How to hire employees in the UK through an employer of record (EOR) [2024]
Hiring in the UK? The United Kingdom is an excellent choice for companies looking to expand internationally due to its business-friendly environment and large pool of diverse and highly skilled talent. Another perk: The main language is English, making it a popular choice for businesses around the world, particularly those based in the US and Canada.
Foreign employers can start their expansion by hiring British contractors and sending international payments. But, if you’d like to hire full-time employees, you’ll need to either establish a legal entity in the UK or hire through an EOR.
While Companies House—the government agency that maintains the register of companies in the UK—has made the business registration process relatively streamlined compared to other countries, once you’ve established your company, you’ll need intimate knowledge of UK employment and tax laws. A mistake will easily put you in hot water with His Majesty’s Revenue and Customs (HMRC).
Alternatively, you can use an “employer of record” (EOR), which handles British payroll, tax, and compliance considerations. Through Rippling EOR’s entities, you can start hiring and working with employees in the UK quickly and compliantly.
Learn more about What is an Employer of Record (EOR)?
Here’s a step-by-step guide for hiring through an EOR in the UK.
Step by step: How to hire through an employer of record in the UK
Step #1: Decide between a UK EOR and a legal entity
Should you hire UK employees through an EOR or go through the process of setting up your own entity? The answer to this question largely depends on your company’s resources (including both time and money), size, and expansion plans.
- Legal entity in the UK. If you decide to go this route, you’ll need to register with the local authorities, learn about and register for the PAYE scheme, figure out if you’re automatically registered for Corporation Tax or not, and consult with local experts to ensure you’re in compliance with UK tax and labor laws.
- UK EOR. An EOR is a third-party service that operates as an employer on a company’s behalf—meaning you don’t need to set up your own entity. As well as allowing you to hire full-time UK employees, EORs handle all the legal requirements for complying with UK laws for payroll, contracts, and benefits. EOR services also include calculating and withholding taxes, onboarding managing employees, and running payroll.
Pros and cons of EORs vs. setting up a legal entity
EOR
Legal Entity
Cost & Implementation
✔ Less time-consuming to set up.
✔ You can start hiring within days instead of months.
✘ Becomes costlier as your headcount increases.
✘ Registration must be timed properly: You can’t register more than two months before you intend to pay employees.
✔ More cost-effective once you’ve hired enough employees in a foreign country.
Hiring
✔ Quickly set up new hires, often within 1-14 days, depending on the provider.
✔ Supports large-scale expansion in a new market.
Compliance
✔ Manages all of your compliance work for you, takes on liability, and provides localized employment contracts.
✘ Can’t tailor certain policies, and other HR/legal processes, to the needs of your business.
✘ Requires expert knowledge of local laws and tax regulations and internal legal resources, as your company is liable for all legal and compliance infractions.
✔ Can tailor certain policies and other HR/legal processes to the needs of your business.
Payroll & Benefits
✔ Quickly pay and insure employees around the world.
✔ Taxes are filed for you.
✘ Must manually keep track of statutory deductions and employee entitlements for every hire.
Step #2: How to choose the best employer of record for your business
Several EORs on the market—including Deel, Papaya Global, and Rippling—can help hire, pay, and manage UK employees. Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.
Here’s how Rippling EOR stacks up against Deel in the UK:
Rippling
Deel
Global Payroll
✔
✔
Benefits Administration
✔
✔
Recruiting & Applicant Tracking
✔
✘
Learning Management
✔
✘
Time & Attendance
✔
✘
Most EOR platforms are not human resource information systems (HRIS’s). They were built with the express purpose to hire and pay people internationally. They aggregate local payroll providers in every country and manually transmit your payroll files to them. This approach comes with many limitations.
All-in-One Global HR Platforms
Most EOR Platforms
Onboarding new hires
90 seconds
2-4 days
Payroll processing time
<5 days
2-4 weeks
Customized reporting
✔
✘
Integrated with every HR, IT, and Finance tool you need to run your business
✔
✘
Normally, setting up a corporate entity abroad is a long, expensive process. But through Rippling EOR’s entities, you can start hiring and working with people abroad quickly and compliantly.
Step #3: How to hire and onboard your UK employees
You’ve selected an EOR that works in the UK. Now, it’s time to start the onboarding process for your new employees.
First, make sure each new employee has the legal right to work in the UK. They can prove their right to work by providing you with a copy of their passport or a relevant visa, or showing that they are a citizen of Great Britain, the EU, or Switzerland. Make sure you put a copy of the given document in their employee file: This is required by UK law.
If you skip this step and hire someone who’s working in the UK illegally—even if they forged their documents and you were not complicit in this activity—your business can be fined a whopping £20,000 per employee, and you could even face up to five years in prison, in addition to having your business’s name published by Immigration Enforcement.
