties. 

Data and Privacy

The United Kingdom also has strong legislation to protect every employee’s data and privacy. The Data Protection Act 2018 provides strict regulations for how personal information can be used by employers or government agencies. It stipulates that employers must ensure all information is:

• Used legally and fairly
• Used for a specific purpose
• Used in a way that’s relevant and limited to the necessary information
• Accurate and current
• Kept only for the necessary amount of time
• Handled carefully to uphold security and protect sensitive data

Additionally, companies hiring talent in the UK will need to ensure all workers have a safe and healthy working environment. 

Employee Benefits

UK employment laws also grant employees certain statutory rights. For example, UK workers are entitled to:

• At least 28 days of paid vacation per year
• Up to 52 weeks of maternity leave
• Up to 18 weeks of parental leave for each child
• Up to 28 weeks of health leave with statutory sick pay
• Eight bank holidays (depending on the region)
• Weekly and daily rest periods
• Equal pay

Daily and weekly rest periods are certain mandated times that allow workers to take a break from work-related duties. These are designed to protect companies from noncompliance an prevent employees from overworking. Rest periods can include a 20 minute rest period for employees working more than six hours in a day, at least 11 hours of rest between working days, and an uninterrupted 24 hours without work every seven days. 

Employers may also choose to offer extra benefits to remain competitive when recruiting top talent from the United Kingdom or retaining existing talent. Supplementary perks can include additional paid vacation days, flexible work arrangements, allowances for health and wellness, and more. Offering more comprehensive benefits or longer annual leave allowances can also help keep employees satisfied, which can increase engagement and productivity. 

5. Termination Procedures

While growing companies may primarily be focused on expanding their workforce in the UK, international organizations should also consider termination procedures if any issues arise. 

When dismissing staff in the United Kingdom, certain requirements must be met to avoid non-compliance risks. There are four types of dismissals in the UK, which include:

• Fair dismissals: This is a legal termination and must include certain requirements, such as a valid reason for dismissal. 
• Unfair dismissal: This is when an employer unlawfully terminates an employment agreement. Unjust terminates can occur if the employer does not provide a valid reason for termination, the reason is not significant enough to justify ending the agreement, or if the employer failed to follow procedures.
• Constructive dismissals: This is when an employee feels obligated to resign from a position because of the employer’s conduct, which is treated as a dismissal by the employer. This could include unreasonable changes to the workplace or workflow, discrimination, not regularly receiving compensation, unfair criticism, and more.
• Wrongful dismissal: This is when the employer breaks the terms of an employee’s contract during the termination process. Wrongful dismissals are considered different than unfair dismissals. Examples can include failure to provide proper notice, unilateral reduction of wages, and more.

To legally end an employment agreement, the employer is required to provide a valid reason for terminating the employee. 

Valid reasons can include:

• Employee performance or capability to fulfill the job’s duties
• Employee misconduct
• Statutory restrictions (if it would be illegal to continue the employment agreement)
• Economic reasons such as redundancy
• Retirement
• Other substantial reasons, such as refusing a reorganization that impacts the original terms of employment

Notice Period and Severance Pay

In the UK, the required notice period is dependent on the employee’s length of service. Employers that have terminated an agreement are not legally required to provide severance pay if the employee’s tenure is less than two years. 

Severance pay is calculated as:

• Half a week of the employee’s pay for each full year they were under the age of 22
• One week’s pay for each year of service between the ages 22 and 41
• One and a half weeks’ pay for each full year after the age of 41

Employment standards also cap the length of service at 20 years. Workers terminated due to economic reasons are entitled to statutory redundancy pay, which is usually calculated based on the employee’s age, wages, and tenure. A UK employer of record will have expertise regarding the intricacies of ending an employment agreement and can help you legally dismiss employees when needed.  

Other Important Considerations

In addition to the legal requirements to build a presence in the United Kingdom’s market, employers will also need to consider other important cultural aspects and financial risks when expanding. 

The Impact of Brexit on the UK’s Culture

On January 31, 2020, the United Kingdom formally withdrew from the European Union, drastically impacting the UK’s economy and how businesses can operate in the region. Before this, EU citizens had freedom of movement and could legally work in England, Wales, Northern Ireland, and Scotland without requiring a right-to-work check. 

