Planning to expand your team abroad? The United Kingdom is commonly high on the list for US companies that want to expand globally. With its high-quality workforce, common language, and close economic connections with the US, the UK could be an ideal location to develop a remote staff or establish new operations. However, it’s worth knowing how things happen when a US company is hiring employees in the UK.
Let’s take you through what you must know—from employment legislation and payroll rules to how to stay compliant and not spend a penny more than you have to.
Step 1: Choose Your Hiring Model
If you are a U.S.-based business, your initial choice is how you will hire in the UK. There are two primary routes:
- Form a UK legal entity – This entails registering your company with the government of the UK, opening a local bank account, establishing a UK payroll, and taking care of all employment compliance on your own.
- Partner with an Employer of Record (EOR) – If you need to hire fast and bypass the bureaucracy, hiring through an EOR is the solution. The EOR is the legal employer and handles employment contracts, payroll, tax withholdings, and compliance with local labor law for you.
For many U.S. companies, the EOR route is the simplest and most cost-effective option, especially if you’re just starting to hire overseas or testing the UK market.
Step 2: Learn About UK Employment Laws
One of the most important differences between hiring in the U.S. and the UK is employee protection. UK labor laws tend to favor the employee, so it’s critical to understand and follow the rules from the start.
Some of the points are:
- Mandatory employment contracts – All UK employees have the right to receive a written employment statement describing work details, remuneration, working hours, notice periods, and other terms.
- Working time rules – UK workers can’t work more than 48 hours a week on average (with the exception of opting out), and they must have rest periods and paid holiday—at least 28 days, including public holidays.
- Statutory benefits – You pay benefits such as sick pay, maternity/paternity pay, and workplace pension.
Gaffes here can result in fines or quarrels. Unless you’re aware of UK labor law, you should seek the assistance of someone who is.
Step 3: Familiarize Yourself with Payroll and Taxation Obligations
As a UK employer, you have to operate payroll on the Pay As You Earn (PAYE) system. This means calculating and deducting:
- Income tax is calculated according to the employee’s salary and tax code
- National Insurance Contributions (NICs), employee and employer contributions
- Pension contributions under the auto-enrollment provisions of the UK
You also need to report this information to HM Revenue & Customs (HMRC) on a regular basis. For a US company hiring employees in the UK, setting this up from scratch can be complex and time-consuming, especially if you’re not used to navigating UK tax codes.
That’s another reason why many businesses turn to EOR providers. They’ll handle UK payroll and taxes on your behalf, keeping everything accurate and compliant.
Step 4: Provide Competitive Pay and Benefits
Salaries in the UK differ based on location, sector, and experience. London, for instance, generally requires higher remuneration than other regions. Besides pay, UK workers generally anticipate benefits like:
- Paid holidays and vacation
- Sick pay
- Pension contributions
- Parental leave
- Private health insurance (although the NHS offers public healthcare)
Providing a good benefits package is critical if you are to recruit and retain the best talent in the UK. And don’t forget, some benefits, such as pensions, are mandatory by law, not optional.
Step 5: Refrain from Worker Misclassification
Similar to the U.S., misclassifying an individual as an independent contractor when they should be an employee can lead to severe legal repercussions in the UK. You must take into account such factors as:
- How much authority do you have over the worker
- Whether they use their own equipment or tools
- If they can have someone else do the work
If you’re bringing someone in long-term and they need to adhere to a regular schedule, chances are they should be an employee. Again, an EOR partner can prevent you from incurring expensive misclassification penalties.
Step 6: Remain Compliant with Local Regulations
UK employment laws can change, and so can tax rates and reporting requirements. To stay compliant, you’ll need to stay up to date or work with someone who does. Things like holiday pay, termination notice periods, and pensions are regulated, and not following the rules can lead to penalties or legal disputes.
Final Thoughts
Hiring in the UK can be an excellent step for your company, but it’s not as easy as simply mailing out a job offer. Payroll and tax obligations, contracts and compliance are just a few of the many moving pieces involved. That’s why having the proper support is beneficial.
If you’d like to streamline the process and remain compliant, EngageAnywhere is here to assist. They make it simple for a US business hiring employees in the UK to bring on talent in a hurry, handle payroll and benefits, and navigate local compliance—so you can concentrate on expanding your global workforce with confidence.
