Employer of Record UK

Employer of Record (EOR) in the United Kingdom is a solution that allows companies to hire employees in the UK without the need to establish a local entity.
This model involves an external company (EOR) formally employing the worker on behalf of a foreign business, taking over responsibilities related to payroll administration,
compliance with labor laws, and the payment of taxes and contributions.

Many employers choose an Employer of Record in the UK because it enables rapid market entry, avoids complex registration procedures, and minimizes the risk
associated with labor law compliance. Setting up a traditional company can be time-consuming and costly, especially for businesses that do not plan a long-term presence in the UK market.

The biggest challenges related to hiring in the UK include:

• ✅ Complex labor law regulations – Employers must comply with rules concerning wages, working hours, and employee benefits.
• ✅ Tax burdens and social security contributions – Employers are required to pay National Insurance contributions and PAYE tax.
• ✅ Legislative changes after Brexit – New visa requirements for foreign employees must be met.

By using an EOR service in the UK, companies can bypass these challenges and focus on business growth, ensuring that their employees are hired in compliance with local regulations.

Using an Employer of Record (EOR) in the UK brings many advantages, especially for companies that want to hire employees in the British market
without the need to establish a local entity. EOR enables fast and legally compliant hiring, eliminating administrative and legal barriers.

Key benefits of using an EOR in the UK:

• ✅ No need to establish a company – Registering a business in the UK involves numerous formalities, costs, and legal obligations.
  Thanks to EOR, a company can hire employees without setting up its own legal entity.
• ✅ Compliance with local labor laws – The Employer of Record ensures compliance with UK regulations concerning wages, leave policies,
  taxes, and social security contributions, minimizing the risk of legal violations.
• ✅ Faster hiring and easier market entry – Instead of going through the lengthy process of setting up a company and obtaining required licenses,
  a business can start operations almost immediately by using EOR infrastructure.
• ✅ Administrative support (payroll, taxes, benefits) – EOR manages payroll, calculates and submits PAYE taxes and National Insurance contributions,
  and handles employee benefits administration, relieving the company of these responsibilities.

The employment law in the UK is well-regulated and protects both employees and employers.
Companies hiring workers in the UK must comply with various regulations regarding employment contracts, working hours, wages, and employee benefits.
Failure to comply with these regulations may result in serious legal and financial consequences.
An Employer of Record (EOR) in the UK helps companies mitigate risks and ensure full compliance with local labor laws.

Types of Employment Contracts in the United Kingdom

Several types of employment contracts exist in the UK, and their selection depends on the nature of employment and the requirements of both the employer and employee.

• ✅ Permanent Contract – The most common type of employment, providing employees with stability and access to full benefits,
  such as paid leave, a workplace pension, and Statutory Sick Pay (SSP). This contract remains valid until one party terminates it.
• ✅ Fixed-term Contract – Used for employment on a specific project or for a defined period.
  Once the contract ends, the employee may be dismissed or have their contract extended. Fixed-term employees are entitled to the same benefits as permanent employees.
• ✅ Zero-hours Contract – This type of contract does not guarantee employees a fixed number of working hours.
  It is commonly used in industries with fluctuating demand (e.g., hospitality, logistics). Employees can decline work hours, but they also do not have guaranteed shifts.
• ✅ Agency Work Contract – The employee is formally employed by a recruitment agency but performs tasks for different employers.
  After 12 weeks of continuous employment with the same employer, the worker is entitled to the same rights as permanent employees.

The standard probation period in the UK ranges from 3 to 6 months, although its length may vary depending on the industry and position.
During this time, the employer can assess the employee’s competencies, while the employee has the opportunity to get familiar with the working conditions.
Employees on probation may receive limited benefits, but they are still entitled to salary, leave, and a minimum notice period if their contract is terminated.

Minimum wage in the United Kingdom

The UK has two types of minimum wages: National Minimum Wage (NMW) and National Living Wage (NLW).
The minimum wage rates depend on the employee’s age and are updated annually by the government.

