How to use an Employer of Record in the United Kingdom

Advancements in technology have transformed the way we live and work dramatically. Businesses can now take advantage of a global talent pool, and find the best candidates for their needs, regardless of where they live.

Hiring from the UK is an excellent way to add value to your team. But international recruitment can be an expensive process that comes with a large amount of red tape. This makes it difficult for small businesses to hire in another country.

Thankfully, businesses can use an employer of record in the UK to hire and manage workers in the UK with zero stress. An employer of record (EOR) can assist with taxes, payroll, employee benefits, and other tedious tasks involved in the process.

This detailed guide will help you understand how to use an employer of record in the UK so that you hire and pay your remote workers quickly and compliantly.

5 steps to hiring employees in the UK using an employer of record:

Step 1: Weigh up the pros and cons of each potential EOR partner. When looking for an employer of record in the UK, it's important to compare as many providers as you can. This will ensure you choose a provider that offers the best service and value for money. 

Step 2: Take the time to select the most appropriate EOR service provider. Each service provider will have a slightly different way of operating, which means that some providers may not fit your needs. Make sure that you consider how the EOR will work with your business and is a good fit with how you operate. Some criteria you could consider include the following:

• Does the EOR have its own entity in the UK?

• Do they offer onboarding services?

• Do they have a global payroll solution?

• Do they take data security and intellectual property concerns seriously?

• Do they offer high levels of compliance?

Step 3: Check reviews, testimonials, and coverage of your shortlisted providers. Many providers include only glowing reviews on their own websites. To get the complete picture of each provider, make sure you review third-party review websites and read testimonials. You can even reach out to previous clients to gain further insights on whether the EOR is right for your business.

Step 4: Ensure that the EOR solution for the UK will provide a best-in-class employee experience. The EOR you choose will hire workers in the UK on your behalf, so they are the first point of contact for any HR-related issues. This means that if they offer a poor experience to your employees, it can negatively affect the reputation of your business, even if you are not aware of what is happening.  Step 5: Work with your employment partner. Work alongside your EOR partner to make sure that your employees receive a fair and equitable compensation package. The EOR will usually have a team of experts who are experienced in local labor laws and employment practices. It helps to work with a team who can offer you the right advice and help you deal with issues that may arise.

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What are the benefits of using an employer of record in the UK?

To employ foreign workers, the first thing you have to do is to open a local entity in that country. This could be a useful option for those looking to expand their operations into the UK on a more permanent basis, but it is a complex and costly process that is not suitable for small businesses. 

An EOR effectively takes on the work of hiring and paying workers for you. In fact, the EOR will handle the entire onboarding process while ensuring your business stays within the regulations of local labor laws. An EOR also handles a range of HR and legal services, such as:

• Taxes and national insurance

• Payroll

• Benefits administration

• Contractor management

• Employee termination

• Pension schemes

Using an EOR to handle these typical HR tasks means your business can focus on building a relationship with their new employees in Britain instead of burying yourself in paperwork.

Unsure if you need to use an employer of record for your global expansion plans? This guide will show you when a business may need help from an EOR.

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How much does it cost to use an EOR in the UK?

An employer of record’s pricing can depend on many factors, including location, billing period, and the services you require. In some cases, there may also be surcharges and a minimum number of employees required to enter an agreement. 

It is important to remember that any charges paid to an EOR partner are only a part of the total cost of employment (TCE). The overall TCE will include any contributions required by local labor, payroll, and tax laws.

Some newer providers will offer low rates, while established providers will often have high enterprise rates. While it may be tempting to go for a lower-cost provider, their low price can come with a catch. They could potentially offer a low level of compliance, security, and poor service overall. They may also add on hidden fees, especially if they rely on third parties to perform their services. We recommend avoiding partner-dependent providers as they typically charge processing fees, onboarding fees, or additional charges that may come as a surprise to you. 

A trustworthy EOR like Remote offers transparent, flat-rate pricing while maintaining a high level of quality and strict compliance standards.

Hiring in the UK

Hiring in the UK requires strong knowledge of the local guidelines and regulations. While the UK shares many cultural similarities with the US, you cannot treat your workers in the UK in the same way, as there are few distinct distinctions in labor laws.

UK employment law sets out guidelines for holiday entitlement, notice periods, and disciplinary practices. It also protects employees by setting a minimum wage that scales with age and has stringent rules to prevent workplace discrimination. 

The penalties for non-compliance can be enough to dissolve a small business. Businesses looking to hire in the UK should be certain that they (or their EOR partner) can handle employee benefits and salaries in a way that complies with local labor laws.

Employment contracts and agreements in the UK

Employment contracts are mandatory in the UK and must be adhered to for the entirety of the defined time frame. 

It is important to note that employment contracts do not need to be in writing. However, an employer must provide employees with a document that clearly defines the main conditions of employment. This is made up of a principle statement and a wider written statement. 

The principle statement must be given upon employment and must include the:

• Employer’s name

• Employee’s name, job description, and start date

• Compensation amount, including how and when it will be paid

• Expected hours and days of work, including overtime on Sundays or at night

• Holiday entitlement, including public holidays

• Where the employee will work (if working remotely, the statement must include locations of work and the employer’s address)

• Contract length, including an end date for fixed-term contracts

• Probation period and conditions 

• Additional benefits

• Training requirements, including details about any payment required by the employee

The wider written statement can be given at any time within the first two months of employment. It should contain information about pension schemes, collective agreements, any other right to non-compulsory training provided by the employer, and disciplinary and grievance procedures. 

