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Hiring employees in the UK
Employment background check in the UK
Hiring options in the UK
Language requirements in the UK
Corporate payroll requirements and payroll setup in the UK
Easily hire employees in the UK with our EoR solution
Employer of record in the UK
If you want to compliantly hire employees in the UK, you usually need to set up a local legal entity. This can be a long and costly process — and may not be worth it if you only want to engage a handful of workers.
Another option is to take on workers as independent contractors, which can be a flexible and affordable alternative. However, there’s a big risk of employee misclassification, which carries heavy fines and penalties in the UK. That means this approach could be risky unless you have a strong understanding of UK employment law, including the rules that apply to off-payroll workers.
Thankfully, there is another solution, which can allow you to easily hire workers in the UK without putting your business at risk: using an employer of record, or EoR.
What are employer of record services?
Employers of record (EoRs) are companies that provide employment services to other organisations. If you hire a worker through an EoR, the EoR will become that worker’s employer for legal and tax purposes. However, you’ll still retain control over their day-to-day activities.
EoR companies also handle various HR tasks on behalf of their clients, which can include everything from onboarding to payroll to benefits administration. This can free up a lot of time for your internal team, allowing you to focus on your core business activities. Working with an EoR can also protect you from compliance risks like employee misclassification. This is when an employee is mistakenly or deliberately classified as an independent contractor, meaning that they miss out on key employee benefits like statutory leave and sick pay. The UK government takes this issue seriously, and there are fines and penalties for employers who misclassify their employees.
Using an employer of record in the UK
When you engage workers through an employer of record in the UK, they become your workers’ legal employer. That means you can engage employees in the UK even if you don’t have a corporate presence there. The EoR will ensure your workers are engaged in compliance with national employment law, and that all taxes and National Insurance contributions are paid on your behalf.
Employee of record services in the UK usually include things like:
- Worker onboarding and training
- Handling taxes and National Insurance contributions (NICs)
- Managing payroll for your workers
- Pension schemes
- Administering benefits
- Employee termination and offboarding
Hiring in the UK without an employer of record
If you want to hire workers in the UK without working with an EoR, you’ll need to ensure your team has a strong understanding of the relevant employment law and tax legislation — or you could end up in hot water. For example, UK employment law sets out the minimum statutory benefits that all employees are entitled to, which include things like paid holidays, notice periods, redundancy pay and the National Minimum Wage. Penalties for non-compliance with these rules can be severe, and could seriously impact your business.
Hiring employees in the UK
Every country has its own rules and regulations when it comes to hiring employees. In the UK, these are defined by various pieces of legislation, including the Employment Rights Act 1996, the National Minimum Wage Act 1998, and the Equality Act 2010.
There are also certain things employers need to set up before they can hire anyone. The UK government has put together the below seven-step process for hiring employees in the UK:
- Decide how much to pay the employee: How much you pay your employees is up to you, but you must pay them at least the National Minimum Wage. You can also decide to pay your employees the National Living Wage, which is higher.
- Check if the employee has the legal right to work in the UK: As an employer, it’s your responsibility to check if a potential employee has the right to work in the UK. You can do this either online through a government service, or by checking the employee’s original documents.
- Check if you need to apply for a DBS check: If you are hiring an employee for certain positions, you might need to get a Disclosure and Barring Service (DBS) check. This shows any unspent convictions and conditional cautions that the employee has. DBS checks are usually required for positions that involve working with children or other vulnerable people.
- Get employment insurance: All employers in the UK must have employer’s liability insurance before they can employ workers. This insurance helps you pay compensation if an employee becomes ill or injured because of their work. Your policy needs to come from an authorised insurer and cover you for at least £5 million.
- Send the employee a written statement: A written statement of employment particulars is a document that employers must provide to their employees. It is not an employment contract. The written statement consists of a ‘principal statement,’ which employers must provide on the first day of employment, and a longer statement, which must be provided within two months.
- Register as an employer with HM Revenue and Customs (HMRC): HMRC is the body responsible for collecting and enforcing taxes in the UK. If you engage an employee in the UK, you have to register with HMRC before their first pay day so that you can run payroll and withhold the appropriate taxes.
- Check if you need to enrol your employee into a pension scheme: Employers must enrol their employees in a workplace pension scheme if they meet certain eligibility criteria. Specifically, employers must enrol all employees who are aged between 22 and the state pension age, who earn at least £10,000 per year and who normally work in the UK.