As of April 2024, the minimum wage rates in the UK are:

• ✅ £11.44 per hour for employees aged 21 and over (National Living Wage).
• ✅ £8.60 per hour for employees aged 18–20.
• ✅ £6.40 per hour for employees aged 16–17.
• ✅ £6.40 per hour for apprentices in their first year of training.

Employers are required to pay at least these rates. Failure to comply can result in severe penalties.
An Employer of Record (EOR) in the UK ensures that all employees receive wages in accordance with legal requirements.

The standard workweek in the UK is a maximum of 48 hours, regulated by the Working Time Regulations.
Employees may choose to work more hours, but this must be a voluntary decision.

• ✅ Breaks during work – Employees are entitled to at least a 20-minute break if they work more than 6 hours per day.
• ✅ Rest periods – Every employee is entitled to at least 11 hours of uninterrupted rest between shifts and one full day off every seven days.
• ✅ Overtime – UK labor law does not require employers to pay extra for overtime, but if an employee works overtime,
  their average hourly rate must not fall below the national minimum wage.

Paid Leave and public holidays

Employees in the UK are entitled to a minimum of 5.6 weeks (28 days) of paid leave per year for full-time workers.
Employers may include public holidays within this allowance or offer them as additional benefits.

• ✅ Bank holidays – The UK has 8 public holidays, which may or may not be paid depending on company policy.
• ✅ Paid parental leave – Employees may be eligible for Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP) if they meet certain conditions.

Employees who are unable to work for more than 4 consecutive days may be entitled to Statutory Sick Pay (SSP).
The SSP rate is £116.75 per week and can be paid for up to 28 weeks. Employers are required to provide this payment if employees meet specific eligibility criteria.

Some companies offer additional sick leave benefits as part of their employee benefits policy, providing higher payments than the statutory minimum.

Dismissal procedures in the United Kingdom

UK labor law requires employers to follow fair and transparent dismissal procedures to avoid claims of unfair dismissal.

• ✅ Notice period – The minimum notice period is 1 week for employees with less than 2 years of service and
  1 week per year of employment (up to a maximum of 12 weeks) for employees with longer tenure.
• ✅ Redundancy pay – Employees who have worked for at least 2 years may be entitled to redundancy pay,
  which is calculated based on their age and length of employment.

Thanks to an Employer of Record (EOR) in the UK, companies do not have to worry about compliance with labor law.
The EOR manages all HR-related matters, ensuring full compliance with local employment regulations.

The tax and social security system in the UK is one of the key aspects of employment that every company hiring workers in the UK must comply with.
Tax obligations and employment costs vary depending on the employee’s salary and employment status.
An Employer of Record (EOR) in the UK takes full responsibility for calculating and paying taxes and social security contributions,
helping companies avoid compliance issues with HMRC (Her Majesty’s Revenue and Customs).

Income Tax (PAYE – Pay As You Earn)

In the UK, income tax is deducted by the employer through the PAYE (Pay As You Earn) system and paid directly to HMRC.
Tax rates are progressive and depend on the employee’s annual income.

As of April 2024, the tax bands are as follows:

• ✅ 0% – Personal Allowance: Income up to £12,570 per year is tax-free.
• ✅ 20% – Basic Rate: Income from £12,571 to £50,270 is taxed at 20%.
• ✅ 40% – Higher Rate: Income from £50,271 to £125,140 is taxed at 40%.
• ✅ 45% – Additional Rate: Income above £125,140 per year is taxed at 45%.

It is important to note that individuals earning more than £100,000 per year gradually lose their personal allowance,
meaning their effective tax rate may be higher.

National insurance contributions (NICs)

National insurance contributions (NICs) are mandatory social security payments that fund pensions, sick pay, and other benefits.
Both employees and employers are required to pay NICs, and the amount depends on earnings.

NIC rates for employees (Class 1 NICs):

• ✅ 0% – For earnings below £12,570 per year.
• ✅ 8% – For earnings between £12,571 and £50,270 per year.
• ✅ 2% – For earnings above £50,270 per year.

NIC rates for employers:

• ✅ 13.8% – Applied to earnings above £9,100 per year.