Due to factors such as Brexit, a rise in early retirements, and the COVID-19 pandemic, and especially due to economic inactivity, the UK is experiencing a labor shortage. Roughly 10% of businesses in the UK reported experiencing worker shortages as of October 2023. As a result, a UK company hiring foreign employees must acquire the required documentation if they wish to hire talent in the UK. 

Partnering with an employer of record UK can help you remain competitive by negotiating wages and administering comprehensive benefits packages on your behalf to attract top talent. Understanding current economic and cultural issues can help your company successfully develop a strategic plan when expanding in the region. 

What is an Employer of Record?

An Employer of Record (EOR) is a third-party organization that acts as the legal employer of a new hire, taking care of administrative tasks such as payroll and taxes - all while the client company retains day-to-day supervisory control.

Administrative tasks include but are not limited to, compliance with local employment laws, payroll processing, tax filing, benefits administration, visa processing and even managing employment contracts. 

 A global  EOR already has local entities set up within the country. This is beneficial to companies who want to quickly hire and onboard new workers without worrying about logistical issues. 

In most cases, using an EOR when engaging talent in the UK streamlines the hiring process and costs significantly less than registering a local entity. This makes partnering with an EOR an ideal choice for growing businesses that want to focus on reaching new markets while mitigating employment-related or legal risks. 

Why Use an Employer of Record UK?

Using an employer of record when hiring talent in the United Kingdom can be advantageous for companies in several ways. In addition to handling all aspects of compliance, EORs manage difficult administrative requirements, so the company can maintain control over its staff and other important day-to-day operations. 

Quick Market Access

Companies that hire talent through an employer of record in the UK can experience several significant benefits, including reduced barriers when entering the British market. Without an employer of record with a UK entity, companies hiring British workers are required to set up a local entity which can be a time-consuming and complicated process. 

Your employer of record will have an existing local entity, allowing global companies to tap into the United Kingdom’s talent pool and quickly hire new workers without needing a legal subsidiary. This can ultimately facilitate a more streamlined and efficient approach when entering the UK and scaling your team.

Increased Focus on Operations

Hiring through an employer of record in the UK can also help your company save a significant amount of time. Organizations that hire through an EOR outsource tedious administrative tasks such as keeping up-to-date records, navigating payroll software, and drafting valid UK employment contracts. This can grant business leaders and HR staff additional time to focus on refining strategy and managing other vital operations. 

Partnering with an employer of record will also save your company time on HR-related aspects, including setting up employee benefits and onboarding each new hire. 

Guaranteed Compliance

Ensuring regulatory compliance is another significant benefit for companies that hire through an employer of record. Without an employer of record, international organizations will need to navigate the complexities of UK labor laws and are entirely responsible for abiding by all relevant employment policies. Failure to adequately obey legislation can lead to strict non-compliance sanctions for your company, including financial penalties such as hefty fines, back pay, compensation payments, and potential reputational damage. 

In contrast, companies that hire employees through an employer of record can experience the benefits of guaranteed compliance. Your EOR of choice will ensure that all legal requirements are met and will stay up-to-date with changing employment laws within that jurisdiction to avoid non-compliance penalties. Additionally, employers of record provide access to valuable expertise and take responsibility for all liabilities, significantly reducing your company’s legal risks if any potential issues arise. 

For example, companies hiring internationally will need to classify each worker properly to avoid penalties. Misclassification occurs when an organization classifies an employee as an independent contractor, which carries drastically different employment rights and statutory benefits. An employer of record will ensure that every employee receives all the necessary employment and statutory rights that they are entitled to. Thus, eliminating the risk of providing back pay or other owed benefits. 

Why Borderless AI?

Borderless AI is an AI-first global EOR that serves as the legal employer of your company’s international teams. We take care of administrative tasks such as payroll and taxes - all while you retain day-to-day supervisory control.

Borderless AI also offers an unrivaled customer and employee experience. From onboarding to offboarding, in-country Borderless AI employees and dedicated account managers are there to guide businesses through the global hiring process. In addition, Borderless AI has created an intuitive mobile app so new team members can easily access their employment data, complete administrative tasks, and directly chat with Borderless AI experts. 

Partner With Borderless AI

Partnering with Borderless AI gives you access to a team with expertise in hiring practices in over 170 countries around the world. Contact us today to see how we can help you grow your business in new markets. 

_Disclaimer

_{Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.}

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