Next, you need to let the HMRC know you’ve hired someone new and set your employee up in the PAYE scheme to ensure the correct amounts of tax and national insurance are deducted from their paychecks. You’ll need the following information from your employee to complete this step:
- Name
- Date of birth, address, and gender
- Start date
- Last day of employment at their previous job
- National Insurance number
- Existing tax code
- Student loan deduction status
- Total pay and tax contributions for the year so far
A lot of this information can come from the employee’s P45, which is a form an employer is required to provide when an employee leaves. Its main purpose is to show how much in tax the employee has paid, as well as their annual salary, for the year. The next step is to provide your employee with a contract of employment, a formal offer letter that outlines key working conditions. An EOR can automatically localize and distribute employment agreements. Every UK hire will have a legally compliant contract offering statutory requirements for probationary periods, working hours, minimum wage, benefits, and termination policies like severance pay and notice periods.
Example: Let’s say you hire an employee in the UK. In addition to collecting their P45 and deducting the correct amounts of tax and National Insurance from their paychecks, you must understand your own responsibilities as an employer.
Employers in the UK are expected to pay 13.8% on all wages above £758 per month for their National Insurance contribution, as well as pay an extra benefits tax, and automatically enroll each employee in their company pension scheme (employer minimum contribution 3%, employee minimum contribution 5%). If either you or your employee is discovered to be under-contributing and not in compliance with UK tax laws, you—not the employee—are responsible for paying the difference to the HMRC.
One final note: Don’t assume that just because two employees are in the UK that they’ll have the same tax bracket. Tax brackets differ between Scotland, Wales, England, and Northern Ireland.
Rippling EOR automatically flags non-compliant sick leave policies and tells you how to fix it. If you'd like to give your employees more leave to match policies in other countries, you can do that too.
Step #4: Run payroll
For the A-to-Z on global payroll, read our guide to running global payroll for employees in the UK.
Once you’ve collected a new hire’s information and both parties have signed the contract of employment, an EOR will pay your UK employees in GBP, while withholding legally required taxes from salaries. This includes contributions to:
- National Insurance
- Income tax
- Pension scheme
Keep in mind many EOR companies are payroll aggregators, meaning they pay employees via third-party vendors. This makes for slower processing times and headaches when it comes to managing international employees under the same system.
Rippling EOR, by contrast, simplifies global employment by using native payroll software to send funds and handle taxes, allowing you to pay UK employees alongside your local workforce.
Below is a preview of how Rippling’s one-click global payroll system works:
Frequently asked questions about hiring through an EOR in the UK
How much does an EOR cost?
Generally, your options will be one of two pricing structures:
- A fixed monthly fee per employee.
- A percentage of payroll plus applicable taxes.
Note that whichever method you choose, you’ll also pay administrative fees, charges for onboarding, and the cost of any supplemental features you may want to add.
You don’t need to use an EOR for all of your employees. You can choose to implement it for part of your workforce and you’ll only be charged for the employees employed through the EOR.
What is the difference between an EOR and PEO?
A professional employer organization (PEO) functions as a co-employer of your workforce. They’ll take care of administrative tasks like paying employees, handling compliance, and filing payroll taxes. Your company and the PEO will be jointly responsible for your employees. If you work with a PEO, however, you can’t hire employees in other countries where you haven’t registered a local entity.
An EOR is the sole employer of whichever employees you use it for. They assume all the liabilities that come with hiring employees and permit you to hire workers in countries where you haven’t registered a local entity.
Does an employer of record protect your sensitive and confidential information?
Yes and no. You should always be aware that when you share your data with a third party, you are taking additional risks of being exposed to data breaches.
With that being said, there are EORs that prioritize data protection. They take extra measures to ensure security, including:
- Compliance with industry-standard privacy regulations in different countries
- Secure infrastructure with constant maintenance
- Carefully vetted IT personnel
For additional security, establish a data processing agreement (DPA) with a payroll service. This agreement protects you in the event of legal issues and mandates the company take sound security measures.
Does an EOR help with UK tax filings?
An EOR can automatically calculate and file your taxes in the UK. Rippling, for instance, is an authorized payroll provider by the HMRC. On your company’s behalf, it can enroll your employees in the UK PAYE scheme and ensure the correct amounts of tax are deducted from their paychecks. These include:
- National Insurance
- Income tax
- Pension scheme
What are the mandatory benefits for UK employees?
Employees in the UK are entitled to the following statutory benefits:
- Workplace pension
- Statutory sick leave
- Statutory sick pay
- Statutory maternity/paternity/parental/shared parental leave and pay and adoption leave
- Annual holiday leave
- Statutory redundancy pay (dependent on length of service)
For more information on mandatory benefits in the UK, read our complete guide.
What are the employer costs for full-time employees in the UK?
Employers are responsible for deducting National Insurance from their employees’ paychecks. Employees' contributions are dependent on their earnings.
Employees must also pay income tax. The rates for 2023/24 are below:
Income
Rates
Basic Rate (income up to £50,270)
20%
Higher Rate (income between £50,271 and £125,140)
40%
Additional Rate (income above £125,140)
45%
Please use this link to review the rates and thresholds for Scotland.
Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