Employers may be eligible for the Employment Allowance, which reduces their total NIC cost by up to £5,000 per year, if they meet specific conditions.

Employer’s Total Cost – What Contributions Does a Company Pay?

Companies hiring employees in the UK must consider additional employment costs beyond the employee’s gross salary.
For example, if an employee earns £50,000 per year, the employer bears the following costs:

• ✅ Gross salary: £50,000
• ✅ Employer NICs (13.8%): £5,658
• ✅ Pension contributions (auto-enrolment, min. 3%): £1,500
• ✅ Total employment cost: Approximately £57,158 per year

Companies using an Employer of Record (EOR) in the UK can reduce administrative costs and minimize tax compliance risks,
as the EOR handles all tax and payroll-related obligations.

Tax optimization options for employees

The UK tax system offers several ways to reduce tax burdens for both employers and employees:

• ✅ Salary sacrifice – Employees can allocate part of their salary to benefits, such as additional pension contributions or company car leasing, reducing their taxable income.
• ✅ Tax-Free childcare – Employees can benefit from tax relief on childcare expenses, lowering their tax liabilities.
• ✅ Company benefits – Offering additional benefits, such as private healthcare or savings schemes, can be a tax-efficient way to compensate employees.

By partnering with an Employer of Record (EOR) in the UK, companies can ensure that all taxes and contributions are accurately calculated and paid in accordance with local laws,
while employees can take full advantage of available tax reliefs.

Hiring employees in the UK can be a time-consuming process that requires compliance with local labor laws, tax regulations,
and social security rules. However, companies using an Employer of Record (EOR) in the UK can simplify recruitment and onboarding
by eliminating the need for in-house HR administration and complex legal procedures.

1. Common Recruitment Channels in the UK

Companies looking for employees in the UK commonly use the following recruitment methods:

• ✅ Job portals – Popular platforms include Indeed, Reed, Totaljobs, CV-Library, and LinkedIn Jobs.
• ✅ Recruitment agencies – Many agencies in the UK specialize in permanent, temporary, and contract recruitment, such as Hays, Michael Page, and Robert Walters.
• ✅ Internal recruitment and employee referrals – Many employers use referral programs to increase their chances of finding suitable candidates.
• ✅ Social media and networking – LinkedIn and industry events play a significant role in recruitment, particularly in specialized sectors.

2. Average Recruitment Time in the UK

The time required to hire an employee in the UK depends on the role, industry, and recruitment method:

• ✅ Unskilled workers and entry-level positions – 2 to 4 weeks.
• ✅ Specialist and mid-level roles – 4 to 8 weeks.
• ✅ Managerial and senior-level roles – 2 to 3 months or more.

3. Required Documents for Employment

Employers in the UK must collect essential documents that verify an employee’s identity and right to work. These may include:

• ✅ Proof of identity (passport or national ID card for UK and EU citizens).
• ✅ National Insurance Number (NIN).
• ✅ Proof of right to work (e.g., work visa, if applicable).
• ✅ References from previous employers (required in some industries).
• ✅ Professional certificates and qualifications (if required for the position).

4. Legally Compliant Onboarding Process

An Employer of Record (EOR) in the UK ensures that the entire onboarding process complies with labor laws and company policies.
The key steps include:

• ✅ Signing an employment contract – The employee should receive a written Contract of Employment detailing salary, benefits, and working conditions.
• ✅ Registering for PAYE and national insurance – Employees must be enrolled in the payroll system to ensure proper tax and social security contributions.

Following Brexit, the regulations for hiring foreign workers in the UK have changed.
European Union citizens, who previously could work in the UK without additional formalities, must now obtain a work permit or have settled/pre-settled status.
An Employer of Record (EOR) in the UK can help companies efficiently hire foreign workers, ensuring compliance with current immigration laws.

1. What types of work visas are available?

The UK operates under a Points-Based Immigration System, which requires employees to meet certain criteria,
such as English language proficiency, salary level, and professional qualifications.