The cost of hiring an employee in the UK
There are certain costs involved with hiring an employee in the UK, in addition to the wages you pay them. For example, you’ll need to take into account:
- Recruitment costs
- National Insurance
- Pension contributions
- Training costs
- Employer’s liability insurance
- Workplace costs
Hiring an employee in the UK from outside the country
The process to hire a UK employee from an overseas company is longer than the steps outlined above because you will first need to set up a legal entity in the UK. This can add a lot of delays to your process. Given that the UK recruitment market is very competitive for certain roles, it could also mean missing out on top talent. If you want to hire employees in the UK easily, quickly, and compliantly, you should consider engaging them through an employer of record instead.
Employment background check in the UK
As an employer in the UK, there are certain employment background checks that you must carry out on job applicants before you can hire them. There are also other checks that are permissible, but not required by law.
Required employment background checks in the UK
Employers in the UK are responsible for ensuring that their employees have the legal right to work in the UK. If the employees are British or Irish citizens, you will need to check their original documents, such as their passport or driving licence. Alternatively, you can use a pre-hire background check service that offers Identity Document Validation Technology (IDVT).
For other employees, you can either check their original documents or ask for their share code. This is a temporary number foreign nationals can use to prove their right to work in the UK.
When you check an employee’s original documents, you should:
- Check that the documents are original, genuine and unaltered
- Check that the photos look like the applicant and are the same across all documents
- Check that the applicant’s name is the same across all documents
- Check that the applicant’s date of birth is the same across all documents
For applicants who are not British or Irish citizens, you’ll also need to:
- Check that their right to work in the UK has not expired
- Check that the applicant has the right to do the specific type of work you’re offering
- Check the applicant’s study and vacation times if they’re on a student visa
For all applicants, you’ll also need to take a copy of the original documents, making sure that it can’t be changed and that it’s clear enough to read. You should record the date you performed the employment background check, and keep a copy of the employee’s documents for the time they work for you plus an additional two years.
Permissible employment background checks in the UK
You can also choose to run a check on a job applicant’s criminal history. In the UK, this is called a Disclosure and Barring Service check, or DBS check. There are different standards of check depending on the requirements of the role. The most common level is called a ‘basic check,’ and reveals any convictions and conditional cautions that the applicant has on their record.
A standard or enhanced DBS check is always required for positions that involve working with children or vulnerable people, including:
- Teachers
- Social workers
- Childminders
- Foster carers
- Medical professionals
The same applies to jobs that involve working in particular settings, including schools, children’s homes or hospitals. Certain jobs, like solicitors, barristers, and veterinary surgeons, also require a DBS check on entering the profession.
- Health checks
- Credit checks
As an employer, you must always follow the rules on data protection when handling information about job applicants.
Contractor background checks in the UK
If you hire contractors instead of employees, the responsibility for checking their right to work in the UK falls on their legal employer. For example, this might be an employer of record (EoR) that you have engaged, or an entity associated with the staffing agency you used to source the workers. You are not required to check if self-employed workers such as independent contractors have the right to work in the UK.
Hiring options in the UK
Businesses that want to engage workers in the UK have several hiring options to choose from. The main types of workers you’ll need to be aware of are employees, self-employed people, and workers. Here’s what those terms mean in UK employment law:
- Employee: Hiring someone as an employee is the most common hiring option in the UK. Employees are people who work under an employment contract and are required to work regularly unless they’re sick or on leave. Employees have a number of rights under UK employment law that are not granted to self-employed people or workers. In the UK, a person can be an employee under employment law, even if they hold a different status in tax law.
- Self-employed: A worker is self-employed if they run their own business and take responsibility for its success or failure. These people are not paid through the Pay As You Earn (PAYE) system. Instead, they typically invoice their clients for the work they have performed. Self-employed people don’t have the same rights and responsibilities as employees or workers in the UK. A person can also be self-employed and employed at the same time, for example if they work part-time for an employer and run their own business on the side.
- Worker: The ‘worker’ status is specific to UK employment law, and describes a person who has a contract to work for an employer, but who has fewer rights than an employee. Workers are entitled to the National Minimum Wage, protection against discrimination, and the statutory minimum paid holiday and rest breaks. They are sometimes entitled to other benefits, including Statutory Sick Pay and Statutory Maternity Pay. However, they are usually not entitled to things like minimum notice periods, protection from unfair dismissal or redundancy pay. Workers are typically casual workers, who may not work a fixed schedule.
Of course, there is also a fourth hiring option: hiring employees through an employer of record, or EoR. If you choose this route, the workers in question will legally be employees of the EoR. However, you’ll be in charge of their day-to-day work. Companies offering EoR services in the UK also handle various HR tasks, including managing payroll, withholding taxes, administering benefits and enabling speedy and efficient onboarding. Engaging workers through an EoR might be the best hiring option if your company is not based in the UK since it enables you to avoid the hassle of setting up a local legal entity.