Labor law compliance in the UK

UK workers are protected by a minimum charter of employment rights, which is made up of various acts, regulations, common law, and equity. These laws ensure the welfare of all parties involved in the employment agreement.

All British employees and job applicants are protected by the Equality Act, which prevents employers from using discriminatory practices based on age, race, gender, or any other protected characteristics. Interestingly, in 2020, an employment tribunal ruled that veganism would become a protected characteristic!

Despite the UK offering free universal healthcare, employers must carry liability insurance to protect them against claims in the event of a workplace injury. Of course, this does not apply to remote working situations. However, the employer should still provide sufficient information and encourage employees to take necessary precautions to ensure they are working safely.

Penalties for noncompliance can vary depending on where in the UK the employee is working. These can include:

• Repayment of any owed money to the employee

• Fines

• Public declaration of noncompliance 

• Imprisonment

Remote advises that you consult legal experts to ensure you comply with the increasingly complicated British labor laws.

Payroll and payroll taxes in the UK

The UK operates a pay-as-you-earn (PAYE) tax scheme, which means employers in the UK are responsible for deducting and paying employment taxes to Her Majesty’s Revenue and Customs (HRMC). Self-employed workers and contractors must report and pay their own taxes on an annual basis. 

By law, employers must provide workers with itemized payslips that clearly show deductions, hourly rates, hours worked, and any other applicable information. Payslips should show accurate figures for hours worked, the amount paid, hourly rates, and deductions during the payment period. 

Employees working in the UK must be paid in British pounds, regardless of where the business that employs them is based. 

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Employee benefits and compensation in the UK

UK workers are entitled to a minimum wage, which scales depending on age. Those over the age of 23 are automatically enrolled in the National Living Wage scheme, which has been designed to replace the minimum wage and support British workers. These rates change every April as the new tax year begins. 

Current minimum wage rates as of 2023 are as follows: 

• Age 23 and over (National Living Wage) – £10.42

• Age 21 to 22 – £10.18

• Age 18 to 20 – £7.49

• Under 18 – £5.28

As the UK has the National Health Service, employers are not required to provide health benefits to their employees. However, senior staff are often given private health care, vision, and dental benefits at the discretion of the employer. 

Legally required benefits in the UK include, but are not limited to:

• Holiday pay

• Maternity/paternity pay

• Sickness pay

• Pension

The UK requires all employers to provide pension schemes, with some exceptions. Employees’ pensions are built with employee, employer, and government contributions. Employees are allowed to opt out of the pension scheme if they wish.

At Remote, we believe that you should pay workers what they deserve. As such, we make it easy to provide fair compensation and an attractive benefits package to help you attract the best talent the UK has to offer. Our network of global partners and local employment law experts allow us to offer above and beyond the norm, even to contractors. 

For more on benefits and compensation for workers in the UK and how Remote can help, read our article on employee benefits in the UK.

Employee termination and severance pay in the UK

Employees in the UK do not have any protections against termination until their second year of employment. As such, employers can end an employment contract at will within the first two years. 

After two years, employers are required to give a “potentially fair reason” for dismissal to terminate a contract. Fair reasons for dismissals include, but are not limited to:

• Employee conduct

• Employee capability/qualifications

• Employee redundancy

• Employee retirement

• Other reasons which justify dismissal

Employees may be instantly dismissed for actions that can be deemed “gross misconduct,” including negligence, harassment, and actions that endanger colleagues. Employees fired for other reasons are entitled to a notice period, which depends on the length of the employment relationship. 

The UK does not require employers to give severance pay. However, companies may use severance pay as a goodwill gesture to avoid grievances that come with termination. 

Labor laws in the UK can be tricky to navigate, but you can rely on Remote to handle onboarding, payroll, taxes, and compliance while offering your UK employees a first-class experience.

For detailed information on hiring in the UK, read our UK hiring guide.

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What are the risks of employee misclassification in the UK?

In the UK, different laws apply to employees and contractors, so you’ll have to make sure you’re classifying your workers correctly or risk getting into financial or legal trouble.

There have been some recent high-profile cases around misclassification, including Uber’s loss in a Supreme Court ruling and Deliveroo’s victory in the Court of Appeals. Unfortunately, these conflicting judgments mean it is still incredibly difficult to correctly classify workers in the UK. We recommend keeping in regular contact with legal experts to ensure your business remains compliant.

Some potential consequences for misclassifying workers include: 

• Penalties and fines: You may be liable for back taxes and associated penalties for paying late.

• Back wages and benefits: You may be required to compensate workers for lost wages or benefits that resulted from the misclassification.

• Legal issues: You may be vulnerable to lawsuits from groups or individuals harmed by misclassification.

The best way to mitigate the risks of misclassification is to partner with a trusted EOR like Remote. Our expert team can advise you on classifying your workers correctly. Read our helpful guide to learn more about employee and contractor misclassification and how Remote can help you be in compliance with UK labor laws.

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Get started with an EOR in the UK

International hiring can seem daunting at first, but using the right services and tools can supercharge your global expansion journey. An EOR like Remote has everything you need to make hiring in the UK quick and easy! Our simple but comprehensive onboarding process can take as little as 8 working days while still maintaining a high level of service quality and compliance. Remote also offers a high level of security for your company’s intellectual property and invention rights via the Remote IP Guard. With Remote, you can:

• View and manage all your global employees within a single platform

• Offer a fully compliant benefits stack to attract the best talent 

• Handle the payroll process and pay your employees quickly in their local currency 

• Stay compliant with UK employment laws and stay updated on evolving changes.

Learn more about global HR solutions for distributed teams. If you’re ready to get started, contact us today and start onboarding your UK employees in minutes!