The most common types of work visas include:

• ✅ Skilled worker visa – The most popular visa for skilled workers. Requires a job offer from a licensed sponsor
  and a minimum salary of £26,200 per year or £10.75 per hour.
• ✅ Global business mobility visa – For employees transferred internally within multinational companies.
• ✅ Health and care worker visa – Designed for healthcare professionals, including nurses, doctors, and social care workers.
• ✅ Graduate visa – Allows graduates from UK universities to stay and work in the UK for 2 years
  (or 3 years for PhD holders) without requiring employer sponsorship.
• ✅ High potential individual (HPI) visa – For graduates of top global universities who wish to work in the UK without a job offer.

2. How Long Does It Take to Obtain a Work Permit?

Processing times for work visas vary depending on the type of visa and completeness of the application.
The average processing times are:

• ✅ Skilled worker visa – 3 to 8 weeks if applying from outside the UK.
• ✅ Health and care worker visa – 2 to 4 weeks.
• ✅ Graduate visa – 3 weeks.

In some cases, applicants can use the priority service to expedite processing, reducing the wait time to 5 business days for an additional fee.

3. How Can an Employer of Record Help with Hiring Foreign Workers?

An Employer of Record (EOR) in the UK can significantly simplify the process of hiring non-UK workers because:

• ✅ Holds a sponsorship license, so companies do not need to apply for sponsor status.
• ✅ Manages all visa-related paperwork, including registering employees with the Home Office.
• ✅ Ensures compliance with immigration regulations, minimizing the risk of fines and legal issues.
• ✅ Speeds up the entire recruitment and hiring process for international specialists.

Thanks to Employer of Record (EOR) services in the UK, companies can hire foreign professionals without navigating complex immigration procedures.

Employment costs in the UK include not only an employee’s salary but also social security contributions, taxes, and additional benefits.
Understanding the total employment cost is essential for companies, especially those planning to expand into the UK market.
An Employer of Record (EOR) in the UK helps businesses manage these expenses by eliminating the need for in-house payroll and HR administration.

1. Key Components of Employment Costs in the UK

• ✅ Gross employee salary – Must comply with the national minimum wage or market rates.
• ✅ Employer’s National Insurance (NI) contributions – 13.8% for salaries above £9,100 per year.
• ✅ Income tax (PAYE) – Employers must calculate and deduct tax according to current tax bands.
• ✅ Workplace pension contributions – Most employers must contribute at least 3% of the employee’s salary to a pension scheme.
• ✅ Optional benefits – Such as private healthcare, meal vouchers, life insurance, company cars, and well-being programs.

2. Sample Employment Costs for Different Salary Levels

Companies using an Employer of Record (EOR) in the UK benefit from predictable employment costs, as the EOR handles all payroll and compliance formalities.

3. Employer of Record vs. Setting Up a Local Company

For companies entering the UK market, choosing between an Employer of Record and setting up a limited company (Ltd.)
has significant financial implications.

Some companies choose payroll outsourcing instead of using an Employer of Record (EOR).
The key difference is that an EOR not only processes salaries but also formally employs workers
and takes full responsibility for compliance with employment laws.

📌 Who should choose which option?

• ✅ Employer of Record (EOR) – Ideal for companies without a local entity in the UK that want to avoid legal and administrative risks.
• ✅ Payroll outsourcing – Suitable for companies that already have a registered business in the UK but only want to simplify payroll processing.

Body leasing is a popular employment model, particularly in the IT and engineering industries.
In this model, a specialist is formally employed by an external company (e.g., an IT agency) but works for a client company.

📌 Who should choose which option?

• ✅ Employer of Record (EOR) – Ideal for companies that want dedicated employees and offer them stable employment.
• ✅ Body leasing – Best for companies that need temporary specialists for specific projects but do not want to commit to long-term employment.

Which solution should you choose?

• ✅ Employer of Record (EOR) → If you want to enter the UK market quickly without setting up a company and dealing with legal compliance.
• ✅ Setting up a company (Ltd.) → If you plan long-term operations in the UK and have the resources to manage HR and payroll.
• ✅ Payroll outsourcing → If you already have a business in the UK but only want to simplify payroll processing.
• ✅ Body leasing → If you need temporary specialists for specific projects but do not want to hire them permanently.