What is a contractor in the UK?
In the UK, a contractor is not a specific employment status. Instead, it’s a general term that can be used to describe professionals who provide their services to a business for a fixed period. A contractor might be:
- Self-employed if they run their own business
- A worker if they work casually for an employer
- An employee if they are engaged by an agency
A contractor’s rights and responsibilities depend on their employment status. For example, a contractor who is employed by an agency would be entitled to the National Minimum Wage and paid holidays, but these rights don’t apply to self-employed contractors.
Language requirements in the UK
There are no statutory language requirements for employment documents in the UK, but standard practice is to write them in English.
English language requirements for UK visas
Many UK visas, including the Skilled Worker Visa and the Student Visa, include a requirement for a certain level of English. UK immigration generally requires people applying for UK visas to be able to read, write, speak and understand English to at least level B1 on the Common European Framework of Reference for Languages (CEFR) scale.
To apply for a visa, workers have to provide proof that they have at least this level of English. This could be:
- A certificate for passing a Secure English Language Test (SELT) by an approved provider
- A GCSE, A level or equivalent qualification gained in the UK before the age of 18
- A degree or equivalent qualification that was taught in English
Exemptions from English language requirements
Certain people are exempt from the UK visa English language requirements. For example, applicants from certain majority English-speaking countries don’t need to provide proof of their proficiency in English. As of 2024, the countries on this list are:
- Antigua and Barbuda
- Australia
- the Bahamas
- Barbados
- Belize
- the British overseas territories
- Canada
- Dominica
- Grenada
- Guyana
- Jamaica
- Malta
- New Zealand
- St Kitts and Nevis
- St Lucia
- St Vincent and the Grenadines
- Trinidad and Tobago
- USA
Some people are also exempt from the English language requirements for UK visas altogether, though this is only the case in very specific circumstances. For example, a person may be exempt from the requirement if they are applying for settlement as a partner, parent or dependent child aged over 18, have lived in the UK for at least 15 years, and can prove they have met certain other requirements.
Corporate payroll requirements and payroll setup in the UK
Employing workers in the UK usually means having a corporate presence and being properly registered for payroll. Employers in the UK must withhold certain taxes and charges from their employees’ wages, and remit them to the appropriate authorities. Self-employed contractors are responsible for managing their own taxes and charges.
Understanding PAYE in the UK
In the UK, employers must use a system called PAYE to run payroll and allow HMRC to collect Income Tax and National Insurance. This stands for Pay As You Earn. Employers should register for PAYE as soon as they start employing someone, and before their first payday. Most employers need to use payroll software to report PAYE information to HMRC on or before each payday.
How to set up payroll in the UK
There are seven steps that employers need to take to set up payroll in the UK:
- Register as an employer with HMRC: The first step is to register as an employer, which you can do through an online form. Employers have to register with HMRC before the first payday after they employ someone. You’ll be issued a PAYE reference number within 30 working days of registering.
- Choose a payroll software: Most employers have to use a payroll software programme to report to HMRC. This software works out employees’ pay and deductions, works out what you owe HMRC, and helps you calculate statutory pay like maternity or sick pay. HMRC has created a list of recognised payroll software that you can choose from.
- Collect and keep records on your employees’ pay: Employers in the UK have to keep certain records about their payroll. For example, they must keep records of the money they have paid to employees and the deductions they have made, reports and payments they make to HMRC, and any taxable expenses and benefits. Employers must keep these records for three years after the end of each tax year. HMRC can ask to see an employer’s records and could charge them a penalty of up to GBP 3,000 if they are not complete.
- Tell HMRC about each employee: Employers have to tell HMRC when they take on a new employee. To do this, you’ll need to gather certain information, including whether they can be paid through PAYE, their tax code, and whether they need to repay a student loan. You can then use these details to set up the new employee in your payroll software.
- Report to HMRC on or before the first payday: Each payday, employers in the UK need to send HMRC a report of the payments they have made to their employees and the deductions they’ve taken from their pay. You should do this by using your payroll software to send a Full Payment Submission (FPS).
- Pay HMRC the tax and National Insurance you owe: UK employers need to pay HMRC the tax and National Insurance they owe them each month. As an employer, you can view how much you owe in your HMRC online account from the next tax month (which starts on the 6th of the month) after you submit your report. You’ll then have to claim any reductions by the 19th and make your payment by the 22nd.
How much does it cost to set up payroll in the UK?
There are no specific fees associated with setting up payroll in the UK. However, it’s important to consider costs like admin time and subscription fees for payroll software.
Easily hire employees in the UK with our EoR solution
Hiring employees in the UK usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.
Through our EoR solution, you can confidently hire employees in the UK, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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